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If a supplier fails to perform, you can claim compensation for the resulting loss, unless the failure cannot be attributed to the supplier (Article 6:74(1) Dutch Civil Code, DCC). As long as performance is still possible, damages are only due once the supplier is in default (verzuim), usually after a written notice of default (Articles 6:74(2) and 6:82 DCC).
In this article, our Dutch attorneys explain the most important aspects of compensation for breach of contract by suppliers under Dutch law: the notice of default, suspension, termination, the calculation of damages, contributory negligence and limitation clauses.
Dutch law uses one concept for every failure to perform: a failure in performance (tekortkoming). It covers non-performance (the supplier does not deliver at all), defective performance (the products or services are defective) and late performance (deadlines are exceeded). Whether a supplier has failed also depends on what it promised. A seller of goods must deliver goods that conform to the contract (Article 7:17(1) DCC). A service provider under a contract for services (overeenkomst van opdracht) must observe the care of a good service provider (goed opdrachtnemer) (Article 7:401 DCC): often an obligation of means (inspanningsverbintenis) rather than an obligation of result (resultaatsverbintenis).
Entrepreneurs in Amsterdam and throughout the Netherlands regularly experience discussions about defective performance in supplier agreements. The financial impact ranges from minor corrections to existential threats for businesses dependent on timely delivery or correct service provision. Therefore, understanding your rights becomes essential when suppliers fail to meet their contractual obligations.
How do you formally place a supplier in default in the Netherlands?
A notice of default (ingebrekestelling) is a written demand giving the supplier a reasonable period to perform. The law does not set a fixed period; what is reasonable depends on the circumstances. If the supplier does not perform within that period, it is in default (Article 6:82(1) DCC), unless the delay cannot be attributed to it or performance is already permanently impossible (Article 6:81 DCC). As a rule, only then can you claim damages or terminate the contract (Article 6:74(2) and Article 6:265(2) DCC).
No notice of default is needed when a fixed deadline for performance expires without performance, unless it appears that the deadline has a different purpose; when the obligation is to pay damages under Article 6:74(1) DCC or arises from a tort and is not performed immediately; or when you must infer from a statement of the supplier that it will fail to perform (Article 6:83 DCC). If the supplier is temporarily unable to perform, or its attitude shows that a reminder would be useless, a written statement holding it liable is enough (Article 6:82(2) DCC). For damages, no default is needed if performance has become permanently impossible (Article 6:74(2) DCC).
The law requires the notice to be in writing and to give a reasonable period (Article 6:82(1) DCC). In practice, also describe precisely which obligation the supplier has failed to perform, with a reference to the contract, quotation or general terms, and state what you will do if performance does not follow, such as terminating the contract or claiming damages. What is reasonable depends on the nature of the breach: a critical IT system that does not work calls for a shorter period than a delayed delivery of office supplies.
Send the notice in a way that lets you prove it was received, for example by registered mail or by e-mail with a confirmation of receipt. A statement addressed to a person only takes effect once it has reached that person. A statement that did not reach the addressee, or not in time, still takes effect if this is due to the addressee’s own act, to the act of persons for whom it is responsible, or to other circumstances concerning it that justify it bearing the disadvantage (Article 3:37(3) DCC).
Do not confuse the notice of default with the duty to complain. If a performance is defective, you must protest to the supplier within a reasonable time after you discovered the defect or reasonably should have discovered it; otherwise you can no longer rely on the defect (Article 6:89 DCC). For the sale of goods, the buyer must notify the seller within a reasonable time after it discovered, or reasonably should have discovered, that the goods do not conform to the contract (Article 7:23(1) DCC). If the goods lack a property that the seller said they had, or the non-conformity concerns facts the seller knew or should have known but did not disclose, the reasonable time runs from discovery. What is reasonable depends on the circumstances, so complain in writing as soon as you find a defect, even before you send a notice of default.
Which remedies do you have against a supplier that fails to perform?
