In this post, the English-speaking lawyers for Dutch contract law of MAAK Advocaten deal with the topic of termination of a contract under Dutch law and in particular the aspect of such termination due to breach of contract. A failure to fulfil obligations in the Netherlands has not the same remedies for a claiming party as in other jurisdictions. In daily practice, contract law specialists deal with legal disputes in which contractual partners, under certain justified circumstances, do not deliver (as agreed). In the following article we discuss the legal possibilities for terminating a Dutch contractual relationship. The many years of experience and existing expertise of our law firm enable us to provide legal advice on Dutch law in English and draft bilingual contracts. Please feel free to contact the Dutch lawyers of MAAK without obligation.
Dissolution of an agreement under Dutch law
The available legal remedies for terminating a contract under Dutch law are not completely listed in the Dutch Civil Code. However, the dissolution of an agreement under Dutch law is listed in Article 6:265 et seq. of the Dutch Civil Code. Article 6:265 BW stipulates that any failure by one party to perform any of its obligations entitles the other party to rescind the contract in whole or in part, unless the failure justifies such rescission and the consequences thereof by reason of its special nature or minor importance. Whether you can dissolve the contract depends, among other things, on whether there is a default and whether the shortcoming is so serious that this is sufficient for a dissolution. A lawyer specialised in contract law will be able to advise you on this.
Burden of proof and non-compliance in Holland
It is the debtor who must prove that the non-performance of his obligations does not justify the dissolution of the contract. It is important to note that under Dutch contract law the dissolution of a contract does not require a fundamental breach and that a creditor does not in any way bear the burden of proof that the breach in question is so fundamental that it justifies the cancellation of the contract. However, the remedy for cancellation of a contract can only be applied when performance of the contract is no longer attributable to the creditor and when this is due to a circumstance of force majeure. The right to damages exists only if the breach of contract is also attributable to the debtor.
Article 6: 277 of the Dutch Civil Code provides as follows:
1. if a mutual agreement has been wholly or partially annulled, the party whose failure to perform has caused the reason for annulment must compensate the damage suffered by the other party as a result of the fact that both parties are unable to perform their agreement
2. if the debtor is not responsible for the non-performance, the preceding paragraph shall only apply within the framework of Article 6:78 of the Dutch Civil Code.
If both parties are unable to perform, both parties have the right to cancel the contract.
The cancellation of a contract under Dutch law may be finalised by a written declaration to the other party (Article 6: 267(1) of the Dutch Civil Code):
The cancellation of a mutual agreement shall be effected by a written notification of the party entitled to cancel the agreement. If the mutual agreement has been concluded exclusively by electronic means, it may also be terminated by means of a notification sent to the other party by electronic means. Article 6: 227a paragraph 1 shall apply mutatis mutandis.
The cancellation of a contract under Dutch law can also be pronounced by a court at the request of the creditor.
Partial dissolution of the contract under Dutch law
After a failure to fulfil obligations in the Netherlands and a given notice period, a contract may be dissolved in whole or in part. A partial cancellation of a mutual agreement means a proportional reduction of the mutual services in quantity or quality which the parties have to provide according to this agreement. In this way one party can enforce a reduction of its obligations (e.g. the obligation to pay the agreed amount) if the other party delivers only a part of the purchased goods or if the delivered goods do not comply with the agreement.
The effects of the dissolution of the agreement in the Netherlands
The dissolution (or ontbinding) of a contract under Dutch law has no retroactive effect. The cancellation of a contract under Dutch law relieves the parties of their contractual obligations at the time of cancellation.
Insofar as these obligations have already been fulfilled, the legal grounds for this performance shall remain in force even after the contract has been cancelled, but the parties shall be obliged to cancel the performance of the obligations already fulfilled. This is governed by article 6: 271 of the Dutch Civil Code:
The dissolution of a contract releases the parties from the obligations affected by it. To the extent that these obligations have already been fulfilled, the legal basis for their fulfilment remains in force, but the law obliges the parties to cancel the benefits they have already received under the cancelled agreement.
If, by their nature, the services cannot be reversed, compensation for their monetary value at the time of performance is required. Article 6: 272 of the Dutch Civil Code provides for this:
1. if the nature of the service rendered makes it impossible to return it, it will be compensated for by a compensation of its value at the time of delivery of the performance.
2. if the performance received did not comply with the contractual obligation, the compensation referred to in paragraph 1 shall be limited to the value of the performance which it had for the recipient at the time of delivery.
Would you like legal advice on whether you can terminate a Dutch contract in a specific case? MAAK Advocaten will be happy to help you.
Dutch lawyer specialized in contract law
Do you have any questions about a failure to fulfil obligations in the Netherlands, Dutch contract law or do you need specific legal advice in the Netherlands on the subject of legal remedies under Dutch law? Our experienced Dutch specialist lawyers in contract law will be happy to help you.