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Under Dutch law, you can dissolve (ontbinden) a B2B contract in whole or in part if the other party fails to perform, unless the failure, given its special nature or minor significance, does not justify dissolution with its consequences (Article 6:265(1) Dutch Civil Code, DCC). Usually the other party must first be in default. Dissolution has no retroactive effect, and businesses can agree their own dissolution clause.
This page explains when you can dissolve a contract for non-performance under Dutch law, how you do it, what the consequences are and what a 2023 judgment of the Dutch Supreme Court means for dissolution clauses in B2B contracts. Our commercial law lawyers in the Netherlands advise foreign businesses on contracts governed by Dutch law.
How does contract dissolution work in B2B agreements?
Many rules of Dutch contract law are default rules. Businesses may depart from them in their contract. According to the Dutch Supreme Court, this also applies to the main rule on dissolution for non-performance in Article 6:265(1) of the Dutch Civil Code (Burgerlijk Wetboek or BW): parties are in principle free to agree a different arrangement (ECLI:NL:HR:2023:1071, ground 3.2).
Article 6:265 DCC applies to every failure in performance (tekortkoming), often called breach of contract or wanprestatie. The failure does not have to be attributable to the other party: a failure caused by force majeure can also justify dissolution. Whether the failure can be attributed mainly matters for damages (Article 6:74(1) DCC and Article 6:277 DCC).
According to Article 6:265(1) DCC, every failure of a party to perform one of its obligations gives the other party the right to dissolve the contract in whole or in part, unless the failure, given its special nature or minor significance, does not justify dissolution with its consequences (the “tenzij-bepaling” or exception clause). A minor delay or defect will therefore not always be enough. A party cannot base dissolution on a failure in the performance of an obligation for which it is itself in creditor’s default (Article 6:266(1) DCC).
When do you need a notice of default before dissolving a contract?
Insofar as performance is not permanently or temporarily impossible, the right to dissolve only arises once the debtor is in default (verzuim) (Article 6:265(2) DCC). Default usually arises after a written notice of default (ingebrekestelling) that gives the debtor a reasonable period to perform, if performance does not follow within that period (Article 6:82(1) DCC). The debtor is not in default insofar as the delay cannot be attributed to it or performance is already permanently impossible (Article 6:81 DCC).
Default arises without a notice of default when a fixed deadline for performance expires without performance, unless it appears that the deadline has a different purpose, or when you must infer from a statement of the debtor that it will fail to perform (Article 6:83(a) and (c) DCC). Read more about non-performance of contractual claims under Dutch law.
How do you dissolve a B2B contract under Dutch law?
You dissolve the contract by a written statement to the other party. If the contract was concluded electronically, it can also be dissolved by an electronic statement (Article 6:267(1) DCC). You can also ask the court to pronounce the dissolution (Article 6:267(2) DCC). Some contracts can only be dissolved by the court. For example, a lease of a building can only be dissolved by the court on the ground that the tenant has failed to perform its obligations, apart from statutory exceptions, and this rule cannot be departed from to the detriment of the tenant (Article 7:231(1) and (3) DCC).
Do not wait too long. A legal claim for dissolution on the ground of a failure in performance becomes time-barred five years after the start of the day following the day on which the creditor became aware of the failure, and in any case twenty years after the failure arose (Article 3:311(1) DCC). Once the claim is time-barred, you can no longer dissolve by a written statement either, unless you dissolve to defend yourself against a claim or other legal measure based on the contract (Article 6:268 DCC). For the other ways to end a contract, see our page on terminating a contract under Dutch law.
What are the consequences of dissolution of a contract?
- No retroactive effect: dissolution does not work retroactively. However, an offer to perform made after dissolution has been claimed has no effect if the court pronounces the dissolution (Article 6:269 DCC).
- Release and undoing: dissolution releases the parties from the obligations affected by it. To the extent these have already been performed, the legal basis for that performance remains, but the parties must undo the performances they have received (Article 6:271 DCC). If the nature of a performance excludes undoing it, for example services already provided, its value at the time of receipt must be compensated instead (Article 6:272(1) DCC). If the performance did not meet the obligation, that compensation is limited to the value the performance actually had for the recipient at that time in the circumstances (Article 6:272(2) DCC).
