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Dutch law does not fine a party for breaching a contract. The other party can claim performance, damages (Article 6:74 Dutch Civil Code, DCC) or termination (Article 6:265 DCC). A penalty is only due under a penalty clause (boetebeding) in the contract (Article 6:91 DCC). A court can reduce it only if fairness manifestly requires this (Article 6:94 DCC).
This page is for businesses with a contract governed by Dutch law. It explains what counts as a breach, which remedies the other party has, and how a penalty clause works under Articles 6:91 to 6:94 DCC. Our team also advises on Dutch Distribution Law.
How does Dutch contract law work?
The general rules on contracts are in Book 6 of the Dutch Civil Code. Book 7 adds rules for specific contracts, such as sale, lease and employment. Within the limits of mandatory law, parties are free to agree their own terms.
A contract binds the parties (pacta sunt servanda). The parties must also behave towards each other in accordance with reasonableness and fairness (redelijkheid en billijkheid) (Article 6:2 DCC). Reasonableness and fairness can add obligations to a contract and, in exceptional cases, set aside a contractual term where applying it would be unacceptable (Article 6:248(1)-(2) DCC).
The Netherlands has a civil law system. The rules are laid down in codes, not in judicial precedents. Judgments of the Supreme Court (Hoge Raad) are important for how the rules are applied, but there is no formal rule of binding precedent as in common law countries.
Which types of contract violation exist?
Dutch law does not use separate categories of breach. It uses one concept: a failure in performance (tekortkoming). Every failure in the performance of an obligation counts (Article 6:74(1) DCC). In practice, a failure takes one of three forms.
Non-performance: a party does not perform at all. Examples are a supplier that does not deliver or a customer that does not pay.
Partial or defective performance: a party performs some, but not all, of its obligations, or performs in a way that does not meet the contract. Examples are a supplier that delivers only part of the order, or goods with defects.
Late performance: a party performs, but too late. For most remedies, the debtor must then be in default (verzuim). Default usually arises when the debtor receives a written notice of default (ingebrekestelling) with a reasonable period for performance, and performance does not follow within that period (Article 6:82(1) DCC). No notice is needed in the cases of Article 6:83 DCC, for example when a fixed deadline for performance expires, unless it appears that the deadline has a different purpose, or when a statement of the debtor shows that it will fail to perform.
Whatever its form, a failure only leads to liability for damages if it can be attributed to the debtor. It cannot be attributed if it is not the debtor’s fault and is not for its account under the law, a juristic act or generally accepted views (force majeure, overmacht) (Article 6:75 DCC).
What are the consequences of a breach?
Dutch law does not punish a breach of contract. There are no punitive damages and no statutory fines. The remedies aim to give the other party what it was promised, or to compensate its loss. Which remedy fits depends on the breach and on what the contract says. The three main remedies are damages, performance and termination.
Damages: the debtor must compensate the loss caused by its failure in performance, unless the failure cannot be attributed to it (Article 6:74(1) DCC). Insofar as performance is not already permanently impossible, this only applies once the debtor is in default (Article 6:74(2) DCC). Loss includes both losses suffered and lost profits (Article 6:96(1) DCC).
Performance: under Dutch law, performance is not an exceptional remedy. At the request of the other party, the court orders a party to do what it is obliged to do, unless the law, the nature of the obligation or a juristic act provides otherwise (Article 3:296(1) DCC). On a claim, the court can attach a penalty payment (dwangsom) to the order. A penalty payment cannot be imposed on an order to pay money (Article 611a(1) Dutch Code of Civil Procedure, Rv).
Termination: every failure in performance gives the other party 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, this right only arises once the debtor is in default (Article 6:265(2) DCC). Termination takes place by a written statement, or the court pronounces it on a claim (Article 6:267 DCC). The party whose failure gave grounds for termination must also compensate the loss caused by the termination (Article 6:277(1) DCC); if the failure cannot be attributed to it, a narrower rule applies (Article 6:277(2) DCC).
What is a contractual penalty clause under Dutch law?
A penalty clause (boetebeding) is any clause under which a debtor that fails to perform must pay a sum of money or render another performance. It does not matter whether the clause is meant to compensate loss or only to encourage performance (Article 6:91 DCC). Unless the contract provides otherwise, the following rules apply:
- Penalty or performance, not both: the creditor cannot claim both the penalty and performance of the obligation to which the penalty is attached (Article 6:92(1) DCC).