A failure in performance can give rise to several remedies. You can claim performance (Article 3:296(1) DCC) and suspend your own performance without a notice of default. For damages and termination, the supplier usually has to be in default first (Articles 6:74(2) and 6:265(2) DCC). Some remedies can be combined, for example termination and damages (Article 6:277 DCC).
When can you suspend payment to a supplier?
In a contract with obligations on both sides, you may suspend your own performance, such as payment, if the supplier does not perform its obligation (Article 6:262(1) DCC). The failure does not have to be attributable to the supplier, and no notice of default is required. If the supplier performs only partly or improperly, you may suspend only to the extent the failure justifies it (Article 6:262(2) DCC). Read more about the right of suspension in the Netherlands.
A fictitious example: you receive an invoice of € 10,000 for an IT system of which one module does not work. You will usually not be able to withhold the full amount for a system that largely works. Withholding a part that is in proportion to the defect and the cost of putting it right is easier to defend.
A wider right of suspension follows from Article 6:52 DCC. A debtor with a claim that has fallen due may suspend its own obligation until its claim is met, if there is a sufficient connection between the claim and the obligation to justify the suspension. Such a connection can be assumed, among other things, if the obligations arise from the same legal relationship or from business the parties have regularly conducted with each other (Article 6:52(2) DCC). Whether you may withhold payment for product A because product B is defective therefore depends on the connection between the two.
Always announce a suspension in writing, stating the reason, the amount suspended and what the supplier must do to lift it. If you suspend without a valid ground, the suspension can itself be a failure in performance on your side, for which you may have to pay damages. It is therefore worth taking advice before you suspend payment.
When can you terminate the contract with a supplier?
Every failure in performance gives you the right to terminate the contract in whole or in part, unless the failure, given its special nature or minor significance, does not justify termination with its consequences (Article 6:265(1) DCC). Insofar as performance is not permanently or temporarily impossible, the right to terminate only arises once the supplier is in default (Article 6:265(2) DCC). You terminate by a written statement to the supplier, or the court pronounces termination on your claim (Article 6:267 DCC).
Extrajudicial termination is faster and cheaper, but if a court later rules that you were not entitled to terminate, you risk being in breach yourself. Termination does not have retroactive effect (Article 6:269 DCC). It releases the parties from the obligations affected by it; performances already received must be undone (Article 6:271 DCC).
For a minor defect, termination of the whole contract will often be excluded. Partial termination, which in practice can come down to a price reduction, or a claim for repair or damages may then be the appropriate remedy. If the contract is terminated, the supplier whose failure gave grounds for termination must compensate the loss you suffer because the contract is terminated instead of performed (Article 6:277(1) DCC). If the failure cannot be attributed to the supplier, this only applies within the limits of Article 6:78 DCC (Article 6:277(2) DCC).
What compensation can you claim from a supplier?
Additional compensation covers extra costs while the agreement continues – consider delay damages, lost profits during the non-conformity period, or costs for temporary alternatives.
Instead of performance, you can claim replacement damages (vervangende schadevergoeding). Insofar as performance is not already permanently impossible, the obligation is converted into an obligation to pay replacement damages when the supplier is in default and you notify it in writing that you claim damages instead of performance. No conversion takes place if the failure, given its minor significance, does not justify it (Article 6:87 DCC). Replacement damages in principle put you in the position you would have been in had the contract been properly performed.
Dutch law does not distinguish between direct and indirect damage. Financial loss covers both losses incurred and lost profits (Article 6:96(1) DCC). Many general terms and conditions, however, limit liability or exclude what they call indirect damage, such as lost turnover, reputational damage or penalties you owe your own customers. Whether such a clause holds up is discussed below and on our page about the exclusion of liability for indirect damage in the Netherlands. Negotiating these clauses beforehand protects your interests better than challenging them afterwards.
How do you calculate the extent of your damage in the Netherlands?
Loss is only compensated insofar as it is so connected with the failure that it can be attributed to the supplier as a result of that failure, also taking into account the nature of the liability and of the loss (Article 6:98 DCC). As a rule, you must prove the existence and extent of your loss, so document it carefully. If the extent cannot be determined precisely, the court estimates it (Article 6:97 DCC).
