Contractual penalty under Dutch law

Published on 19 April 2022 · Last updated 24 October 2026

A contractual penalty (boetebeding) is a clause under which a party that fails to perform must pay money or provide another performance, whether to compensate loss or only to encourage performance (Article 6:91 of the Dutch Civil Code). Such clauses are valid in principle. As a rule, the penalty replaces statutory damages, and a court can reduce it only if fairness manifestly requires this.

This page explains, for foreign businesses, when a penalty falls due, how it relates to performance and damages, and when a Dutch court can reduce it. Our Dutch lawyers also advise on Challenging Penalty Clauses in the Netherlands.

What is a contractual penalty under Dutch law?

Dutch law regulates penalty clauses in Articles 6:91 to 6:94 of the Dutch Civil Code (Burgerlijk Wetboek), as part of general Dutch contract law.

Any clause that obliges the debtor to pay money or to provide another performance if it fails to perform counts as a penalty clause. The label does not matter: a clause called “fixed compensation”, “liquidated damages” or “fine” falls under these rules if it fits that definition.

The definition covers two purposes. A penalty can fix the compensation in advance, so that the creditor does not have to prove the amount of its loss. It can also serve only as an incentive to perform. The same statutory rules apply to both.

A contractual penalty is not the same as a dwangsom. A dwangsom is a sum that a court, at the request of a party, orders the other party to pay if it does not comply with the court’s main order. It cannot be imposed with an order to pay money, and it cannot be forfeited before the judgment has been served (Article 611a(1) and (3) of the Dutch Code of Civil Procedure). A contractual penalty follows from the contract itself.

Which rules govern contractual penalties?

The core rules on penalty clauses in contract law in the Netherlands are short:

• Definition: any clause requiring the debtor to pay a sum of money or provide another performance if it fails to perform, whether to compensate loss or only to encourage performance (Article 6:91).
• No double claim: the creditor cannot claim both the penalty and performance of the obligation to which the penalty is attached (Article 6:92(1)).
• Penalty replaces damages: what is due under a penalty clause replaces statutory damages (Article 6:92(2)).
• Attributable failure: the creditor cannot claim the penalty if the failure cannot be attributed to the debtor (Article 6:92(3)). A failure is not attributable if it is not due to the debtor’s fault and is not for its account by law, juristic act or generally accepted views (Article 6:75).
• Notice of default: a reminder or other prior notice is needed to claim the penalty in the same cases in which it is needed to claim statutory damages (Article 6:93).
• Reduction: at the debtor’s request, the court can reduce the penalty if fairness manifestly requires this, but never below the statutory damages for the failure. Clauses that exclude this power are void (Article 6:94(1) and (3)).
• Additional damages: at the creditor’s request, the court can award additional damages on top of a penalty that is intended to replace statutory damages, again only if fairness manifestly requires this (Article 6:94(2)).

These rules apply to every penalty clause in a contract governed by Dutch law. Extra rules apply to penalty clauses in general terms and conditions and in employment contracts (see below).

Article 6:95 of the Dutch Civil Code is often cited in this context, but it does not deal with penalties. It defines the loss that must be compensated under a statutory obligation to pay damages. That matters here, because a court cannot reduce a penalty below that amount. Article 6:95(1) reads, in translation:

‘The damage to be compensated on the basis of a legal obligation to pay compensation consists of material damage and other damage, the latter to the extent that the law entitles it to compensation.‘

Material damage includes both loss suffered and lost profit (Article 6:96(1)). It also includes certain reasonable costs, such as costs to prevent or limit damage, costs to establish damage and liability, and costs of out-of-court collection (Article 6:96(2)).

The Supreme Court (Hoge Raad) has explained the standard for reduction. Because a court may only reduce a penalty if fairness manifestly requires it, it may only use this power if applying the penalty clause leads, in the given circumstances, to an excessive and therefore unacceptable result. The court must look not only at the relationship between the actual loss and the amount of the penalty, but also at the nature of the contract, the content and purpose of the clause and the circumstances in which it was invoked (Hoge Raad 27 April 2007, Intrahof / Bart Smit, ECLI:NL:HR:2007:AZ6638, r.o. 5.3).

In that case the court of appeal had reduced the penalty because of the “too disproportionate” gap between the penalty and the loss, which it equated with the statutory interest on the late rent. The Supreme Court held that this misapplied the statutory standard, quashed the judgment of the court of appeal and referred the case to the Amsterdam Court of Appeal. See also our page on mitigation of a Dutch penalty.

Article 6:94(3) only makes the court’s power to reduce mandatory. In practice, contracts often provide that the penalty is due in addition to the right to claim full damages. Without such a provision, a creditor that wants more than the penalty has to rely on Article 6:94(2).