- Penalty instead of damages: the penalty replaces the damages due under the law (Article 6:92(2) DCC). You do not need to prove your loss, but in principle you cannot claim additional damages either.
- No penalty without attribution: the penalty cannot be claimed if the failure cannot be attributed to the debtor (Article 6:92(3) DCC).
- Notice of default: a reminder or other prior notice is required to claim the penalty in the same cases in which it is required to claim damages under the law (Article 6:93 DCC).
Contracts often depart from these rules, for example by making the penalty due without notice, or in addition to performance or damages. The law does not require a penalty clause to be in writing, but there are exceptions. An employer can only impose fines if the employment contract states the rules whose breach is fined and the amount, and the clause must be agreed in writing (Article 7:650(1)-(2) DCC). Read more on our page about Penalties under Dutch law.
When can a Dutch court reduce a contractual penalty?
At the debtor’s request, the court can reduce (matigen) a penalty if fairness manifestly requires this (indien de billijkheid dit klaarblijkelijk eist). It cannot award the creditor less than the damages due under the law for the failure (Article 6:94(1) DCC). A clause that departs from this power of the court is void (Article 6:94(3) DCC).
Courts use this power with restraint. According to the Supreme Court, a court may only reduce a penalty if applying the clause leads, in the circumstances, to an excessive and therefore unacceptable result. The court looks not only at the ratio between the actual loss and the penalty, but also at the nature of the contract, the content and purpose of the clause and the circumstances in which it is invoked (HR 27 April 2007, ECLI:NL:HR:2007:AZ6638, ground 5.3). In that case, the Supreme Court set aside the judgment of the court of appeal, which had applied the wrong test, and referred the case to another court of appeal.
The reverse is also possible. At the creditor’s request, the court can award additional damages on top of a penalty that replaces the statutory damages, again only if fairness manifestly requires this (Article 6:94(2) DCC).
A penalty clause in general terms and conditions can be annulled if it is unreasonably onerous for the other party (Article 6:233(a) DCC). Not every party can rely on this. Excluded are a legal entity within the meaning of 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), 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) and a party that itself repeatedly uses the same or nearly the same terms (Article 6:235(3) DCC). These rules do not apply at all between businesses that are not both established in the Netherlands (Article 6:247(2)-(3) DCC). Even outside general terms, relying on a penalty clause can in exceptional cases be unacceptable according to standards of reasonableness and fairness (Article 6:248(2) DCC).
How do you prove a breach of contract?
The party that relies on the legal consequences of facts or rights it asserts must prove them, unless a special rule or the requirements of reasonableness and fairness lead to a different allocation of the burden of proof (Article 150 Rv). If you claim damages or a penalty, you will therefore usually have to prove the contract, the obligation and the failure. If the other party relies on force majeure, it will have to prove the facts it relies on.
Such evidence can be in various forms, including documents, witnesses, and expert testimonies.
To successfully prove a contract violation in the Dutch legal system, the following steps are typically taken:
- Gathering solid evidence to support the claim. This could involve collecting emails, memos, contracts, or any written communication that clearly sets out the agreement’s terms and conditions.
- Identifying and documenting any non-compliance or deviations from the agreed terms. This includes showing attempts made to resolve the issue.
- Seeking professional legal advice. A lawyer can provide valuable insights into the strengths and weaknesses of your case and guide you through the complex legal process.
Which compensation can you claim?
Under Dutch law, remedies and compensation serve as the aggrieved party’s recourse in the event of a contract violation, offering a route to rectification and potential recompense for damages suffered.
If the other party fails to perform, you can claim performance (Article 3:296 DCC) or damages (Article 6:74 DCC), or terminate the contract (Article 6:265 DCC). Termination does not undo the contract with retroactive effect. It releases the parties from the obligations affected by it; performances already made must be undone (Article 6:271 DCC).
Damages aim to put you in the position you would have been in if the contract had been properly performed. They cover losses suffered and lost profits (Article 6:96(1) DCC), and also reasonable costs to prevent or limit loss, to establish loss and liability, and to obtain payment out of court (Article 6:96(2) DCC). If the loss is partly due to circumstances attributable to you, for example because you did not limit it, the loss is in principle divided according to the extent to which the circumstances attributable to each party contributed to it; fairness may require a different division, or that the obligation to pay damages lapses entirely or remains in full, given the differing seriousness of the faults or other circumstances (Article 6:101(1) DCC).
Which role does the Dutch court play?
