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Under Dutch law, a failure to fulfil an obligation (tekortkoming) lets the creditor claim performance, damages if the failure is attributable to the debtor (Article 6:74 Dutch Civil Code, DCC) or dissolution (Article 6:265 DCC). Damages and dissolution usually require that the debtor is in default (verzuim, Articles 6:81-6:83 DCC). Force majeure (overmacht) excludes damages under Article 6:74 DCC, but not dissolution.
In this article, the English-speaking lawyers for Dutch contract law of MAAK Advocaten explain when a failure to perform gives rise to damages or dissolution, when the debtor is in default, what force majeure means and how Article 6:98 DCC limits the damage to be compensated. We advise on Dutch law in English and draft bilingual contracts.
What is a failure to perform under Dutch law?
A failure to perform is any situation in which the debtor does not perform as owed: not at all, too late or not properly. Every such failure obliges the debtor to compensate the resulting damage, unless the failure cannot be attributed to him (Article 6:74(1) DCC). As long as performance is not yet permanently impossible, the debtor is only liable for damages once he is in default (Article 6:74(2) DCC). The creditor can also claim performance in court (Article 3:296 DCC) and, in a mutual contract, suspend its own performance (Article 6:262 DCC). The debtor is liable for the persons he uses to perform the obligation as for his own conduct (Article 6:76 DCC).
When is the debtor in default (verzuim)?
The debtor is in default while performance is not made after it has become due and the requirements of Articles 6:82 and 6:83 are met, except insofar as the delay cannot be attributed to him or performance is already permanently impossible (Article 6:81 DCC). As a rule, default arises when the debtor receives a written notice of default (ingebrekestelling) giving him a reasonable period to perform, and performance does not follow within that period (Article 6:82(1) DCC). If the debtor is temporarily unable to perform, or his attitude shows that a reminder would be pointless, a written statement holding him liable suffices (Article 6:82(2) DCC).
Default arises without a notice of default (Article 6:83 DCC): (a) when a fixed deadline for performance expires, unless the deadline has a different purpose; (b) when the obligation arises from a tort or is an obligation to pay damages under Article 6:74(1) and is not performed immediately; and (c) when the creditor must conclude from a statement by the debtor that he will fail to perform. Damages for delay are only owed for the period of default (Article 6:85 DCC).
What is force majeure under Dutch law?
A failure is not attributable to the debtor (force majeure, overmacht) if it is not due to his fault and is not for his account by law, by a juridical act (such as the contract) or according to generally accepted views (Article 6:75 DCC). Many contracts contain a force majeure clause that defines which events are, or are not, for the debtor’s account. If unsuitable equipment or goods are used to perform, the resulting failure is attributed to the debtor, unless that would be unreasonable (Article 6:77 DCC).
Force majeure means that no damages are owed under Article 6:74. If the debtor nevertheless gains a benefit in connection with the failure that he would not have had with proper performance, the creditor can claim compensation up to that benefit (Article 6:78 DCC). Force majeure does not prevent dissolution: Article 6:265 applies to “every failure”, attributable or not.
What does Article 6:98 Dutch Civil Code mean?
Article 6:98 DCC limits the damage for which a liable party must pay. In our translation (there is no official English text): “Only damage that is connected with the event on which the debtor’s liability is based in such a way that it can be attributed to him as a consequence of that event, also taking into account the nature of the liability and of the damage, qualifies for compensation.” (Article 6:98 DCC).
The provision is part of the general rules on statutory obligations to pay damages (Articles 6:95-6:110 DCC), so it applies to liability for breach of contract and for tort alike. In practice, the court first asks whether the event was a necessary condition for the damage (condicio sine qua non), and then whether the damage can reasonably be attributed to the liable party, looking among other things at the nature of the liability and of the damage. Related rules are Article 6:99 (alternative causation), Article 6:100 (deduction of benefits), Article 6:101 (contributory fault) and Article 6:109 (judicial mitigation). Read more on our page on claims for damages under Dutch law.
How do you dissolve an agreement under Dutch law?
The remedies for ending a contract are not all listed in one place in the Dutch Civil Code. Dissolution (ontbinding) because of a failure to perform is regulated in Article 6:265 DCC and the following articles. See also our page on terminating an agreement under Dutch law.
Under Article 6:265(1) DCC, every failure by one party to perform one of its obligations entitles the other party to dissolve the contract in whole or in part, unless the failure, given its special nature or minor importance, does not justify the dissolution with its consequences. Insofar as performance is not permanently or temporarily impossible, the right to dissolve only arises once the debtor is in default (Article 6:265(2) DCC). A lawyer specialised in contract law can advise you on whether these conditions are met.
