It regularly happens that a non-compete clause is included in an agency contract, also referred to as a non-competition clause. The client of the agent, the principal, can protect himself or herself in this manner against competition from his or her own agent after the end of the agency contract. Agents are not always aware at the entering into of an agency contract which far-reaching implications such a non-competition clause can have for their business after the end of the contract.
The possibilities are not unlimited
The possibilities for agreeing a non-competition clause are not unlimited. The law sets out various requirements and limitations for a non-competition clause, which cannot be derogated from in a legally valid manner. A non-competition clause must be recorded in writing. Verbal arrangements therefore have no legal value. Furthermore, only arrangements can be made regarding the goods or services for which the agent had the representation authority and this only in the territory that, or in the group of customers, which were entrusted to the agent. The maximum duration of the non-competition clause is two years, to be calculated from the day on which the agency contract has ended. It is therefore not possible to agree to a longer operation of the non-competition clause.
There are three cases listed in the law during which the principal can indeed rely on a non-competition clause. Essentially, if the agency contract has ended due to certain culpable behaviour on the part of the principal (for example: the principal terminated the agency contract without due regard to the statutory or agreed period), the principal cannot derive any rights from the non-competition clause.
The court can intervene on request from the agent.
An agent who is of the opinion that he or she has been affected unreasonably severely by a non-competition clause can go to court. In that case the court can assess whether the agent has been disadvantaged by the non-competition clause in an unreasonable manner. If this is the case in the opinion of the court, the court can intervene and declare the clause, wholly or partly, inoperative. The court also can, on request from the agent, mitigate a financial penalty imposed due to breach of the non-competition clause.