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The dissolution of a contract according to Dutch law has no retroactive effect. The dissolution of a contract under Dutch law relieves the parties of their contractual obligations at the time of cancellation. Dissolution under Article 6:265 DCC is allowed in the Netherlands if sufficient weight can be attached to the dissolution. Parties can make agreements about dissolution regulations in Dutch B2B contracts. There must also be a default.
At MAAK Advocaten, we believe in empowering businesses by providing them with knowledge about Dutch law and insights they need to navigate the intricacies of commercial contracts in the Netherlands. In this blog post, our Commercial law lawyers in the Netherlands delve into the topic of contract dissolution in Dutch B2B agreements, shedding light on its legal framework, recent developments in case law, and the importance of a well-crafted dissolution clause. Our aim is to equip you with the necessary understanding to optimize your contractual relationships in the Netherlands and protect your interests.
Introduction to Dutch Contract Dissolution in B2B Agreements
B2B contracts often provide parties with the flexibility to deviate from statutory provisions in favor of their own tailored arrangements. This principle extends to the dissolution regulation outlined in Article 6:265 of the Dutch Civil Code (Burgerlijk Wetboek or BW). This article specifically addresses situations where one party fails to fulfill its contractual obligations, resulting in a breach of contract (wanprestatie).
According to Article 6:265 BW, any breach of a party’s obligations entitles the other party to fully or partially dissolve the agreement under Dutch law, unless the nature or significance of the breach does not justify such dissolution (“tenzij-bepaling” or “exception clause”).
Recent Case Law and Customized Dissolution Clauses
A recent ruling by the Dutch Supreme Court on July 7, 2023 (ECLI:NL:HR:2023:1071) reinforces the possibility of creating a tailored dissolution provision in a contract to favor one party in specific legal relationships. The case involved a dispute between DE WIELINGEN VASTGOED B.V. (the lessor) and BEACHHOTEL DE WIELINGEN B.V., (the lessee) concerning the non-performance of a guarantee provision by the lessor.
The crucial question before the Dutch court was whether the lower court had rightly determined that dissolution was not justified, despite the contractual agreement that granted the lessee the right to immediately dissolve the lease agreement if the lessor failed to comply with the specified guarantee provision. The lower court had evaluated the dissolution based on the “tenzij-bepaling” in Article 6:265 BW.
The Facts of the 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 breached any of the guarantees outlined in Article 6 and Article 12, it would incur an immediate and enforceable penalty of €50,000.00 per violation. 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.
Lessee, in a letter dated August 24, 2018, notified Lessor of several breaches of the guaranteed provisions outlined in the lease agreement, asserting that Lessor was liable for damages and had incurred contractual penalties. In a letter dated October 25, 2018, Lessee declared the immediate dissolution of the lease agreement and the cessation of hotel operations as of that date. The dissolution letter explicitly referenced Article 12(b) of the lease agreement, granting Lessee the right to dissolve the contract without delay.
The lower court rejected Lesseel’s claim about the explanation of the dissolution regulations in Dutch B2B contracts, prompting an appeal. In the subsequent cassation procedure, Lessee argued that, due to the guarantee obligations in Article 12(a) and the dissolution provision in Article 12(b) of the lease agreement, the court should not have evaluated the dissolution based on the “tenzij-bepaling” in Article 6:265 BW.
The Supreme Court’s Ruling
The Dutch Supreme Court in the Netherlands (the “Hoge Raad”) sided with Lessee about the dissolution regulations in Dutch B2B contracts, emphasizing that Article 6:265 BW is a default provision and can be deviated from by mutual agreement (in Dutch: “regelend recht”). In this specific case, the parties had agreed that if the lessor failed to fulfill any of the guarantees specified in Articles 6 and 12 of the lease agreement, the Lessee would have the right to immediately dissolve the agreement (as per Article 12(b) of the lease agreement). It was undisputed that Lessor had indeed breached the guarantee obligations. Therefore, the effect of Lessee’s dissolution declaration should be examined based on the contractual terms agreed upon by the parties.
Effective Dissolution Clauses under Dutch law
This landmark ruling by the Dutch Supreme Court regarding dissolution regulations in Dutch B2B contracts highlights the significance of well-drafted dissolution provisions within contracts. It reinforces the notion that a contract should not be treated as a mere copy-and-paste exercise, but rather as a carefully tailored instrument that adequately addresses the specific needs and potential disputes in the Netherlands that may arise between the parties.
When entering into a B2B contract in the Netherlands, it is crucial to consider the rights and obligations of both parties in the event of a breach. A well-drafted dissolution clause under Dutch law can provide your business with a robust foundation and a competitive advantage. To ensure your contracts offer the necessary protection and clarity, consult with our experienced legal professionals, led by Remko Roosjen, and the dedicated team in our Commercoal Contract law (Business Law) division.
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.
