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What is the right of suspension under Dutch contract law?
Under Dutch law, you may suspend (opschorten) your own performance while the other party does not perform. In a mutual contract, Article 6:262 Dutch Civil Code (DCC) lets you withhold what you owe in return. If the other party performs only partly or improperly, you may suspend only to the extent that failure justifies it. Article 6:52 DCC adds a general right of suspension.
What are the conditions for suspension under Articles 6:262 and 6:52 DCC?
Book 6 of the Dutch Civil Code contains three general grounds for suspending your own performance. In disputes between contracting parties, the first one is usually the most relevant.
- Contracts with obligations on both sides (Article 6:262 DCC): if one party does not perform its obligation, the other party may suspend performance of its obligations that stand against it (Article 6:262(1) DCC). In case of partial or improper performance, suspension is only allowed to the extent the failure justifies it (Article 6:262(2) DCC). A supplier that is not paid may stop further deliveries. A buyer that receives goods with a minor defect will usually not be able to withhold the full price.
- The party that must perform first (Article 6:263 DCC): this party may still suspend if circumstances that came to its knowledge after the contract was concluded give it good grounds to fear that the other party will not perform its obligations. If there are only good grounds to fear partial or improper performance, suspension is allowed only to the extent the failure justifies it.
- The general right of suspension (Article 6:52 DCC): a debtor that has a claim against its creditor which has fallen due may suspend performance of its obligation until its claim is met, if there is a sufficient connection between the claim and the obligation to justify the suspension (Article 6:52(1) DCC). Such a connection can be assumed, among other things, if the obligations arise from the same legal relationship or from business the parties have regularly conducted with each other (Article 6:52(2) DCC).
Suspension is temporary. The contract stays in force, and the aim is to make the other party perform. A right of suspension can also be invoked against the creditors of the other party (Article 6:53 DCC). It remains in place even after the legal claim against the other party has become time-barred (Article 6:56 DCC).
When are you not allowed to suspend performance?
There is no right of suspension to the extent that (Article 6:54 DCC):
- you yourself prevent the other party from performing, because you do not give the cooperation needed or because another obstacle arises on your side, unless the cause cannot be attributed to you (creditor’s default, schuldeisersverzuim; Article 6:54(a) and Article 6:58 DCC);
- performance of the other party’s obligation is permanently impossible (Article 6:54(b) DCC);
- the claim of the other party cannot be attached (Article 6:54(c) DCC).
In addition, the right of suspension lapses once security has been provided for the performance of the other party’s obligation, unless that performance would be unreasonably delayed as a result (Article 6:55 DCC). Exceptions (b) and (c) and the security rule do not apply to suspension under Articles 6:262 and 6:263 DCC (Article 6:264 DCC).
Do you need to send a notice of default before suspending?
No. The law does not require the other party to be in default (verzuim) before you suspend. It is enough that the other party does not perform (Article 6:262(1) DCC), or that you have a claim against it that has fallen due (Article 6:52(1) DCC). A notice of default does matter for other remedies, such as damages and termination. Those remedies are explained on our page about non-performance of contractual claims under Dutch law. In practice, it is still wise to tell the other party in writing that you are suspending and why. Your contract may also require this.
Lawful suspension also protects you. If the other party, due to circumstances attributable to it, does not perform its obligation towards you, and you therefore lawfully suspend, the other party is in creditor’s default (Article 6:59 DCC). As long as it is, you cannot be in default yourself (Article 6:61(2) DCC). If you suspend without a valid ground, however, the suspension can itself be a failure in performance on your side.
How does suspension relate to the right of retention?
The right of retention (retentierecht) is a special form of suspension. In the cases provided by law, it allows a creditor to suspend its obligation to hand over a thing to its debtor until its claim is paid (Article 3:290 DCC). If a right of suspension fits that description, the general rules on suspension apply, unless the rules on the right of retention depart from them (Article 6:57 DCC). Read more about what a right of retention is under Dutch law.
