Commercial agency agreement: rules, notice and compensation (2026)

If someone else is going to sell your goods on commission, you are dealing with a commercial agent. That is not the same as a dealer or a distributor, and the difference matters: commercial agents are protected by a special Danish act, and some of its rules cannot be contracted out of. This guide covers what a commercial agency agreement should contain, which notice periods apply, and when the agent is entitled to compensation when the relationship ends.

What is a commercial agent?

Under section 2 of the Danish Commercial Agents Act (handelsagentloven), a commercial agent is a self-employed person who, for remuneration and on another business's account, works on a continuing basis to sell or buy goods. The agent obtains orders for the business, which the act calls the principal, or concludes agreements in the principal's name.

Three things characterise the relationship:

• The agent acts on the principal's account, not its own. The principal sells to the customer and carries the risk if the customer does not pay.
• The agent is independent, not an employee. The agent organises their own work and often has several principals.
• The agent earns commission on the sales that come in, not a margin on goods the agent has bought.

The act covers the sale and purchase of goods. If the agent arranges services, the act does not apply directly, which makes it even more important that the agreement itself deals with notice and termination.

Commercial agent, dealer or distributor?

The three roles are often mixed up, but they rest on different models:

	Commercial agent	Dealer/distributor
Acts in	the principal's name or passes on orders	its own name
Buys the goods	no	yes
Sales risk	the principal	the dealer
Remuneration	commission	margin on resale
Special act	Commercial Agents Act	none; contract and competition law apply

In practice a distribution agreement is the same as a dealer agreement: the distributor buys the goods and resells them on its own account. If that is the model you are considering, see our guide to dealer agreements.

What the agreement is called does not decide the matter. If a "dealer" in reality only passes on orders and earns commission, the relationship may be treated as an agency, with the rights that gives the agent.

What a commercial agency agreement should cover

The act contains a set of default rules, but most of them can be varied. The agreement should at least deal with:

1. Territory and customers. Which area and which customers the agent covers, and whether the agent has exclusivity.
2. The goods. Which products the agent may sell, and whether the agent may represent competing products.
3. Commission. The rate, what it is calculated on, when it is earned and when it is paid. Also agree whether the agent earns commission on orders from the territory that come in without the agent's involvement.
4. The agent's authority. Whether the agent only obtains orders or may conclude agreements in the principal's name.
5. Reporting and information. What the agent must report, and what information the principal must provide so the agent can check the commission.
6. Term and termination. Whether the agreement is for a fixed term, and which notice periods apply (see below).
7. Non-compete. Whether the agent is bound after the agreement ends, and to what extent.
8. Governing law and venue.

Termination: notice periods that cannot be shortened

If the agreement is not for a fixed term, section 22 of the act applies:

• 1 month's notice in the first year.
• The notice increases by 1 month for each year or part year the agreement has lasted.
• The notice is capped at 6 months unless otherwise agreed.

The periods apply both ways and cannot be shortened by agreement. The only exception is that the agent may be allowed to give 3 months' notice once the agreement has lasted 3 years or more. If the parties agree longer periods, the principal's notice may not be shorter than the agent's. Unless otherwise agreed, notice runs to the end of a calendar month.

Under section 23, a fixed-term agreement that the parties continue after it expires becomes an agreement for an indefinite term, and the notice periods above then apply.

Compensation when the agreement ends

The rule that surprises most principals is the agent's right to compensation under section 25. The agent is entitled to compensation if the agent has brought in new customers or significantly increased business with existing ones, and the principal will continue to derive substantial benefits from those customers. Payment must also be fair in all the circumstances, in particular the commission the agent loses.

Compensation is capped at one year's remuneration, calculated as the average of the last 5 years, or of the whole period if the agreement has lasted less than that (section 26).

The agent is not entitled to compensation (section 27) if:

• the principal terminates because of the agent's material breach,
• the agent terminates, unless this is due to circumstances attributable to the principal or to the agent's age, infirmity or illness, or
• the agent, with the principal's consent, assigns the agreement to someone else.

The agent must give notice that a claim will be made no later than 1 year after the agreement ends, or the claim lapses (section 28). The compensation rules cannot be waived in advance to the agent's detriment (section 29), and they cannot be avoided by choosing another country's law if the agreement would otherwise be covered by the Danish act (section 1(2)).

Non-compete after termination

Under section 30, a non-compete clause binds the agent only if it is:

• made in writing,
• limited to the territory or customer group the agent was given, and
• limited to the types of goods covered by the agreement.

The clause can last at most 2 years after the agreement ends, and a court can set it aside if it is unreasonable.

Common mistakes

• Calling the agent a "dealer" to avoid the compensation rules. The substance, not the label, decides which rules apply.
• Notice periods that are too short. Periods below the statutory minimum cannot be enforced against the agent, and the statutory notice applies instead.
• No rule on commission after termination for orders the agent obtained but that are only executed later.
• A broad non-compete with no geographic or product limits, which therefore cannot be enforced.

Do you need a dealer agreement instead?

If your partner is going to buy the goods and resell them on its own account, you need a dealer agreement, not an agency agreement. You can use our dealer agreement template. For a true agency agreement with commission, have the agreement reviewed, because the mandatory rules of the Commercial Agents Act must be in place.

This article is general information and not legal advice on a specific case.