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Under Dutch law, you can withdraw from (rescind, ontbinden) a contract if the other party fails to perform, unless the failure, given its special nature or minor importance, does not justify rescission (Article 6:265 Dutch Civil Code). If performance is still possible, the other party must first be in default. As Dutch contract attorneys in the Netherlands, we advise on rescission and its alternatives.
In practice, businesses rescind a contract when the other party does not deliver, delivers late or delivers something that does not conform to the contract, for example a machine that does not work as agreed. Dissatisfaction alone is not enough: there must be a failure in performance (tekortkoming). “Withdrawal” on this page means rescission for breach. It is different from the consumer’s right of withdrawal (herroepingsrecht), which allows a consumer to rescind a distance or off-premises contract within fourteen days without giving reasons (Article 6:230o Dutch Civil Code). Below we discuss the main questions entrepreneurs ask us. Our team also advises on comparative misleading advertising under Dutch law.
When can you withdraw from a purchase agreement?
Every failure of a party to perform one of its obligations gives the other party the power to rescind the contract in whole or in part, unless the failure, given its special nature or minor importance, does not justify rescission and its consequences (Article 6:265(1) Dutch Civil Code).
If performance is still possible, for example because the machine can be repaired or replaced, the power to rescind only arises once the other party is in default (verzuim) (Article 6:265(2)). We come back to default below. It is important to know, and often forgotten, that you can also rescind only part of a contract. Both parties’ performances are then reduced proportionally (Article 6:270).
Is the contract a sale of goods between businesses in different states that are both party to the Vienna Sales Convention (CISG)? Then the CISG usually applies first (Article 1(1)(a) CISG), also if Dutch law has been chosen, unless the parties have excluded the Convention (Article 6 CISG). Under the CISG, the buyer can only avoid the contract for a fundamental breach or, in case of non-delivery, if the seller does not deliver within an additional period fixed by the buyer or declares that it will not deliver within that period (Articles 25 and 49 CISG). The avoidance must be declared by notice to the seller (Article 26 CISG).
Do you need to send a notice of default first?
In most cases, yes. Default arises when the other party is given a written notice of default (ingebrekestelling) setting a reasonable period for performance, and performance does not take place within that period (Article 6:82(1) Dutch Civil Code). No notice is needed if, for example, a fixed deadline for performance has expired (unless the deadline has a different purpose) or if the other party has said that it will not perform (Article 6:83). If the other party temporarily cannot perform, or its attitude shows that a reminder would be useless, a written statement holding it liable for the non-performance is enough (Article 6:82(2)). Name the defects and the reasons for rescission carefully. Our advice is, if there is still time, to send a notice of default anyway.
What are the consequences of rescinding a contract?
Rescission releases the parties from the obligations it affects. Performances already made keep their legal basis, but each party must undo what it has received (undoing obligation, ongedaanmakingsverbintenis) (Article 6:271). Rescission has no retroactive effect (Article 6:269). In a sale, this usually means that the buyer returns the product and the seller refunds the purchase price.
Can you claim damages after rescinding a contract?
The party in breach must compensate your damage, unless the failure cannot be attributed to it (Article 6:74(1)). A failure is not attributable if it is not due to its fault and is not for its account by law, contract or generally accepted views (force majeure, Article 6:75). A late supplier, a fire, a power failure or an internet outage may, depending on the facts, be force majeure. After rescission, the party whose failure gave grounds for rescission must also compensate the damage caused by the fact that the contract is rescinded instead of performed (Article 6:277); if the failure is not attributable, only up to the benefit that the party in breach obtained because of the failure (Articles 6:277(2) and 6:78). Force majeure does not prevent rescission: the failure does not have to be attributable for you to rescind.
How do you rescind a contract: in writing or in court?
You can rescind a contract yourself by a written declaration to the other party; if the contract was concluded electronically, an electronic declaration is also possible (Article 6:267(1)). The contract may add further conditions. State all reasons for rescission carefully, so that you can explain your position if the rescission is challenged later. You can also ask the court to rescind the contract (Article 6:267(2)). If you rescind out of court and the other party disputes it, there is a risk that the court will find the rescission invalid. The contract then remains in force. You should seek advice from an English-speaking lawyer in the Netherlands.
Can you contractually exclude rescission?