What did the Rotterdam court decide in the Cooltoren dispute?
Two judgments of the District Court of Rotterdam show how suspension can play out between professional parties. They concern the construction of the Cooltoren, a residential tower in Rotterdam. Contractor Ballast Nedam and project developer De Vijf Heeren disagreed, among other things, about who had to bear extra foundation costs and about a € 20 million escrow deposit that De Vijf Heeren had agreed to make. After summary proceedings (kort geding) and prejudgment attachments by both parties, the court gave judgment in the proceedings on the merits on 13 October 2021.
Was the contractor entitled to suspend its obligations?
In July 2018, Ballast Nedam suspended performance of the turnkey construction contract. The summary proceedings concerned two of its obligations: obtaining acceptance of the project under the Woningborg guarantee scheme and signing construction contracts with the buyers of apartments. It relied on extra costs of about € 4 million caused by a changed pile plan, and on the fact that De Vijf Heeren had not yet deposited the € 20 million in escrow. According to De Vijf Heeren, buyers were about to pull out and the project was at risk. Notably, the turnkey contract stated that the contractor irrevocably and unconditionally waived its right of retention and any other right of suspension (ECLI:NL:RBROT:2018:7981, ground 2.3).
On 30 July 2018, the interim relief judge held that Ballast Nedam had not made sufficiently plausible that the changed pile plan entitled it to suspend. The new grounds it raised at the hearing did not justify suspension either (grounds 4.7 and 4.8). The judge ordered Ballast Nedam to sign the contracts with buyers, on pain of a penalty payment, but ruled that it could not forfeit any penalty payment before De Vijf Heeren had made the escrow deposit. This was a provisional judgment in summary proceedings.
On 3 September 2018, the parties concluded two additional work agreements (meerwerkovereenkomsten), which also released De Vijf Heeren from the escrow obligation. De Vijf Heeren later argued that it had signed them only under pressure from Ballast Nedam. It claimed repayment of about € 6.2 million, mainly on the ground of abuse of circumstances and, in the alternative, mistake and fraud (ECLI:NL:RBROT:2021:10089, grounds 3.1 and 3.2).
Why did the claim of abuse of circumstances fail?
A juristic act can be annulled if it was concluded through abuse of circumstances (misbruik van omstandigheden) (Article 3:44(1) DCC). Abuse of circumstances exists when someone who knows or should understand that another person is induced to perform a juristic act by special circumstances, such as a state of necessity, dependence, rashness, an abnormal mental state or inexperience, promotes that juristic act although what he knows or should understand ought to keep him from doing so (Article 3:44(4) DCC).
The District Court rejected this claim (grounds 4.2 to 4.5). It left open whether De Vijf Heeren was really in a tight spot, but held that this was largely its own risk: it had itself agreed in writing to make the € 20 million escrow deposit. The additional work agreements had been negotiated between two professional parties, and De Vijf Heeren was assisted by its lawyers. To the extent Ballast Nedam had used the circumstances, it had not abused them. The agreements were not one-sided, as they contained obligations for both parties and released De Vijf Heeren from the escrow obligation. The agreed prices did not give Ballast Nedam a disproportionate advantage. The claims for mistake and fraud also failed.
The two judgments show that using a strong negotiating position is not automatically abuse of circumstances; the court looks at all the circumstances. Whether a suspension is justified is a separate question, which depends on the statutory conditions and on what the contract says.
Can you suspend payment if a machine does not meet the agreed specifications?
Misunderstandings about the right of suspension often arise in practice, for example in the manufacturing industry. A typical question:
A client has a machine or production line built. Suppose that during the test phase in the contractor’s factory, the machine functions properly in principle, but does not achieve the production speed. May the principal then suspend its payment obligations?
