A Dutch lawyer terminating a long-term contract assesses the legal validity of the termination, determines a reasonable notice period under Article 6:248 of the Dutch Civil Code, and advises on potential compensation obligations to prevent liability and costly disputes.
Under Dutch law, Long-term contracts involve continuous or recurring performance over extended periods, including Dutch supply agreements, distribution contracts under Dutch law, and partnership arrangements. The absence of specific statutory rules for Dutch distribution agreements, for example, makes professional legal guidance essential when terminating these long-term agreements in the Netherlands. Without proper termination procedures, you risk damage claims that lead to prolonged proceedings in approximately 75% of cases.
When Can You Terminate a Long-Term Contract Under Dutch Law?
A long-term contract under Dutch law for an indefinite period is generally always terminable, even without contractual termination provisions. However, please note that a proper notice period must be taken into account (and sometimes even a compensation for damages). Only in rare circumstances it is not possible to terminate the Dutch agreement. Fixed-term commercial contracts under Dutch law without termination clauses can only be terminated under compelling circumstances such as structural non-performance.
The Dutch Supreme Court clarified the rules for terminating long-term contracts in the Goglio/SMQ Group ruling (ECLI:NL:HR:2018:141). A legal specialist analyses which category applies to your specific situation:
- Fixed term with termination clause: termination according to contractual provisions, unless reasonableness and fairness impose additional requirements
- Fixed term without termination clause: no interim termination possible, except in cases of structural breach of contract
- Indefinite term with termination clause: termination pursuant to contract, with potential supplementary conditions
- Indefinite term without termination clause: termination permitted, provided reasonableness requirements are satisfied
How Does a Lawyer Determine a Reasonable Notice Period in the Netherlands?
The reasonable notice period depends on the content of the Dutch law contract, duration of the collaboration, the degree of interdependence between parties, investments made, and the foreseeability of termination. A one-month notice period following years of cooperation is in genenral insufficient under Dutch standards.
Article 6:248(1) of the Dutch Civil Code establishes that the requirements of reasonableness and fairness may impose additional conditions on termination. The Court of Appeal recently ruled in a case against logistics company DPD that a contractual one-month notice period was unreasonably short following collaborations of thirteen and seven years respectively. The court deemed notice periods of two to three months appropriate.
A contract law specialist weighs the following factors:
- Collaboration duration: longer relationships necessitate more generous notice periods
- Investment scope: specific investments made for the agreement increase protection levels
- Dependency: one-sided dependency justifies extended notice periods
- Foreseeability: sudden termination without prior warning proves more problematic
What Compensation May Be Due When Terminating Under Dutch Law?
Upon terminating a long-term contract, compensation may be owed for unrealised investments, lost profits, and business adaptation costs. Failing to offer compensation can render the termination invalid under Article 6:248(2) of the Dutch Civil Code.
The Dutch Supreme Court has established that the absence of a compensation offer upon termination may justify awarding higher damages. A lawyer calculates potential compensation obligations based on:
- Investments specific to the agreement that have not yet been recouped
- Revenue loss during a reasonable transition period
- Costs for restructuring business operations
Practice example: A distributor had invested €180,000 in a new warehouse at the supplier’s request. After three years, the supplier terminated the agreement with two months’ notice. The District Court ruled that besides a longer notice period, compensation of €95,000 was due for the unrecovered investment. This demonstrates how courts protect parties who made relationship-specific investments.
What Are the Consequences of Wrongful Termination in the Dutch Jurisdiction?
Wrongful termination does not hold legally and obligates the terminating party to either continue the agreement or pay full damages. Article 6:248(2) of the Dutch Civil Code renders termination unacceptable if it conflicts with reasonableness and fairness.
The District Court of Central Netherlands ruled in March 2023 that FrieslandCampina could not validly terminate supply agreements with dairy farmers. The cooperative should have chosen a less drastic measure. Relevant circumstances included:
- The termination clause had been unilaterally imposed without negotiation opportunity
- The dairy farmers had made substantial investments
- FrieslandCampina was assisted by legal counsel, whereas the farmers were not
How Does a Lawyer Guide the Termination Process Under Netherlands Law?
A contract law specialist follows a systematic approach when guiding termination procedures:
| Phase | Action | Timeline |
|---|---|---|
| Analysis | Assessment of agreement and terminability | 2-5 working days |
| Strategy determination | Establishing notice period and compensation offer | 1-3 working days |
| Correspondence | Drafting termination letter with legal substantiation | 1-2 working days |
| Follow-up | Guidance during execution and potential negotiation | Variable |
This approach prevents the termination from becoming challengeable due to formal defects or unreasonable conditions. Should disputes arise regarding the termination, proceedings before the District Court may follow, with court fees starting from €667 for legal entities.
Why Is Legal Advice Essential for Long-Term Contracts in the Netherlands?
The absence of specific statutory rules for long-term contracts makes case law decisive. Dispute outcomes depend heavily on the circumstances of each individual case. A Dutch lawyer specialising in contract law understands the relevant jurisprudence and applies it to your particular situation.
Moreover, parties can make arrangements when entering the agreement that prevent future termination problems. A clear termination clause with reasonable notice periods and unambiguous conditions saves both parties expensive legal proceedings.
Seeking certainty about your legal position when terminating a long-term contract? Our specialised lawyers analyse your situation and advise on the optimal strategy to protect your business interests.
Can the Other Party Object to Termination According to Dutch Legislation?
The counterparty can object by invoking reasonableness and fairness principles. This may result in extension of the notice period, award of damages, or even continuation of the agreement under Article 6:248 of the Dutch Civil Code.
In the Heineken/Jumbo case, the court ruled that Jumbo was permitted to terminate the oral long-term agreement, but that the notice period applied was not reasonable. Heineken nonetheless could not enforce compulsory performance because Jumbo continued purchasing products for another eighteen months. The conclusion: determining the correct notice period requires thorough legal analysis.
The counterparty has several defences available:
- Insufficiently compelling reason for termination
- Notice period too short given the circumstances
- No offer of reasonable compensation provided
- Conflict with previously created expectations
Contact our law firm for personal legal advice regarding terminating your long-term contract or defending against a received termination notice. Our specialists ensure your interests are protected throughout the entire process.
Frequently Asked Questions
What factors determine a reasonable notice period when terminating a long-term contract in the Netherlands?
Under Dutch law, a reasonable notice period depends on several factors: the duration of the collaboration, the degree of interdependence between parties, investments made specifically for the agreement, and the foreseeability of termination. Article 6:248(1) of the Dutch Civil Code requires that reasonableness and fairness principles be applied. Courts have ruled that one-month notice periods following years of cooperation are virtually always insufficient.
What compensation may be required when terminating a long-term contract under Dutch law?
When terminating a long-term contract in the Netherlands, compensation may be owed for unrealised investments, lost profits during a transition period, and business adaptation costs. The Dutch Supreme Court has established that failing to offer compensation can render termination invalid under Article 6:248(2) of the Dutch Civil Code and may result in higher damages being awarded by the court.
How can the other party object to termination of a long-term contract in the Netherlands?
The counterparty can object to termination by invoking reasonableness and fairness principles under Article 6:248 of the Dutch Civil Code. Successful objections may result in extension of the notice period, award of damages, or even continuation of the agreement. Courts consider factors such as whether termination clauses were unilaterally imposed, whether substantial investments were made, and the balance of legal assistance between parties.