A fictitious example: a supplier delivers a production machine three months late. Your loss may include the rent of a replacement machine, extra labour costs because the replacement works less efficiently, and transport costs. It may also include the profit on an order you had to decline for lack of capacity, and a contractual penalty your own customer charged you. Whether each item can be attributed to the late delivery is assessed under Article 6:98 DCC.
Document each item with invoices, order confirmations, e-mails and, where useful, an accountant’s statement. For lost profit, you must show which revenue you missed and which costs you saved as a result: what counts is the lost profit, not the lost revenue. A damage statement with a specification and substantiation per item helps. Whether the supplier is actually in breach is the prior question, addressed in what constitutes a contract breach under Dutch law.
What does Article 6:101 Dutch Civil Code say about contributory negligence?
Article 6:101 DCC deals with contributory negligence or contributory fault (eigen schuld). If the loss is partly the result of a circumstance that can be attributed to the injured party, the obligation to pay damages is reduced. The loss is divided between the injured party and the liable party in proportion to the extent to which the circumstances attributable to each of them contributed to the loss. A different division applies, or the obligation to pay damages lapses entirely or remains in full, if fairness requires this because of the differing seriousness of the faults made or other circumstances of the case (Article 6:101(1) DCC). There is no official English translation of the Dutch Civil Code; this is a summary of the Dutch text.
This is often described as a duty to mitigate, but the law contains no separate duty under that name. If you fail to take reasonable measures to prevent or limit the loss, for example by not engaging an alternative supplier that was available in time at market prices, that can be a circumstance attributable to you under Article 6:101 DCC. Reasonable costs you incur to prevent or limit loss that could be expected as a result of the failure can themselves be claimed as damages (Article 6:96(2)(a) DCC).
What are the limitations of liability under Dutch law?
Between businesses, clauses limiting or excluding liability are valid in principle. A clause does not apply to the extent that applying it would be unacceptable by standards of reasonableness and fairness in the circumstances (Article 6:248(2) DCC). A clause in general terms and conditions can also be annulled if it is unreasonably onerous (Article 6:233(a) DCC), but not every business can rely on that ground (see below). Consumers have more protection: against them, a clause in general terms that wholly or partly releases the user from a statutory obligation to pay damages is presumed to be unreasonably onerous (Article 6:237(f) DCC).
Typical clauses in supplier terms limit liability to the invoice value, exclude indirect damage, or provide that the supplier only has to repair, replace or credit the product at its own choice. Whether a court upholds such a clause between professional parties depends on all the circumstances of the case.
Some limits apply whatever the clause says. First, according to the Supreme Court, reliance on an exclusion clause will in general be unacceptable if the damage is due to intent or conscious recklessness of the supplier or of the persons charged with managing its business (Supreme Court 12 December 1997, ECLI:NL:HR:1997:ZC2524, ground 3.6.1). Second, the liability of a producer for damage caused by a defect in its product cannot be excluded or limited towards the injured person (Articles 6:185 and 6:192(1) DCC). This product liability covers death, personal injury and certain damage to property for private use, not damage to business property (Article 6:190 DCC). Third, a clause in general terms can be annulled if it is unreasonably onerous, given among other things the nature and other content of the contract, the way the terms came about and the mutually apparent interests of the parties (Article 6:233(a) DCC). That ground is not available to every business: see Articles 6:235 and 6:247 DCC below.
Entrepreneurs in Amsterdam assessing supplier terms therefore examine: the total risk profile (not only the liability clause), whether core obligations are excluded from exoneration, and whether insurance coverage exists for residual risks. A supplier guaranteeing delivery within 10 working days but subsequently excluding all liability for delay damage creates an empty shell – such provisions may be deemed unreasonably onerous. Consequently, an all-round contract review prevents unpleasant surprises later.
How does breach of contract relate to force majeure in Dutch law?