If a payment falls due while the machine still falls short, the client may in principle suspend it, but only in part. A machine that works but does not reach the agreed production speed is improper performance, not a complete failure to perform. The client may therefore suspend payment only to the extent the shortfall justifies it (Article 6:262(2) DCC). Withholding the entire price for a machine that works but runs too slowly will often go too far. Withholding a part that is in proportion to the shortfall and the cost of putting it right is easier to defend.
Check the contract first. Many contracts link payment instalments to a factory acceptance test, contain their own suspension clause or limit the right of suspension. If you suspend more than is justified, you risk failing to perform yourself. If the machine is bought from a seller in another country, also check whether the UN Convention on Contracts for the International Sale of Goods (CISG) applies. It has its own, stricter rule on suspension. A party may suspend only if, after the contract was concluded, it becomes apparent that the other party will not perform a substantial part of its obligations because of a serious deficiency in its ability to perform or in its creditworthiness, or because of its conduct in preparing to perform or in performing the contract (Article 71(1) CISG). The party that suspends must notify the other party immediately and must continue with performance if the other party provides adequate assurance of its performance (Article 71(3) CISG).
Frequently asked questions about the right of suspension in the Netherlands
What does Article 6:262 of the Dutch Civil Code say about suspension of payment?
If one party to a contract with obligations on both sides does not perform its obligation, the other party may suspend performance of its obligations that stand against it (Article 6:262(1) DCC). A buyer may therefore withhold payment while the seller does not deliver. If the failure is only partial or improper, payment may be suspended only to the extent the failure justifies it (Article 6:262(2) DCC).
What is the difference between Article 6:52 and Article 6:262 DCC?
Article 6:262 DCC applies to contracts with obligations on both sides and covers the obligations that stand against each other. Article 6:52 DCC is broader: any debtor with a claim that has fallen due may suspend, if there is a sufficient connection between the claim and its own obligation, for example because both arise from the same legal relationship. Two limits of Article 6:54 DCC (permanent impossibility and claims that cannot be attached) and the security rule of Article 6:55 DCC do not apply to suspension under Articles 6:262 and 6:263 DCC (Article 6:264 DCC).
Do you need to give notice before suspending a contract?
Dutch law does not require a notice of default before you suspend; the other party does not have to be in default. It is still wise to inform the other party in writing, and many contracts require a warning first. Under the CISG, which can apply to international sales of goods, suspension is only allowed if it becomes apparent after the contract was concluded that the other party will not perform a substantial part of its obligations (Article 71(1) CISG). The suspending party must then notify the other party immediately and must continue with performance if the other party provides adequate assurance (Article 71(3) CISG).
Can a suspension clause in a contract exclude the right of suspension?
Contracts often regulate or limit the right of suspension. In general terms and conditions used against a consumer, a clause that excludes or limits the consumer’s statutory right of suspension, or gives the user a wider right of suspension than the law does, is deemed unreasonably onerous (Article 6:236(c) DCC). Between businesses there is no such fixed rule. If Dutch law applies, a contractual rule does not apply to the extent that this would be unacceptable by standards of reasonableness and fairness (Article 6:248(2) DCC).
What happens if you suspend performance without a valid reason?
Then you are not entitled to suspend, and not performing can itself be a failure in performance on your side. The other party may then suspend in turn, and may claim damages or terminate the contract once the conditions for those remedies are met, usually including default (Articles 6:74 and 6:265 DCC).
Primary sources
- Dutch Civil Code (Burgerlijk Wetboek), Book 3: Articles 3:44 and 3:290
- Dutch Civil Code, Book 6: Articles 6:52, 6:53, 6:54, 6:55, 6:56, 6:57, 6:58, 6:59, 6:61, 6:74, 6:236, 6:248, 6:262, 6:263, 6:264 and 6:265
- UN Convention on Contracts for the International Sale of Goods (CISG): Article 71
- District Court of Rotterdam (interim relief judge) 30 July 2018, ECLI:NL:RBROT:2018:7981
- District Court of Rotterdam 13 October 2021, ECLI:NL:RBROT:2021:10089
