AGENCY AND DISTRIBUTION AGREEMENTS IN THE NETHERLANDS CARIBBEAN (I)
Commercial Agency Agreement
According to Section 7:428, Paragraph 1, of the Netherlands Antilles Civil Code, a commercial agency contract (agentuurovereenkomst) is a contract for services whereby one party, the principal, instructs the other party, the commercial agent, and whereby the latter binds himself, for a fixed or indeterminate term and for remuneration, to act as an intermediary in the conclusion of contracts, and, as the case may be, to enter into such contracts in the name and for the account of the principal, without being his subordinate.
No procedural requirements apply for entering into an agency agreement, and it may be agreed either verbally or in writing. However, the act does contain a provision (Section 7:428, Paragraph 3, Civil Code) which obliges each party to submit a document revealing the content of the agreement, at the request of the other party. The parties are free to determine the duration of the agreement; however, rules are imposed on its termination.
If the content and the practical execution of the agreement lead to the conclusion that there is an agency, the rules of Section 4 of Book 7 of the Civil Code apply to the commercial agent. An agent can be either a natural or a legal person.
The agency agreement ends upon the expiry of the period for which it was entered into, upon the termination of the agreement on the basis of mutual consultation, or if it is terminated by one party for ‘urgent reasons’. An agency agreement for an indeterminate period, or for a specific period with the right of interim termination, may be terminated by either of the parties, taking the agreed period of notice into account. If no period of notice has been agreed then a legal period of notice of a minimum of four months must be observed. The legal period is five months if the agreement has lasted at least three years and six months after six years (Section 7:437, Paragraph 1, Civil Code).
If the parties wish to come to an agreement about a period of notice, they must take into account the following minimum periods. The periods depend on the duration of the agreement in the following way: one month after a duration of a maximum of one year; two months for a duration between one and two years and three months for the following years. If longer periods are agreed then these may not be shorter for the principal than for the commercial agent (Section 7:437, Paragraph 2, Civil Code). Notice must be given at the end of a calendar month (Section 7:437, Paragraph 3, Civil Code).
Every agency agreement may be terminated with immediate effect if there is any question of an urgent reason. In that case the other party must be immediately informed of that reason. If the termination of the agreement for such reasons is based on circumstances for which the other party is at fault, the latter is liable for damages (Section 7:439, Paragraph 1, Civil Code).
The party which has become liable for damages with regard to the termination owes the other party a sum equal to the payment for the time that the agreement would have continued if it had come to an end in a regular manner. In that case, there is a legally determined compensation for damages based in principle on the remuneration for the period of twelve months preceding the termination (Section 7:441 Civil Code).
In addition to the right to compensation for damages, the agent has the right to a so-called goodwill payment at the end of the agency agreement if his work has led to significant increases in turnover in the principal’s company or to goodwill or an increase in goodwill.
Karel Frielink / Ursus van Bemmelen
Netherlands Caribbean Attorneys / Lawyers
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