Termination of the agency contract

Termination by operation of law

The agency contract can end by operation of law, termination, or setting aside The agency contract terminates by operation of law:

• after the end of the specified period for a contract that is entered into for a specified period;
• due to the death of the commercial agent;
• due to the occurrence of a resolutive condition (as this has been agreed in the agency contract).

The agency contract will not terminate by operation of law if one of the parties is declared bankrupt or placed under guardianship. Usually this is indeed regarded as an urgent cause for termination. In addition, the commercial agent also has the option on the basis of the Bankruptcy Act to terminate if the principal goes bankrupt.

Termination

Both parties can terminate an agency contract that has been entered into for an indefinite period or for a specified period with the right to termination before the end of term. However, the notice period must be observed hereby. If nothing has been arranged in the contract, the statutory notice period will apply. This is determined at 4 months for contracts up to 3 years, 5 months for contracts with a term of 3-6 years and 6 months for contracts that have lasted longer. Usually parties agree to a contractual notice period. However, this is not permitted to be less than one month in the first year, two months in the second and third year and three months in the following years.

Urgent cause

An agency contract can be terminated without due regard to the notice period if there is an urgent cause. However, the other party must be promptly informed of the urgent cause. Urgent causes are circumstances of such a nature that it cannot reasonably be required of the party, who wants to terminate, that he maintains the contract (comparable with instant dismissal in employment law). If in the event of termination on the basis of an urgent cause the other party can be blamed, he can be held liable for damage. 

Setting aside by the court

An agency contract can also be terminated by means of setting aside (Section 440 Book 7 of the Civil Code). Both parties can request that the subdistrict court sets aside the contract on the basis of:

• circumstances resulting in an urgent cause;
• change of circumstances that are such that fairness requires that the contract is terminated.

Compensation in the event of irregular termination

If an agency contract is terminated without due regard to the notice period or without an urgent cause, the party giving notice of termination (usually the principal) will be liable for compensation. The payment can consist of fixed compensation or payment of the complete actual damage (Section 441 Book 7 of the Civil Code). If the commercial agent claims the fixed amount of the claim, he does not have to prove that he has actually suffered the actual damage. However, this will be required if he claims the actual damage. The time limit of a claim for compensation is short, one year after the irregular termination.

Fixed compensation

The fixed amount of the claim consists of a sum equal to the remuneration over the time that the agency contract would have continued in the event of regular termination. During the calculation the commission earned by the commercial agent prior to the termination will be taken into consideration. Other factors can also have an impact on the amount of the payment, such as for example the expenses saved by the commercial agent due to the termination.