A failure cannot be attributed to the supplier if it is not due to its fault and is not for its account under the law, a juristic act or generally accepted views (force majeure, overmacht) (Article 6:75 DCC). The supplier then does not have to pay damages (Article 6:74(1) DCC). A supplier that uses other persons to perform its obligation is liable for their conduct in the same way as for its own (Article 6:76 DCC). Suppliers regularly invoke force majeure for delays due to supply chain problems, natural disasters, pandemics or government measures.
The law does not use the terms absolute and relative force majeure, but it does distinguish between permanent and temporary impossibility. If performance has become permanently impossible, performance can no longer be claimed, but the contract does not end automatically: you can terminate it without a notice of default (Article 6:265(2) DCC). If performance is temporarily impossible because of force majeure, the supplier is not in default for as long as the delay cannot be attributed to it (Article 6:81 DCC). You can still suspend your own performance (Article 6:262 DCC) and, also without default, terminate the contract (Article 6:265 DCC), unless the failure, given its special nature or minor significance, does not justify termination.
Not every hindrance qualifies as force majeure. Under Article 6:75 DCC, the question is not only whether the supplier is at fault, but also whether the cause is for its account under the law, the contract or generally accepted views. Whether the event was foreseeable when the contract was concluded, and whether the supplier could have prevented or limited its consequences, can play a role in that assessment. Check the contract and the facts carefully before you accept a force majeure claim.
Moreover, many contracts explicitly exclude certain force majeure situations or allocate risks contractually. General terms specify, for example, that strikes at the supplier’s premises, currency fluctuations or raw material price increases do not constitute force majeure. Always check the force majeure clause in your agreement. Understanding these allocations prevents disputes about who bears which risks.
What role do general terms and conditions play in the Netherlands?
General terms and conditions largely determine your rights and obligations upon breach, but are tested against Article 6:233 Dutch Civil Code (voidability of unreasonably onerous terms) and Article 6:248 paragraph 2 Dutch Civil Code (reasonableness and fairness).
Not every party can annul a clause in general terms. The grounds for annulment are not available to a legal entity referred to in Article 2:360 DCC that, when the contract was concluded, had most recently published its annual accounts (or to which Article 2:403(1) DCC had most recently been applied), or to a party in which 50 or more persons were working at that time or for which the trade register showed this (Article 6:235(1) DCC). Nor are they available to a party that itself repeatedly uses the same or nearly the same general terms in its contracts (Article 6:235(3) DCC). Between businesses that are not both established in the Netherlands, these rules (Articles 6:231-6:247 DCC) do not apply at all, whatever law governs the contract. What counts is the principal place of business or, if the contract is to be performed by another establishment, that establishment (Article 6:247(2) and (3) DCC). If Dutch law applies, Article 6:248(2) DCC then remains.
Three conflict situations arise in practice. First, a battle of forms: both parties refer to their own general terms. Under Dutch law, the second reference then has no effect, unless it also expressly rejects the general terms referred to first (Article 6:225(3) DCC). This is sometimes called the first-shot rule. Second, a conflict between the general terms and individually negotiated terms: which one prevails is a matter of interpretation, so an order-of-precedence clause helps. Third, ambiguity in a clause, discussed below.
How is an ambiguous contract clause interpreted under Dutch law?
Dutch courts do not interpret a written contract by its wording alone. What matters is the meaning the parties could reasonably attribute to the provisions in the circumstances, and what they could reasonably expect from each other. The social circles to which the parties belong and the legal knowledge that can be expected of them can also be relevant (Supreme Court 13 March 1981, ECLI:NL:HR:1981:AG4158 (Haviltex), ground 2). The wording is a starting point, not the end of the analysis.
In consumer contracts, clauses in general terms must be drafted clearly and comprehensibly, and if there is doubt about the meaning of a clause, the interpretation most favourable to the consumer prevails (Article 6:238(2) DCC). That statutory rule does not apply between businesses. To avoid ambiguity, define key terms such as “delivery”, “acceptance” and “indirect damage” in the contract itself.
