As a principal, you may terminate an assignment agreement at any time without stating reasons according to Article 7:408 paragraph 1 Dutch Civil Code. This applies to both fixed-term and indefinite-term assignments, although notice periods and compensation obligations must be considered.
The authority to terminate an assignment differs significantly between principals and contractors. Moreover, different rules apply to professional principals compared to private individuals. Therefore, we examine both situations thoroughly, ensuring you understand exactly your position when terminating an assignment agreement under Dutch law.
What Constitutes an Assignment Agreement Under Dutch Law?
An assignment agreement obliges the contractor to perform work activities for payment on behalf of the principal, whereby the principal provides instructions regarding execution of these activities. This legal construction differs fundamentally from an employment contract, which involves an employment relationship with wage service.
In practice, this agreement occurs regularly in collaborations with freelancers, self-employed professionals, accountants, architects and lawyers. The contractor executes specific activities but remains an independent entrepreneur without employment law protection. Consequently, different rules apply when terminating the collaboration.
An assignment agreement typically contains clear arrangements regarding work activities to be performed, compensation and any notice periods. Nevertheless, questions regularly arise about possibilities for premature termination, for instance when the company takes a different direction or the collaboration does not meet expectations.
How Does Termination by the Principal Work Under Dutch Law?
The principal possesses extensive authority to terminate the assignment agreement. This authority applies regardless of whether the agreement was concluded for a fixed or indefinite term. However, this freedom includes important nuances and limitations.
Professional versus Private Principal
Private principals enjoy the most extensive termination freedom. They can always terminate immediately without compensation, even when a notice period is stated in the contract. This protection prevents private individuals from being bound long-term to contractual obligations that no longer suit their situation.
Professional principals, by contrast, must consider contractual arrangements regarding notice periods and compensation. They can indeed always terminate the agreement, but must respect the arrangements made. In absence of clear contractual provisions, a reasonable notice period applies, depending on circumstances and duration of the collaboration.
Notice Period and Irregular Termination
When the agreement contains a notice period, the professional principal must observe this term. With immediate termination without observing the agreed period, an irregular termination occurs. This can lead to compensation liability towards the contractor for non-fulfillment of contractual obligations.
Even in absence of an explicit notice period, a reasonable term may apply. This particularly applies when the contractor suffers disproportionately large disadvantage from immediate termination. Courts assess per situation what constitutes a reasonable term, whereby factors such as nature of activities, duration of collaboration and consequences for the contractor are considered.
Which Compensation Must You Pay Upon Termination in the Netherlands?
Upon termination of an assignment agreement, payment for work already performed always becomes due. The contractor receives reasonable remuneration for all activities executed until the moment of termination, regardless of termination reason.
Additionally, a professional principal may owe compensation when termination is unlawful or fails to meet contractual conditions. For instance, when an assignment is abruptly terminated while the contractor has already made considerable investments for execution.
Practice Example of Compensation Obligation
An Amsterdam marketing agency hires a freelance content specialist for a six-month campaign. After two months, the agency terminates the assignment due to internal reorganization. The content specialist rejected other clients for this assignment and now receives €8,500 wages for work performed plus €6,000 compensation for lost income over the remaining four months, because no reasonable notice period was observed.
Private principals, conversely, are only obliged to pay for work performed and expenses incurred. They need not provide compensation for missed income, which significantly strengthens the position of private individuals when terminating assignments.
When May the Contractor Terminate Under Dutch Law?
Termination options for contractors are considerably more limited than for principals. This limitation protects the principal against sudden termination of essential activities and guarantees continuity in service provision.
Indefinite-Term Agreement
Professional contractors can terminate an indefinite-term agreement, provided it does not end through completion of the assignment. Here, typically a notice period of one to two months applies, unless other arrangements are recorded in the contract. This term gives the principal time to seek replacement and ensure the transition proceeds smoothly.
For non-professional contractors, no statutory regulation exists regarding termination. The possibility of termination depends on specific circumstances and the agreement type. This makes it essential to establish clear arrangements about termination options when drafting the contract.
Fixed-Term Agreement in the Netherlands
Fixed-term agreements cannot in principle be terminated prematurely by the contractor. The contractor must complete activities until the agreed deadline or until the project is finished. This applies regardless of whether the contractor acts professionally or privately.
However, an exception exists for weighty reasons. When the working relationship becomes seriously disrupted or the contractor loses confidence in the principal, interim termination may nevertheless be justified. Situations wherein the principal makes unreasonable demands or fundamentally fails in obligations can also constitute weighty reasons.
How Do You Prevent Problems Upon Termination According to Dutch Law?
Prevention avoids many legal disputes when terminating an assignment agreement. By making clear arrangements beforehand and following correct procedures, you minimize the risk of conflicts and damage claims considerably.
Contractual Recording of Termination Rules
Always explicitly record in the assignment agreement when and how parties can terminate. Mention concrete notice periods, for example one month for assignments up to six months and two months for longer collaborations. Additionally, specify whether written termination is mandatory and through which channel this must occur.
For professional principals, it is advisable to also include arrangements regarding compensation. Determine, for instance, that with regular termination a maximum of 25% of remaining contract value is owed as compensation. This prevents discussions afterwards about the amount of any damage.