- Partial dissolution: a partial dissolution means a proportional reduction of the performances on both sides, in quantity or quality (Article 6:270 DCC).
- Damages: the party whose failure gave grounds for dissolution must compensate the other party for the damage it suffers because the contract is dissolved instead of performed by both sides. If that failure cannot be attributed to that party, this only applies within the limits of Article 6:78 DCC (Article 6:277(1)-(2) DCC).
What does recent case law say about tailored dissolution clauses?
In a judgment of 7 July 2023, the Dutch Supreme Court (Hoge Raad) answered the question whether parties can agree a dissolution arrangement that departs from Article 6:265(1) DCC, in particular from the exception clause (ECLI:NL:HR:2023:1071, ground 2.1). The case concerned a dispute between De Wielingen Vastgoed B.V. (the lessor) and Beachhotel De Wielingen B.V. (the lessee) about the lessor’s failure to comply with guarantees in a lease agreement.
The cantonal court held that the lessor had breached two guarantees, but that the dissolution was not justified, given the nature and extent of the failure, the nature of the lease and the lessor’s interest in its continuation. It declared that the dissolution had no legal effect and ordered the lessee to compensate the damage caused by the unjustified dissolution. The Court of Appeal of ‘s-Hertogenbosch upheld that decision on this point. It considered that the exception clause in Article 6:265(1) DCC is based on reasonableness and fairness and that the dissolution clause in the lease did not change this (ground 2.5).
What were the facts of the Beachhotel De Wielingen case?
Lessor and Lessee entered into a lease agreement for a hotel in Cadzand-Bad at the end of June 2018. Article 12 of the lease agreement, titled “Guarantees,” contained various provisions, including the following (informal translation):
- Lessor guarantees that the current operation of the hotel, restaurant, swimming pool, wellness facilities, etc., complies with all requirements related to public health, fire safety, and other safety aspects, as well as all relevant government regulations.
- Lessor also guarantees that supporting equipment necessary for the hotel’s operation and the associated hospitality functions functions properly according to standard industry norms.
Furthermore, Article 12(b) stipulated that if Lessor did not comply, or did not fully comply, with one or more of the guarantees set out in Articles 6 and 12, and/or if there was a breach, it would forfeit a penalty of €50,000.00 per violation, payable immediately. Lessee would then have the right to immediately dissolve the agreement (in Dutch: “ontbinden”), in addition to claiming compensation for damages resulting from the dissolution, such as loss of revenue and legal costs.
In a letter of 24 August 2018, the lessee told the lessor that several guarantees in the lease had been breached, that the lessor was liable for damages and had forfeited contractual penalties, and that the lessee suspended its payments. In a letter of 25 October 2018, the lessee declared the lease dissolved with immediate effect and stopped operating the hotel. The dissolution letter expressly relied on Article 12(b) of the lease.
In cassation, the lessee argued that Article 6:265(1) DCC is default law and that the parties had departed from the exception clause through the guarantees in Article 12(a) and the dissolution clause in Article 12(b) of the lease. Because the lessor had breached the guarantees, the Court of Appeal should not have assessed the dissolution under the exception clause (ground 3.1).
What did the Supreme Court decide?
The Supreme Court agreed with the lessee. Article 6:265(1) DCC is a default rule (aanvullend recht), so parties are in principle free to depart from it by contract (ground 3.2).
The parties had agreed that the lessee could dissolve the lease with immediate effect if the lessor did not fully comply with one or more of the guarantees in Articles 6 and 12 of the lease (Article 12(b)). The Court of Appeal had found that the lessor breached guarantees, and that finding was not challenged in cassation. Whether the dissolution was effective therefore had to be assessed under what the parties had agreed, which required an interpretation of Article 12(b). The Supreme Court quashed the judgment and referred the case to the Court of Appeal of Arnhem-Leeuwarden for that purpose (ground 3.2 and decision). The Supreme Court therefore did not itself decide that the dissolution was valid.
How do you draft an effective dissolution clause?