Effective supplier management therefore requires you to negotiate core terms beforehand. Delete or limit exclusion clauses that unacceptably increase your risks, agree measurable service levels (SLAs) with clear consequences, and set complaint procedures with response periods. Arranging contractual protection upfront is usually cheaper than resolving a dispute afterwards.
When should you engage legal expertise under Dutch law?
Consider legal advice once the damage is substantial, the supplier contests termination, or questions arise about attribution, causation or exclusion clauses. Early advice helps you avoid procedural errors that are hard to repair later.
Reasonable costs to obtain payment out of court can be claimed as damages (Article 6:96(2)(c) DCC), unless the rules on legal costs in court proceedings apply to them (Article 6:96(3) DCC). The fixed rates of the Decree on compensation for extrajudicial collection costs (Besluit vergoeding voor buitengerechtelijke incassokosten) apply to contractual claims for payment of a sum of money. To a claim for damages, they apply only insofar as the claim has been laid down in a settlement agreement or a payment obligation has been converted into replacement damages under Article 6:87 DCC (Article 1 of the Decree). Weigh the expected costs against what you can recover before you decide to litigate.
It is often worth trying to reach an amicable settlement before you litigate. Mediation can help: a mediator assists the parties in negotiating a business solution, which can save time, money and the business relationship.
What are common mistakes in breach of contract cases in the Netherlands?
The three most costly errors are: immediately engaging an alternative supplier without giving the original supplier opportunity to remedy, suspending without proper legal basis, and failing to complain within reasonable time about defects. These procedural errors drastically weaken your legal position.
A fictitious example: a business orders a custom ERP system from a software supplier. On delivery, several modules do not meet the specifications. Without sending a notice of default, the business immediately has another party adapt the system and refuses to pay any part of the supplier’s invoice. As long as performance is still possible, the supplier is not yet in default, so the business will generally not be able to claim the cost of the other party as damages (Articles 6:74(2) and 6:82 DCC). It may withhold payment only to the extent the defects justify it (Article 6:262(2) DCC), and it must complain in time (Article 6:89 DCC).
Businesses also often underestimate the evidentiary challenge. For complex services or technical products, an expert report is often essential. Engage a technical expert in good time to establish the defects, the causal link with the failure and the cost of repair or the loss in value. Reasonable costs to establish damage and liability can be claimed as damages (Article 6:96(2)(b) DCC), unless the rules on legal costs in court proceedings apply (Article 6:96(3) DCC).
Be careful when you pay an invoice you dispute. If you pay, state clearly in writing at the time of payment that you dispute the invoice and reserve the right to reclaim the amount. Whether you can reclaim it later depends on whether the payment was owed: a payment made without a legal ground can be reclaimed as an undue payment (Article 6:203 DCC).
How do you prevent future disputes with suppliers under Dutch law?
Contractual risk allocation, clear specifications and structured supplier monitoring reduce the risk of disputes. It therefore pays to invest in solid contracts and active supplier management.
Start with detailed specifications of the product or service to be delivered. Vague descriptions lead to interpretation differences. For IT projects, you work with functional and technical requirements, acceptance criteria and test procedures. For products, you define technical standards, quality standards, packaging requirements and inspection procedures. These specifications become annexes to the contract. Clarity at the start prevents disputes later.
Next, agree Service Level Agreements (SLAs) with measurable performance indicators and contractual consequences. A fictitious example: “Supplier delivers within 5 working days after order. If it exceeds this by 1-5 working days, 10% of the invoice value lapses; if it exceeds it by more than 5 working days, the client may terminate the contract and claim compensation for lost profit up to a maximum of 50% of the order value.” A clause that requires the defaulting party to pay a sum of money is a penalty clause (boetebeding) (Article 6:91 DCC). What is due under it replaces the statutory damages (Article 6:92(2) DCC), unless the contract provides otherwise, and at the debtor’s request the court can reduce the penalty if fairness manifestly requires this, but not below the damages due under the law (Article 6:94(1) DCC).
Additionally, you implement milestones with payment linkage for phased projects. Pay for example 30% upfront, 40% at interim acceptance and 30% after final delivery. This creates natural control moments and limits your financial exposure if problems arise. Phased payment aligns supplier incentives with your quality requirements.