A penalty clause does not have to be in writing to be valid: unless the law provides otherwise, declarations can be made in any form (Article 3:37(1) DCC). An oral penalty clause is, however, much harder to prove. Employment contracts are an exception: a penalty clause there must be agreed in writing (Article 7:650(2) DCC).

A penalty falls due because of the contract and the debtor’s failure to perform; a court does not impose it. If the parties disagree, the court decides whether the penalty fell due and, if the debtor asks for it, whether it should be reduced.

Does the creditor have to send a notice of default first?

Often, yes. Under Article 6:93, a notice is needed to claim the penalty in the same cases in which it is needed to claim statutory damages. As a rule, the debtor is only in default (verzuim) after a written notice of default (ingebrekestelling) that gives it a reasonable period to perform, and performance within that period does not follow (Article 6:82(1)).

Default occurs without a notice in the cases listed in Article 6:83. Examples are a fixed deadline for performance that expires without performance, unless the deadline appears to have a different purpose, and a statement by the debtor from which the creditor must conclude that the debtor will fail to perform.

No notice is needed either where performance has already become permanently impossible (Article 6:74(2) and 6:81).

For drafting, this means that a penalty which should run from a specific date works best with a fixed deadline for performance. Where a notice is needed, send it in writing and give a reasonable period to perform.

Can you claim both the penalty and performance?

Not as a rule. The creditor cannot claim both the penalty and performance of the obligation to which the penalty is attached (Article 6:92(1)).

The creditor must therefore choose: insist on performance, for example delivery of the goods, or claim the penalty.

How this works out in a specific case depends on the wording of the clause and on the obligation to which the penalty is attached. Contracts therefore often state expressly whether the penalty is due in addition to performance.

When is a penalty clause triggered?

A penalty clause is triggered when the debtor fails to perform the obligation to which the clause is attached, and the failure can be attributed to it (Article 6:92(3)). In short:

1. There is a failure to perform the obligation that the clause covers, such as late delivery or a breach of a non-compete or confidentiality obligation.
2. The failure is attributable to the debtor: it is due to its fault, or it is for its account by law, juristic act or generally accepted views (Article 6:75).
3. Where Article 6:93 requires it, the debtor has received a notice of default and has not performed within the reasonable period.
4. The creditor does not have to prove that it suffered loss; the clause is triggered by the failure itself.

Beyond attribution, the debtor’s degree of fault does not decide whether the penalty fell due. It can, however, be one of the circumstances the court weighs if the debtor asks for a reduction.

How are penalty clause disputes resolved?

Most disputes about penalty clauses turn on three questions: did the penalty fall due, how much is due, and should the court reduce it? If the parties cannot settle, the creditor can claim the penalty in court or, if the contract contains an arbitration clause, in arbitration. See also our page on litigation in the Netherlands.

Dutch law has no general rule that parties must first try internal dispute resolution or mediation before going to court. A contract can, however, provide for an escalation, mediation or arbitration procedure.

A debtor that wants a reduction must ask for it: the court can reduce a penalty only at the request of the debtor (Article 6:94(1)).

Besides the penalty, the usual remedies for breach remain relevant: performance (nakoming), damages (schadevergoeding) and termination (ontbinding), subject to the rules on penalty clauses described above.

How do you enforce a penalty clause?

To enforce a penalty clause, a creditor typically takes these steps:

• Check the clause: which obligation it covers, the amount (fixed, per day or per breach), any cap, and whether it is due in addition to performance or damages.
• Check whether the debtor is in default, and send a written notice of default where Article 6:93 requires it.
• Claim payment in writing, with a calculation of the penalty.
• If the debtor does not pay, start proceedings in court or arbitration. To recover the penalty from the debtor’s assets, the creditor needs an enforceable title, usually a court judgment.

Expect the debtor to ask for a reduction. The threshold is high (see below), but the court will consider mitigating circumstances, such as the relationship between the penalty and the actual loss.

Can you claim damages on top of a contractual penalty?

As a rule, no. What is due under a penalty clause replaces statutory damages (Article 6:92(2)). If the actual loss turns out to be higher than the penalty, the creditor is in principle limited to the penalty.

There are two ways around this. First, the contract can provide that the penalty is due in addition to damages; Article 6:94(3) only makes the court’s power to reduce mandatory.

Second, at the creditor’s request the court can award additional damages on top of a penalty intended to replace statutory damages, but only if fairness manifestly requires this (Article 6:94(2)).

The reverse also applies. A penalty can be claimed even if the creditor suffered no loss, because the clause does not depend on proof of loss. If the debtor asks for a reduction, the court cannot reduce the penalty below the statutory damages for the failure (Article 6:94(1)).

Are penalty clauses allowed in consumer and employment contracts?

