The importance of the pre-contractual phase lies in the risks of pre-contractual liability in the Netherlands. Under Dutch law, obligations of the parties to the contract may arise already at this stage or a point may be reached in the negotiations at which, according to the principles of good faith or fairness, the negotiations cannot simply be terminated. This may result in the other party being entitled to compensation or even performance. Important aspects in this respect are the extent to which negotiations have progressed and the extent to which details have been discussed or agreed.
Contract negotiations with a Dutch party
Dutch people often negotiate contracts in a different way owing to their unique culture. Our Dutch lawyers often hear that when negotiating prices, the Dutch first start at the extreme edges of the price table, then move closer to the price and finally reach an agreement. The proposals are often judged by international parties to be incomprehensible, so misunderstandings often arise at such an early stage. International business partners may be inclined to submit proposals that are already reasonable, well thought-out and comprehensible. Our attorneys in the Netherlands are familiar with the cultural differences, the cultural subtleties in contract negotiations and contract drafting between Dutch and other international parties. Please contact our contract lawyer for contract negotiations with a Dutch party.
Fairness and equity in contract negotiations under Dutch law
The Supreme Court (Hoge Raad) in the Netherlands, in the pre-contractual phase, attached importance to the principle of honesty and fairness in that the parties to the contract must take account of the legitimate interests of the other party/parties. Thus, a party may be entitled to damages if the negotiations end at a time when that party already had a legitimate expectation that the contract would eventually be concluded. It may also be relevant whether unforeseen circumstances have occurred during the negotiations and whether fulfilment of the intended contract has become impossible. The negotiations must therefore be assessed against the background of the entire course of the negotiations. Of course, the individual case must always be examined. Our Dutch lawyers at MAAK Advocaten in Amsterdam will be happy to advise you on how to assess the termination of negotiations in individual cases.
Pre-contractual liability under Dutch law
Dutch law, like many other legal systems, knows the basic principle of contractual freedom. This means that the parties are free to enter into contracts within the framework of the law, or not. However, a characteristic of Dutch contract law is the role of principles such as honesty, fairness, and good faith. Dutch case law often emphasises that the negotiating parties must respect the principle of honesty and fairness in contract negotiations. In general, this means that, with regard to the agreement on honesty and fairness, one negotiating party must take into account the legitimate interests of the other party. The obligations arising from the principle of fairness and equity should therefore always be borne in mind when you negotiate or conclude agreements under Dutch law, especially if you are considering breaking off negotiations. Pre-contractual liability in the Netherlands is mainly based on case law. Our attorneys in the Netherlands would be happy to advice you.
Contract negotiations in the Netherlands
Pre-contractual negotiations are not explicitly regulated by Dutch law. However, the case law of the Supreme Court (Hoge Raad) shows an established approach to determining the obligations of the parties already during pre-contractual negotiations. For example, a negotiating party may be legally obliged to continue the negotiations or, alternatively, to pay damages for withdrawal from the negotiations. However, this depends on the phase in which the negotiations were conducted according to objective standards. The more extensively the parties have negotiated and discussed the details of the planned contractual relationship, the more difficult it becomes for one party to simply withdraw from the negotiations.
Dutch contract law basically distinguishes between three negotiation phases:
- During the first phase of “open negotiations”, the parties can withdraw without any obligations to the other party, such as the payment of damages.
- During the second phase of negotiations, although the parties remain free to break off from the negotiations, they may have to bear the costs incurred by the other party in order to fulfil their obligation to act in good faith.
- In a third negotiation phase, the good faith of the other party requires that one party cannot simply break away from the negotiations without compensating the other party accordingly. If the other party assumed in good faith that a contract would be concluded, the damage can be calculated on the basis of a comparison between the current situation and the situation in which a contract would have been concluded.
Letters of intent and gentlemen’s agreements under Dutch law
In contract negotiations, it is not unusual for documents to be drawn up during the negotiations which contain the basic intentions of the parties. Examples can be preliminary agreements in the form of a Letter of Intent, a Memorandum of Understanding or a Heads of Agreement. Our Dutch attorneys will be pleased to assist you in the preparation of these documents.
Under Dutch law, it should be noted that these documents, which were drawn up during the negotiations, are, individually or together with other communications or correspondence, deemed to constitute a contract from which the parties incur corresponding obligations. It is not necessary for the parties to agree on all important points in order for such a contract to come into existence. In case of doubt, a Dutch court will examine the content of the present documents and interpret them. The name or form of the document is not decisive in this respect.
A Dutch court can, by applying various provisions of Dutch contract law and the principles of good faith and fairness, even supplement any loopholes in the agreement if the dispute between the parties so requires.
Our Dutch lawyers therefore advise our clients, as a rule, to stipulate in preliminary contracts that the documents or parts thereof are not to be regarded as binding and that no obligations arise from them. In addition, conditions may also be included which must be fulfilled before a contract is concluded. In order to ensure maximum effectiveness and legal certainty, such preliminary contracts and the provisions included therein must be carefully and in detail formulated.
From experience we can say that it is advisable to consult a Dutch lawyer for this. An English-speaking lawyer with expertise in Dutch contract law can also accompany you during the negotiations and advise you on your legal position with regard to pre-contractual liability in the Netherlands.
Dutch specialist lawyer specialized in pre-contractual liability
Do you have any questions about Dutch contract law or do you need specific legal advice in Holland on the drafting of contracts and/or on pre-contractual liability in the Netherlands? Our experienced specialist lawyers in the Netherlands, Remko Roosjen, will be happy to help you.