Goodwill payment after termination of the agency contract

After the end of the agency contract the commercial agent also has the right to payment of goodwill. Goodwill consists of the group of customers that a commercial agent has accrued for the benefit of the principal. For this reason the payment is also referred to as the customer fee. The right to this customer fee is separate from the compensation that the commercial agent also might have the right to.

Sustained increase in value enterprise

Section 442 Book 7 of the Civil Code determines whether the commercial agent has the right to compensation of goodwill. For instance, a payment will be owed if the commercial agent has introduced new customers, or if the commercial agent has arranged considerably more orders from existing customers. However, the increase of the group of customers and/or the number of orders from the existing group of customers must be somewhat prolonged: an increase of sales that is only of a temporary nature will less quickly result in a goodwill payment.

Calculation of the customer fee

The calculation of the payment consists of three stages, which are further elaborated in case law:

1. quantification of the advantages for the principal from the transactions with the customers introduced by the commercial agent;
2. correction in accordance with fairness of the quantified amount;
3. comparison calculated payment with the statutory maximum amount.

Stage 1) The advantage for the principal

The advantage for the principal is recorded on the basis of the commission earned in the last 12 months by the commercial agent for new and existing customers. This amount is subsequently corrected with factors such as inter alia the duration of the advantage that the principal is expected to have from these transactions and the progress of the customer base.

Stage 2) equitable correction

During the assessment of the payment in accordance with fairness various circumstances are important: if the commercial agent continues to work for other principals, if the commercial agent can be blamed for the termination, what is the extent of the advantage for the principal, etcetera. For example the payment can be reduced if the commercial agent takes the accrued group of customers with him. Whether or not a non-competition clause has been agreed can also play a role. 

Stage 3) not higher than the maximum amount

The law determines that the amount of the payment is not higher than the remuneration of one year, calculated in accordance with the average over the last 5 years. If the agency contract lasted less than 5 years, the average of the total duration will apply. 

No payment owed

There are some statutory exceptional cases regarding the right to a customer fee. For instance, no payment will be owed if the contract has been terminated by the principal under circumstances that make the commercial agent liable for compensation. There is also no payment owed if the commercial agent has personally terminated the contract, unless the ground for the termination can be attributed to the principal, or the termination is the reasonable result of sickness or retirement of the commercial agent. Lastly, no payment will accrue to the commercial agent if he transfers the (rights under the) agency contract to a third party.