Are you an international operating company or individual dealing with American or British clients and negotiating contracts with them? Then, you need to be well-versed in the differences between English and Dutch contract law. In this blog series, our Dutch lawyers in the Netherlands (Amsterdam) will be covering the differences between the two, with a focus on the various damage concepts.
Differences between the English and Dutch law system
English contracts often differentiate between different types of damages such as direct, indirect, consequential and special damages. The terms “direct” and “indirect damages” were explained in the Hadley v. Baxendale ruling. In the event of a default, the affected party is entitled to compensation for the damage that naturally flows from that default. This is direct damage. In addition, the affected party is entitled to compensation for the damage that the parties took into account or could have taken into account when entering into the contract. This is indirect damage.
The difference between direct and indirect damages relates to the reason why the damage was foreseeable. Direct damages are foreseeable because the damage naturally (according to the usual course of events) flows from the default. Indirect damages are foreseeable because the parties were or should have been aware of a special circumstance at the time of contracting and had to take into account that damage could result from this.
According to English law, both direct and indirect damages are eligible for compensation. English contracting parties often exclude indirect damages. Profit that is lost according to English law can be direct or indirect damage, depending on the circumstances of the case, or neither.
Dutch lawyers about indirect damages
Dutch lawyers often use the terms “direct” and “indirect damages” (or “directe” and “indirecte schade”) in their contracts. These concepts do not have a standard meaning under Dutch law. The concepts of “directe” and “indirecte schade” are not defined in Dutch law and have not acquired a fixed meaning in Dutch case law. The meaning of both concepts must always be determined in the context of the specific case.
Three legal definitions:
- Default – Failure to fulfill a contractual obligation.
- Foreseeable – Capable of being predicted or anticipated.
- Contracting parties – The individuals or entities who are party to a contract.
Legal advice on Dutch contract law
In conclusion, understanding the differences between English and Dutch contract law is crucial for lawyers dealing with American or British clients. The differences in the concept of damages between the two legal systems can have a significant impact on the outcome of a contract dispute. It’s important to have a thorough understanding of the concepts of direct and indirect damages and how they are applied in each legal system. So, always be well-prepared and seek expert advice if necessary. Feel free to contact our litigation attorney in the Netherlands or one of our other Dutch specialist lawyers in Holland. Our Dutch attorneys would be happy to speak about the differences between English and Dutch contract law.