Finally, organise structured consultation with strategic suppliers: periodic reviews of performance against agreed KPIs, risks and points for improvement. This helps you detect potential breaches early and find solutions before legal steps become necessary.
Frequently asked questions about compensation for breach of contract by suppliers
What does Article 6:74 of the Dutch Civil Code say?
Every failure in the performance of an obligation obliges the debtor to compensate the loss the creditor suffers as a result, unless the failure cannot be attributed to the debtor (Article 6:74(1) DCC). Insofar as performance is not already permanently impossible, this only applies with due observance of the rules on default (Article 6:74(2) DCC). In practice, you usually have to send a written notice of default with a reasonable period first (Article 6:82(1) DCC).
What does Article 6:101 Dutch Civil Code say about contributory negligence?
If the loss is partly the result of a circumstance attributable to the injured party, the obligation to pay damages is reduced. The loss is divided in proportion to the extent to which the circumstances attributable to each party contributed to it. Fairness can require a different division, or that the obligation lapses entirely or remains in full, because of the differing seriousness of the faults or other circumstances (Article 6:101(1) DCC). There is no official English translation of the Dutch Civil Code; the Dutch text on wetten.overheid.nl is the authentic text.
How is ambiguity in a contract resolved under Dutch law?
Not by the wording alone. What matters is the meaning the parties could reasonably attribute to the provisions in the circumstances and what they could reasonably expect from each other, also in view of the social circles they belong to and the legal knowledge that can be expected of them (Haviltex, ECLI:NL:HR:1981:AG4158). Only in consumer contracts does the law provide that, in case of doubt about a clause in general terms, the interpretation most favourable to the consumer prevails (Article 6:238(2) DCC).
Does Article 7:759 of the Dutch Civil Code allow you to suspend payment?
No, Article 7:759 DCC does not deal with suspension. It applies to construction contracts (aanneming van werk). If the work shows defects after delivery for which the contractor is liable, the client must, unless this cannot be required of it in the circumstances, give the contractor the opportunity to remedy them within a reasonable period, without prejudice to the contractor’s liability for damage (Article 7:759(1) DCC). Whether you may withhold payment follows from the general rules, such as Article 6:262 DCC: only to the extent the failure justifies it.
Can you claim compensation without sending a notice of default?
Sometimes. No notice of default is needed if performance has become permanently impossible (Article 6:74(2) DCC), or if default arises without notice: for example because a fixed deadline expires without performance (unless it appears that the deadline has a different purpose) or because a statement of the supplier shows that it will fail to perform (Article 6:83 DCC). In other cases, send a written notice with a reasonable period first (Article 6:82(1) DCC).
Primary sources
- Dutch Civil Code (Burgerlijk Wetboek), Book 3: Articles 3:37 and 3:296
- Dutch Civil Code, Book 6: Articles 6:52, 6:74, 6:75, 6:76, 6:81, 6:82, 6:83, 6:87, 6:89, 6:91, 6:92, 6:94, 6:96, 6:97, 6:98, 6:101, 6:185, 6:190, 6:192, 6:203, 6:225, 6:233, 6:235, 6:237, 6:238, 6:247, 6:248, 6:262, 6:265, 6:267, 6:269, 6:271 and 6:277
- Dutch Civil Code, Book 7: Articles 7:17, 7:23, 7:401 and 7:759
- Decree on compensation for extrajudicial collection costs (Besluit vergoeding voor buitengerechtelijke incassokosten): Article 1
- Supreme Court 13 March 1981, ECLI:NL:HR:1981:AG4158 (Haviltex), ground 2
- Supreme Court 12 December 1997, ECLI:NL:HR:1997:ZC2524, ground 3.6.1
Contract lawyers in the Netherlands
A supplier’s breach of contract calls for a careful approach. Our contract lawyers in the Netherlands can analyse your situation, guide you through the formal steps and help you claim the compensation you are entitled to. Contact us for an intake interview about your supplier dispute.