Burden of proof and non-compliance in Holland
The creditor must state and, if necessary, prove that the debtor failed to perform and, where required, that the debtor is in default. It is for the debtor to state and, if necessary, prove the circumstances that bring the exception (“unless”) into play. In substance, only a failure of sufficient weight justifies dissolution, and all circumstances of the case can be relevant (HR 28 September 2018, ECLI:NL:HR:2018:1810, paras 3.5-3.6). Dissolution does not require that the failure is attributable to the debtor; the right to damages does (Article 6:74 DCC).
Article 6:277 DCC provides as follows (our translation):
1. If a contract is dissolved in whole or in part, the party whose failure to perform gave grounds for the dissolution must compensate the other party for the damage it suffers because the contract is dissolved instead of being performed by both parties.
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.
Paragraph 2 means that, in case of force majeure, damages for the dissolution are owed only up to the benefit the debtor gained from the failure (Article 6:78 DCC).
Dissolution takes place by a written declaration to the other party (Article 6:267(1) DCC):
Dissolution takes place by a written declaration of the party entitled to it. If the contract was concluded electronically, it can also be dissolved by a declaration made electronically. Article 6:227a(1) applies by analogy.
Dissolution can also be pronounced by the court at the request of the party entitled to it (Article 6:267(2) DCC).
Partial dissolution of the contract under Dutch law
A contract may be dissolved in whole or in part. Partial dissolution means a proportional reduction of the mutual performances in quantity or quality (Article 6:270 DCC). In this way, one party can reduce its own obligations (for example the price to be paid) if the other party delivers only part of the goods or goods that do not conform to the contract.
What are the effects of dissolution?
Dissolution (ontbinding) has no retroactive effect, except that an offer to perform made after dissolution has been claimed has no effect if the court pronounces the dissolution (Article 6:269 DCC). Dissolution releases the parties from the obligations affected by it.
Insofar as those obligations have already been performed, the legal basis for that performance remains, but the parties must undo the performances they have received. This is governed by Article 6:271 DCC:
A dissolution releases the parties from the obligations affected by it. Insofar as these have already been performed, the legal basis for that performance remains, but the parties become obliged to undo the performances they have already received.
If, by its nature, a performance cannot be undone, its value at the time it was received must be paid instead. Article 6:272 DCC provides:
1. If the nature of the performance rules out that it is undone, it is replaced by compensation equal to its value at the time it was received.
2. If the performance did not conform to the obligation, this compensation is limited to the value that the performance actually had for the recipient at that time in the circumstances.
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.
Frequently asked questions about failure to fulfil obligations in the Netherlands
What is the English translation of Article 6:98 Dutch Civil Code?
There is no official English text. In our translation: “Only damage that is connected with the event on which the debtor’s liability is based in such a way that it can be attributed to him as a consequence of that event, also taking into account the nature of the liability and of the damage, qualifies for compensation.”
Does Article 6:98 apply to both contract and tort?
Yes. Article 6:98 is part of Section 6.1.10 DCC on statutory obligations to pay damages, which covers damages for a failure to perform (Article 6:74) as well as for a tort (Article 6:162).
What is force majeure under Dutch law?
A failure to perform is not attributable to the debtor if it is not due to his fault and is not for his account by law, by the contract or according to generally accepted views (Article 6:75 DCC). The debtor then owes no damages under Article 6:74 DCC (only compensation up to a benefit he gained from the failure, Article 6:78 DCC), but the creditor can still dissolve the contract (Article 6:265 DCC).
When can you dissolve a contract under Article 6:265 Dutch Civil Code?
Every failure to perform gives the right to dissolve the contract in whole or in part, unless the failure, given its special nature or minor importance, does not justify dissolution with its consequences. Unless performance is impossible, the debtor must first be in default (Article 6:265(2) DCC). Dissolution is effected by a written declaration or by the court (Article 6:267 DCC).
What does Article 6:163 Dutch Civil Code (relativity) mean?
In tort, there is no obligation to pay damages if the violated norm does not serve to protect against the damage as the injured party suffered it (Article 6:163 DCC). This relativity requirement comes on top of the requirements of Article 6:162 DCC.
Primary sources
- Dutch Civil Code (Burgerlijk Wetboek) Book 6: Articles 6:74, 6:75, 6:76, 6:77, 6:78, 6:81, 6:82, 6:83, 6:85, 6:98, 6:162, 6:163, 6:262, 6:265, 6:267, 6:269, 6:270, 6:271, 6:272 and 6:277
- Dutch Civil Code Book 3: Article 3:296
- Supreme Court (Hoge Raad) 28 September 2018, ECLI:NL:HR:2018:1810 (dissolution under Article 6:265; burden of proof)
When should you engage a Dutch contract lawyer?
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?
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