The judgment shows that a clear dissolution clause can change the statutory test. If the clause applies, the court assesses the dissolution under the contract, not under the exception clause of Article 6:265(1) DCC. Whether the clause applies depends on its interpretation. Separately, if Dutch law applies, a rule that applies between the parties under their contract does not apply to the extent that this would be unacceptable by standards of reasonableness and fairness in the circumstances (Article 6:248(2) DCC).
It reinforces the notion that a contract should not be treated as a mere copy-and-paste exercise, but as a carefully drafted instrument that adequately addresses the specific needs and potential disputes in the Netherlands that may arise between the parties.
When you draft a dissolution clause for a B2B contract in the Netherlands, consider at least the following points:
- Which failures give a right to dissolve: name the obligations or guarantees, and state whether every failure counts, regardless of its significance.
- Whether a notice of default or a cure period is required first, or whether dissolution with immediate effect is possible.
- How the dissolution must be declared, for example in writing and to which address (compare Article 6:267(1) DCC).
- Whether partial dissolution is possible and what happens to performances already made (compare Articles 6:270 to 6:272 DCC).
- Which damages or penalties are due after dissolution (compare Article 6:277 DCC).
Frequently asked questions about dissolution of B2B contracts under Dutch law
What does Article 6:265 of the Dutch Civil Code say in English?
There is no official English translation. In short, Article 6:265(1) DCC says that every failure of a party to perform one of its obligations gives the other party the right to dissolve the contract in whole or in part, unless the failure, given its special nature or minor significance, does not justify dissolution with its consequences. Article 6:265(2) DCC adds that, insofar as performance is not permanently or temporarily impossible, the right to dissolve only arises once the debtor is in default.
What are the requirements for dissolution for non-performance?
There must be a failure in performance, and its special nature or minor significance must not stand in the way of dissolution (Article 6:265(1) DCC). The debtor must usually be in default, unless performance is permanently or temporarily impossible (Article 6:265(2) DCC). You cannot dissolve on the basis of a failure for which you are yourself in creditor’s default (Article 6:266(1) DCC). You then dissolve by a written statement or ask the court to do so (Article 6:267 DCC).
Does dissolution of a contract have retroactive effect under Dutch law?
No. Dissolution has no retroactive effect (Article 6:269 DCC). It releases the parties from the obligations affected by it. Performances already received must be undone, or their value compensated if undoing is not possible (Articles 6:271 and 6:272(1) DCC).
Can a B2B contract depart from the statutory rules on dissolution?
Yes, in principle. The Dutch Supreme Court held that Article 6:265(1) DCC is a default rule, so parties are in principle free to depart from it by contract (ECLI:NL:HR:2023:1071, ground 3.2). If Dutch law applies, a contractual rule still does not apply to the extent that this would be unacceptable by standards of reasonableness and fairness (Article 6:248(2) DCC). Contracts with consumers are subject to stricter rules: a clause in general terms and conditions that excludes or limits the consumer’s statutory right to dissolve is deemed unreasonably onerous (Article 6:236(b) DCC).
Do you need to go to court to dissolve a contract?
Usually not. A written statement to the other party is enough (Article 6:267(1) DCC), but you can also ask the court to pronounce the dissolution (Article 6:267(2) DCC). Some contracts can only be dissolved by the court, such as a lease of a building where the tenant has failed to perform, apart from statutory exceptions (Article 7:231(1) DCC).
Primary sources
- Dutch Civil Code (Burgerlijk Wetboek), Book 3: Article 3:311
- Dutch Civil Code, Book 6: Articles 6:74, 6:78, 6:81, 6:82, 6:83, 6:236, 6:248, 6:265, 6:266, 6:267, 6:268, 6:269, 6:270, 6:271, 6:272 and 6:277
- Dutch Civil Code, Book 7: Article 7:231
- Dutch Supreme Court 7 July 2023, ECLI:NL:HR:2023:1071 (Beachhotel De Wielingen)
For any questions or further inquiries regarding the content of this article or other legal matters, please feel free to contact Remko Roosjen or any other member of our Commercial Law (Business Law) department.
