THE BOTTOM LINE
- Inform Third Parties Directly: Terminating your agreement with an intermediary or agent is not enough. If you don’t formally notify the suppliers and other counterparties they dealt with on your behalf, you may still be bound by the agent’s subsequent actions.
- Price-Setting Mechanisms are Binding: A contract is valid even if the final price is determined later, as long as the mechanism for setting that price is agreed upon. Revoking an agent’s authority doesn’t invalidate this pre-agreed mechanism.
- Good Faith Protects Suppliers: A supplier acting in good faith is protected if they are unaware that an agent’s authority has been revoked. The onus is on the principal (the business) to ensure all relevant parties are aware of the change.
THE DETAILS
A recent ruling from the Amsterdam District Court provides a critical reminder for any business that uses intermediaries for procurement. The case involved an energy supplier (PZEM), a corporate customer (FLM), and an energy purchasing collective (HIT) acting as FLM’s agent. In 2022, FLM authorized HIT to secure an energy contract on its behalf. HIT promptly signed FLM up for a two-year supply agreement with PZEM, covering 2023 and 2024. The agreement used a “click” model, where the agent (HIT) could lock in market prices for future energy volumes at various moments.
The dispute arose when FLM terminated its relationship with its agent, HIT, in May 2023 and revoked its power of attorney. FLM informed HIT but failed to notify the energy supplier, PZEM. Believing the 2024 portion of the contract was now invalid, FLM only partially paid its energy bills for that year, leading to a claim of over €210,000. FLM argued that since HIT no longer had authority, no valid contract existed for 2024. The court decisively rejected this argument, ruling that a binding two-year agreement was formed back in 2022. The subsequent termination of the agent could not retroactively invalidate an existing contract with a third party.
Crucially, the court addressed the agent’s actions after its authority was revoked. HIT had continued to “click” and lock in the energy prices for 2024 on behalf of the collective, including FLM, even after being fired. The court found these actions were still binding on FLM. Under Dutch law, a third party like PZEM, who was unaware of the termination of the agent’s authority, could continue to rely on it in good faith. Since FLM only notified PZEM in December 2023—long after all the pricing decisions for 2024 had been made—it was too late. The court concluded that FLM was liable for the full amount based on the prices locked in by the agent it had already fired.
SOURCE
Source: Rechtbank Amsterdam