In the complexities of contract disputes, Dutch courts play a central role in enforcing contractual obligations and deciding on the remedies available to the aggrieved parties.
In assessing the violation of contractual terms in the Dutch legal system, courts apply specific principles to ensure a fair and balanced resolution.
- Principle of Freedom of Contract: Dutch courts uphold the legality of the agreements freely entered into by parties. They recognize the power of parties to lay down their own terms and conditions, and their duty to fulfill them.
- Principle of Good Faith: Courts exercise the principle of good faith in contract execution. This principle implies that contracting parties must act reasonably and fairly towards each other.
- Reduction of damages: as a rule, damages compensate the full loss, not the degree of the debtor’s fault. If the loss is partly due to circumstances attributable to the injured party, the loss is in principle divided according to each party’s contribution, although fairness may lead to a different division, taking into account, for example, the differing seriousness of the faults (Article 6:101(1) DCC). The court can also reduce a statutory obligation to pay damages if full compensation would, in the circumstances, lead to clearly unacceptable consequences, taking into account the nature of the liability, the legal relationship between the parties and the financial capacity of both (Article 6:109(1) DCC).
In short, Dutch courts enforce contractual obligations and decide which remedy the injured party gets, within the limits set by the law.
A judgment of a district court can generally be appealed within three months of the date of the judgment (Article 339(1) Rv). A judgment in summary proceedings (kort geding) can be appealed within four weeks (Article 339(2) Rv).
What should you do if the other party breaches a Dutch contract?
First check the contract. Does it contain a penalty clause, a deadline for performance, a limitation of liability or a dispute resolution clause? Then choose the remedy you want. In most cases, send a written notice of default with a reasonable period for performance before you claim damages, a penalty or termination (Articles 6:82, 6:93 and 6:265(2) DCC). Keep evidence of the breach and of your loss.
If the other party still does not perform, you can go to court. In urgent matters, the interim relief judge can give an immediate provisional measure in summary proceedings (Article 254(1) Rv). See also our overview of contract law in the Netherlands.
Frequently asked questions about contract violation penalties under Dutch law
What is a breach of contract under Dutch law?
Dutch law speaks of a failure in performance (tekortkoming): a party does not perform, performs only partly or defectively, or performs too late. The other party can then claim performance, damages or termination. Damages are only due if the failure can be attributed to the debtor (Articles 6:74 and 6:75 DCC).
What is the penalty for breach of contract in the Netherlands?
There is no statutory penalty and Dutch law has no punitive damages. A party that breaches a contract must compensate the loss it causes, unless the failure cannot be attributed to it (Article 6:74 DCC). A fixed penalty is only due if the contract contains a penalty clause (Article 6:91 DCC). Unless agreed otherwise, the penalty then replaces the statutory damages (Article 6:92(2) DCC).
Can a Dutch court reduce a contractual penalty?
Yes, at the debtor’s request, but only if fairness manifestly requires this, and never below the damages due under the law (Article 6:94(1) DCC). The parties cannot exclude this power (Article 6:94(3) DCC). The Supreme Court requires that the penalty leads to an excessive and therefore unacceptable result (HR 27 April 2007, ECLI:NL:HR:2007:AZ6638).
Can you claim both a contractual penalty and damages?
Only if the contract says so. Otherwise the penalty replaces the statutory damages (Article 6:92(2) DCC). At the creditor’s request, the court can award additional damages on top of the penalty if fairness manifestly requires this (Article 6:94(2) DCC).
Do you need to send a notice of default before claiming a penalty?
Only in the cases in which a notice is also required to claim damages (Article 6:93 DCC). Usually that means a written notice with a reasonable period for performance (Article 6:82(1) DCC). No notice is needed in the cases of Article 6:83 DCC, such as an expired fixed deadline, or if the contract makes the penalty due without notice.
Primary sources
- Dutch Civil Code (Burgerlijk Wetboek), Book 3: Article 3:296
- Dutch Civil Code, Book 6: Articles 6:2, 6:74, 6:75, 6:82, 6:83, 6:91, 6:92, 6:93, 6:94, 6:96, 6:101, 6:109, 6:233, 6:235, 6:247, 6:248, 6:265, 6:267, 6:271 and 6:277
- Dutch Civil Code, Book 7: Article 7:650
- Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering): Articles 150, 254, 339 and 611a
- Supreme Court (Hoge Raad) 27 April 2007, ECLI:NL:HR:2007:AZ6638 (Intrahof/Bart Smit)
