Article 7:442 of the Dutch Civil Code explained: commercial agent goodwill indemnity

Dutch term: Artikel 7:442 BW | Legal basis: Article 7:442 of the Dutch Civil Code

Article 7:442 of the Dutch Civil Code entitles a commercial agent to a goodwill indemnity on termination of the agency agreement. The indemnity compensates the agent for the lasting benefit the principal derives from the customers the agent brought or substantially developed, where the principal continues to benefit after termination and payment of the indemnity is equitable. The indemnity is capped at one year's average annual remuneration calculated over the last five years (or the full duration if shorter).

The indemnity is mandatory: it cannot be excluded or limited by contract to the detriment of the agent (article 7:445 BW). It applies even where the agency agreement is governed by non-EU law, if the agent operates within the EU (CJEU, Ingmar, Case C-381/98). The indemnity is lost only if the principal terminates for serious fault attributable to the agent (article 7:442(4) BW), if the agent terminates voluntarily without justification, or if the agent assigns the agreement to a third party.

Why it matters for international businesses

Article 7:442 is the single most commercially significant provision for principals appointing commercial agents in the Netherlands or the EU. Understanding the calculation methodology and the limited exclusion grounds is essential before entering into or terminating an agency relationship.