Yes, but with extra protection. If a penalty clause is part of general terms and conditions (algemene voorwaarden), the other party can annul it if it is unreasonably onerous. The court takes into account the nature and content of the contract, the way the terms came about, the mutually recognisable interests of the parties and the other circumstances (Article 6:233(a) DCC).

Not every counterparty can rely on this. It is not available to a legal entity referred to in Article 2:360 DCC that, when the contract was concluded, had last published its annual accounts (or to which Article 2:403(1) was last applied at that time), to another party that at that time had fifty or more people working for it or for which a filing under the Trade Register Act 2007 showed this, or to a party that itself repeatedly uses the same or almost the same general terms (Article 6:235(1) and (3)).

For consumers, also check the black and grey lists in Articles 6:236 and 6:237 for related clauses. For example, a clause that obliges a consumer to pay a sum when the contract ends other than because of the consumer’s own breach is presumed unreasonably onerous, unless it is a reasonable compensation for loss suffered or profit lost (Article 6:237(i)).

Between businesses that are not both established in the Netherlands (what counts is the main establishment or, if the contract is to be performed by another establishment, that establishment: Article 6:247(3)), the Dutch rules on general terms and conditions (Articles 6:231-6:247) do not apply, whatever law governs the contract (Article 6:247(2)). If Dutch law applies, the penalty clause remains subject to Articles 6:91-6:94 and, among other things, to reasonableness and fairness (Article 6:248(2)).

Employment contracts have their own regime. An employer can only stipulate a penalty for breach of the rules of the employment contract if the contract states the rules whose breach is penalised and the amount of the penalty. The clause must be in writing and state the purpose of the penalty, which may not benefit the employer personally, and the penalties imposed in one week may not exceed half a day’s wages.

Clauses contrary to these rules are void, although some of them can be set aside in writing for employees whose hourly wage exceeds the minimum wage; the court can then reduce an excessive penalty (Article 7:650 DCC).

How do you draft an enforceable penalty clause?

When drafting a penalty clause under Dutch law, cover at least these points:

• Which obligation the penalty is attached to, described precisely.
• The amount: a fixed sum, a sum per day of delay or per breach, and a maximum where appropriate.
• Whether the penalty is due in addition to performance (Article 6:92(1)) and in addition to damages (Article 6:92(2)).
• When the penalty starts to run, and whether a fixed deadline applies so that no notice of default is needed (Articles 6:93 and 6:83).
• Whether the clause is part of general terms and conditions; if so, the test of Article 6:233(a) (unless Article 6:235 or 6:247(2) excludes it) and, if the counterparty is a consumer, the black and grey lists of Articles 6:236 and 6:237.

There is no statutory requirement that the penalty reflects an estimate of the loss. A penalty that exceeds the actual loss is therefore not void for that reason alone.

The real check is the court’s power to reduce it under Article 6:94(1), and a penalty that is proportionate to the interest it protects is less exposed to that risk.

What are the consequences of not complying with a contract?

The consequences of failing to comply with a contract can be serious. Dutch law gives the injured party a set of remedies, and a penalty clause changes how those remedies work in practice.

• Performance: the creditor can ask the court to order the debtor to perform (nakoming), unless the law, the nature of the obligation or a juristic act provides otherwise (Article 3:296 DCC).
• Damages: an attributable failure obliges the debtor to compensate the loss; unless performance is already permanently impossible, the debtor must first be in default (Article 6:74). Where a penalty clause applies, the penalty replaces those damages as a rule (Article 6:92(2)).
• Termination: every failure to perform gives the other party the right to terminate (ontbinden) the contract in whole or in part, unless the failure, given its special nature or minor importance, does not justify termination. Unless performance is permanently or temporarily impossible, the debtor must first be in default (Article 6:265).

A Dutch penalty clause is in principle valid and enforceable. It does not have to represent a pre-estimate of the loss.

The court can, however, reduce an agreed penalty at the debtor’s request if fairness manifestly requires this (Article 6:94(1)).

Which remedies does Dutch law provide for breach of contract?

When a contract is breached, Dutch law offers several remedies. Which one fits depends on the seriousness of the breach, the wording of the contract and the commercial outcome you want to reach.

Some remedies you can invoke yourself, without going to court. If the other party does not perform its obligation, you can suspend performance of your own obligations that are its counterpart, and in the case of partial or improper performance only to the extent the failure justifies this (Article 6:262), and you can terminate the agreement by a written statement (Article 6:267(1)).

Termination generally requires that the other party is in default, so a written notice of default often comes first.

Other remedies require a court. A Dutch court can order specific performance, award compensation for the loss you can demonstrate, or declare the contract terminated. Dutch law does not recognise punitive damages: compensation is aimed at the loss actually suffered, not at punishing the party in breach.

These remedies can often be combined. A penalty clause sits alongside them, which raises the question of how far a court can interfere with a penalty the parties agreed themselves.