In certain agreements, such as a settlement agreement or an acquisition agreement, the parties often agree that rescission is excluded. This may be desirable, because unwinding the deal can have undesirable effects. When a business takeover is reversed, the parties have already exchanged a lot of confidential information; rescission cannot undo that. Excluding rescission is possible between businesses, but a court may set the clause aside if relying on it would be unacceptable according to standards of reasonableness and fairness (Article 6:248(2)). In general terms and conditions used against a consumer, a clause that excludes or limits the right to rescind is deemed unreasonably onerous (Article 6:236(b)). Partial rescission is part of the same statutory power (Article 6:265(1)); whether an exclusion clause also covers partial rescission is a question of interpreting the clause. The English-speaking contract lawyers at MAAK will be happy to assist you in this matter.
What is the difference between rescission, termination and cancellation?
What we as lawyers in contract law often see is a confusion of terminology. This is not surprising, because legal jargon is something that should largely be reserved for lawyers. How about that?
In English language contracts often use the term termination, which means termination in its pure sense. If you find yourself in a situation where you want to end your cooperation with a contracting party, please do not use the term “termination”. From a legal point of view, this is not a clearly defined term and may lead to discussions under certain circumstances.
If your contractual partner fails to perform properly, because delivery does not take place, is late or is defective, you may rescind the contract. The same applies if it is already certain, or follows from the other party’s statement, that it will fail to perform (Article 6:80(1)). Rescission requires a failure in performance. Where performance is still possible, the other party must also be in default: it has not performed within the reasonable period set in a written notice of default (Article 6:82(1)).
Termination is another term that we usually see in agreements that aim at continuous performance, so-called continuing obligations. For example, a distribution contract, agency contract or franchise agreement. A chain of sales contract can also lead to a lasting relationship with your contractual partner. Such a contract can often be terminated by notice (opzegging) without a breach, for example because you do not wish to continue the relationship. If the contract does not regulate this, reasonableness and fairness (Article 6:248) may require a sufficient notice period or compensation. Another reason may be that your contract partner is threatened with insolvency or because their assets have been confiscated, or it could be that a pandemic means a partnership can no longer be maintained, as was the case with the corona virus (COVID-19). It would be wise to include the reasons for termination in such a contract. This will also be an important indicator of whether you can terminate successfully, what deadlines apply to the termination, whether there must be an important reason or whether you have to combine the termination with an offer of compensation. Your lawyer in contract law will be happy to help you with this and will inform you further about the possibilities.
Frequently asked questions about rescinding a contract under Dutch law
When can you rescind a contract under Dutch law?
If the other party fails to perform one of its obligations, unless the failure, given its special nature or minor importance, does not justify rescission (Article 6:265(1) Dutch Civil Code). If performance is still possible, the other party must first be in default (Article 6:265(2)).
Do you need to go to court to rescind a contract in the Netherlands?
No. You can rescind by a written declaration, or electronically if the contract was concluded electronically (Article 6:267(1)). You can also ask the court to rescind the contract (Article 6:267(2)).
Can you rescind a contract if the other party invokes force majeure?
Yes. The power to rescind applies to every failure in performance, also one that cannot be attributed to the other party (Article 6:265(1)). Force majeure does affect damages: without attribution, the other party is in principle not liable (Articles 6:74 and 6:75).
What happens to payments already made after rescission?
Rescission has no retroactive effect, but each party must undo what it has received, for example by returning the goods and refunding the price (Articles 6:269 and 6:271).
Does Dutch law or the CISG apply to rescission of an international sale of goods?
For a sale of goods between businesses in different Contracting States, the CISG usually applies (Article 1(1)(a) CISG), also with a choice of Dutch law, unless it has been excluded (Article 6 CISG). Avoidance then requires a fundamental breach or expiry of an additional period (Articles 25 and 49 CISG).
Primary sources
- Dutch Civil Code (Burgerlijk Wetboek) Book 6: Articles 6:74, 6:75, 6:78, 6:80, 6:82, 6:83, 6:230o, 6:236, 6:248, 6:265, 6:267, 6:269, 6:270, 6:271 and 6:277
- United Nations Convention on Contracts for the International Sale of Goods (CISG), Articles 1, 6, 25, 26 and 49
Dutch specialist lawyer specialized in contract rescission
Do you have any questions about Dutch contract law or is a withdrawal from a contract under Dutch law at stake? Do you need specific legal advice in Holland on the subject of withdrawal from a contract under Dutch law? Our Dutch specialist lawyer specialized in contract rescission, Remko Roosjen, will be happy to help you.