Moreover, as a professional principal you can contractually exclude interim termination by the contractor. Note: private principals cannot contractually limit the general termination right, as this concerns mandatory law.
Correct Execution of Termination
Always terminate in writing via registered letter or email with read confirmation. State in the termination letter minimally the termination date, commencement date of termination considering the notice period, and a brief motivation for termination. Although motivation is not always legally required, it does promote transparency.
Communicate termination timely to the contractor and avoid ambiguity regarding the termination date. When doubting the correct notice period, you better choose a slightly longer term than risk irregular termination with possible damage claims.
Pay all outstanding invoices for work performed directly after termination. This prevents disputes about financial settlement and demonstrates your good intentions, which can be important in any legal proceedings.
Do you want certainty about your legal position when terminating an assignment? Our specialized lawyers analyze your agreement and advise on the correct termination procedure, enabling you to terminate without legal complications.
What Are the Alternatives to Termination in Dutch Law?
Besides termination, other paths exist to end an assignment agreement. These alternatives can in certain situations be more suitable and lead to fewer legal complications or financial consequences.
Dissolution of the Agreement
With an attributable shortcoming by one party, the other party can claim dissolution of the agreement. This requires prior notice of default, wherein the negligent party receives a reasonable term to still fulfill obligations. With non-compliance within this term, the right to dissolution arises.
Dissolution leads to termination of all future obligations and can moreover provide entitlement to compensation. This differs from termination, whereby often only future obligations end but no claim to compensation exists. In practice, dissolution particularly occurs with serious breach of contract, such as non-delivery of agreed work activities or non-payment of invoices.
Termination by Mutual Agreement
Parties can always decide jointly to terminate the agreement. This solution offers maximum flexibility and prevents legal disputes about the lawfulness of termination. Record arrangements regarding termination in writing, including the end date and any financial arrangements.
Mutual consultation works particularly well when both parties see advantage in termination. For instance, because the contractor has found a more interesting assignment and the principal prefers working with a different specialist. Through constructive consultation, parties can often reach a win-win situation.
Appeal to Nullification or Invalidity
In exceptional cases, an assignment agreement can be invalid or voidable. Invalidity arises, for example, with an unlawful cause or content of the agreement. Nullification is possible with error, fraud or abuse of circumstances when concluding the contract.
However, these legal constructions rarely occur with standard assignment agreements. They generally require legal assistance and can lead to complex procedures. Therefore, they form only in very specific situations a practical alternative to regular termination.
Which Mistakes Must You Avoid Upon Termination Under Dutch Law?
Despite the apparent simplicity of termination, principals and contractors regularly make crucial errors leading to unnecessary legal proceedings and damage claims. By knowing these pitfalls, you avoid costly mistakes.
Verbal Termination Without Written Confirmation
Although verbal termination can be legally valid, absence of written evidence often leads to disputes. The contractor can deny that termination occurred or contest when it was expressed. This makes evidence provision in potential litigation complex and expensive.
Therefore always ensure written confirmation of termination, preferably via registered letter or email with read confirmation. This creates clear evidence regarding the moment of termination and commencement date of termination, preventing legal uncertainty.
Ignoring Contractual Notice Periods
Many principals underestimate the importance of contractual notice periods and terminate the agreement directly. This leads to irregular termination with possibly far-reaching financial consequences. With a notice period of two months, you may consequently be obliged to pay wages for those two months regardless or provide compensation.
Therefore always first check the agreement before terminating. When no explicit notice period is stated, consult with a legal advisor about what constitutes a reasonable term in your situation. This prevents unpleasant surprises afterwards.
No Settlement of Outstanding Obligations
Some principals believe that termination ends all obligations, including payment for work already performed. This is incorrect and can lead to payment claims or attachment by the contractor. Approximately 70% of disputes after termination concern unpaid invoices for completed activities.
Make an overview immediately after termination of all outstanding obligations and arrangements regarding completion of ongoing activities. Pay invoices within the payment term and communicate clearly about any discussion points. This promotes professional completion and prevents legal escalation.
Contact our law firm for personal legal advice about terminating your assignment agreement. We analyze your specific situation and guide you through a legally correct termination without financial risks.
Overview of Termination Options Per Party in the Netherlands
Termination rules vary greatly per party type and agreement duration. This overview provides a clear total picture of who may terminate when and under which conditions.
Professional Principal:
- Fixed-term agreement: termination always possible, observing notice period
- Indefinite-term agreement: termination always possible, observing notice period
- Compensation possible with irregular termination
- Wages owed for work performed
Private Principal:
- Fixed-term agreement: immediate termination always possible
- Indefinite-term agreement: immediate termination always possible
- No compensation owed
- Only wages and expenses incurred owed
Professional Contractor:
- Fixed-term agreement: only with weighty reasons
- Indefinite-term agreement: termination possible with term of 1-2 months
- Contractual deviation possible
- Notice period can be contractually established
Non-Professional Contractor:
- Fixed-term agreement: depending on circumstances and agreement type
- Indefinite-term agreement: depending on circumstances and agreement type
- No specific statutory regulation
- Contractual arrangements essential
These differences underscore the importance of clear contractual arrangements when entering an assignment agreement. By creating clarity beforehand about termination options, you prevent discussions and conflicts with eventual termination. Approximately 85% of disputes regarding termination arise with agreements without explicit termination provisions.