When can a court reduce a contractual penalty?

A penalty clause agreed between commercial parties is binding, but it is not beyond review. A Dutch court has the power to reduce an agreed penalty, and the parties cannot contract that power away (Article 6:94(3)).

The threshold is deliberately high. A court can only reduce a penalty if fairness manifestly requires it (indien de billijkheid dit klaarblijkelijk eist, Article 6:94(1)): applying it in full must lead to an excessive and therefore unacceptable result in the circumstances of the case. A high penalty compared with the loss is not enough on its own (Intrahof / Bart Smit, ECLI:NL:HR:2007:AZ6638, r.o. 5.3).

In practice the court looks at the relationship between the penalty and the actual loss, the nature of the contract, the content and purpose of the clause and the circumstances in which it was invoked. The position of the parties can also play a role; in Intrahof / Bart Smit, the court of appeal regarded the tenant, which rented several shops and had its own property department, as a party equal to the landlord. A penalty agreed between two professional parties of comparable bargaining strength is less likely to be reduced than one imposed on a much weaker counterparty. Even after a reduction, the creditor keeps at least the statutory damages for the failure (Article 6:94(1)).

This matters when you draft the clause. A penalty that is proportionate to the interest it protects, and that is clearly linked to a defined breach, is the one most likely to survive a challenge. A round figure with no relation to the underlying interest invites a request for reduction.

Frequently asked questions about contractual penalties under Dutch law

Can a contractual penalty be claimed if there is no loss?

Yes. A penalty clause does not depend on proof of loss: any clause that requires a payment on a failure to perform is a penalty clause, whether it aims to compensate loss or only to encourage performance (Article 6:91 DCC). The absence of loss can, however, be a reason for the debtor to ask the court for a reduction, which is only possible if fairness manifestly requires it (Article 6:94(1)).

Does a contractual penalty require a notice of default?

It depends. A notice is needed in the same cases as for claiming statutory damages (Article 6:93 DCC). Usually that is a written notice giving a reasonable period to perform (Article 6:82(1)). No notice is needed in the cases of Article 6:83, for example when a fixed deadline expires without performance, unless the deadline appears to have a different purpose.

What does Article 6:95 of the Dutch Civil Code say?

Article 6:95(1) DCC provides that the damage to be compensated under a statutory obligation to pay damages consists of material damage and other loss, the latter only to the extent the law gives a right to it. Article 6:95(2) adds that the right to compensation for non-material loss cannot be attached, and that for it to pass under universal title it is sufficient that the entitled person has told the other party that it claims compensation. Article 6:95 does not regulate penalty clauses; those rules are in Articles 6:91 to 6:94.

Is a penalty clause in an employment contract valid in the Netherlands?

Only if it meets Article 7:650 DCC: a written agreement that states the rules whose breach is penalised, the amount of the penalty and its purpose, which may not benefit the employer personally. Penalties imposed in one week may not exceed half a day’s wages. Some of these rules can be set aside in writing for employees whose hourly wage exceeds the minimum wage; the court can then reduce an excessive penalty.

What is the difference between a contractual penalty and a dwangsom?

A contractual penalty (boetebeding) is agreed by the parties and becomes due when the debtor fails to perform (Article 6:91 DCC). A dwangsom is ordered by a court, at a party’s request, to secure compliance with a court order. It cannot be imposed with an order to pay money, and it cannot be forfeited before the judgment has been served (Article 611a(1) and (3) of the Dutch Code of Civil Procedure).

Primary sources

• Dutch Civil Code (Burgerlijk Wetboek) Book 3: Articles 3:37 and 3:296
• Dutch Civil Code Book 6: Articles 6:74, 6:75, 6:81, 6:82, 6:83, 6:91, 6:92, 6:93, 6:94, 6:95, 6:96, 6:233, 6:235, 6:236, 6:237, 6:247, 6:248, 6:262, 6:265 and 6:267
• Dutch Civil Code Book 7: Article 7:650
• Dutch Code of Civil Procedure (Wetboek van Burgerlijke Rechtsvordering): Article 611a
• Hoge Raad 27 April 2007, Intrahof / Bart Smit, ECLI:NL:HR:2007:AZ6638 (r.o. 5.3)

Conclusion

Under Dutch law, a contractual penalty is a valid way to secure performance. It falls due on an attributable failure to perform, after a notice of default where one is required, and without proof of loss.

As a rule, it replaces statutory damages and cannot be claimed together with performance of the same obligation (Article 6:92).

A court can only reduce a penalty if fairness manifestly requires this, and never below statutory damages (Article 6:94(1)). Extra rules apply to penalty clauses in general terms and conditions and in employment contracts (Articles 6:233 and 7:650).

Clear drafting is the best protection for both parties.