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Termination of a contract under Dutch law

Termination of a contract under Dutch law

As contract lawyers in the Netherlands, we regularly hear questions such as: “When can a Dutch contract be terminated?” and “what are the consequences of terminating a sales contract in the Netherlands?”. In the following, we will outline some of these recurring issues in our practice regarding the termination of a contract under Dutch law. What we as contract lawyers often see is that legal terminology gets confused. In the Netherlands, three legal terms are used to describe the termination of a contract, all of which describe “the divergence of the parties to the contract”. However, if you wish to end your cooperation with a party to a contract in the Netherlands, it is better not to use the term termination. From a legal point of view, this is not a well-defined concept and may be a source of confusion and necessitate discussion with a specialist.

Understanding the Essence of Dutch Commercial Contracts

A commercial contract, at its core, is a binding agreement between two or more business entities concerning a professional transaction or venture. Sometimes referred to as “B2B” contracts, these differ from those involving consumers. These contracts often encompass sales of goods or paid services. Within the contract, parties outline specifics about the transaction, compensation, and repercussions if either party fails to uphold their end of the bargain.

Commercial contracts are the very lifeblood of any business. They stand as a testament to mutual understanding, ensuring that both parties are in agreement about their business relationship. At MAAK Advocaten, we’re staunch believers in the power of well-drafted agreements that safeguard your business interests and reduce potential risks.

Common Types of Commercial Contracts

The world of commercial contracts is vast, with each serving its distinct purpose. Some of the most prevalent contracts include:

  • Distribution Agreements
  • Commercial agency Contracts
  • Joint Venture Agreements
  • Goods or Services Supply Agreements
  • Software Development Agreements
  • Software as a Service (SaaS) Agreements
  • General Terms & Conditions (B2B)
  • Supplier Agreements
  • Collaboration Contracts
  • Non-Disclosure Agreements (NDA)
  • Service Level Agreements (SLA)
  • Reseller Contracts
  • Licensing Agreements

Every business’s needs are unique, so it’s essential to understand which type of contract aligns with your specific requirements.

Dutch Commercial Contract: Key Elements

Though the allure of a generic model contract may seem convenient, it’s crucial for a commercial contract to truly resonate with your business’s unique needs. At MAAK Advocaten, we always advocate for bespoke contracts tailored to your specifications. Some critical elements that a commercial contract should encompass are:

  • Parties’ Details: A clear representation of the involved entities.
  • Contract Background: The reason and context behind the agreement.
  • Liability Limitations: Terms to limit any possible liabilities.
  • Force Majeure Clauses: Covering unforeseen circumstances.
  • Payment Terms: Clear, concise payment conditions.
  • Service/Product Details: A detailed description of the product or service in question.
  • Applicable Laws: Clarity on which laws will govern the contract.
  • Jurisdiction in Case of Disputes: Determining which court will have authority should disputes arise.
  • Signatures: Legally binding signatures from all parties involved.

Does a Commercial Contract Need to Be Written?

Contrary to popular belief, a commercial contract isn’t only valid if it’s written. Contracts can be verbal, implicit, or written, and still be legally binding. However, the advantages of a written contract far outweigh its counterparts. A written agreement offers substantial evidence, minimizing potential misunderstandings and disputes.

Dissolution, termination or cancellation: what is the legal difference?

If your contractor fails to perform – for example, they do not deliver, does not deliver on time, the delivery is defective, and/or there are indications that the delivery will not be (properly) made – this could possibly justify a termination of contract. Termination of the agreement in accordance with Dutch law requires a breach of contract and is only permissible if notice of default has been given in advance. This means that, as a rule, after a reminder or notification/determination has been served that no service will be provided, the service must still be provided before further legal action can be taken.

Dissolution of a purchase agreement under Dutch law

According to the Dutch Civil Code, you usually dissolve a purchase agreement under Dutch law if you are dissatisfied with a (non-)delivered product or a (non-)delivered service. Regardless of whether it is a machine that is not in accordance with what is stated in the agreement, or a collaboration that is no longer profitable, the law offers the affected party the opportunity to (partially) dissolve the agreement.

Termination of a commercial contract under Dutch law

The duration of commercial agreements varies based on mutual understanding. They can be short-term, long-term, or indefinite. However, the terms for contract termination largely depend on the contract type and the mutual agreements made. It’s vital to reference the specific contract when considering termination and adhering to any stated terms, such as notice periods. To evade any misunderstandings about contract end dates or early termination, it’s always advisable to be explicit in the contract about such details. Specify the initial contract period, the terms for early termination, and any associated conditions.

The termination of a commercial contract under Dutch law is another term that we often hear in connection with permanent agreements, also called term agreements, i.e. contracts that aim at continuous performance. This usually concerns distribution agreements, agency agreements or franchise agreements in the Netherlands. In addition, there are a number of purchase agreements that also lead to a long-term commercial relationship with one of the parties to the agreement. You can terminate these contracts if you do not wish to extend this cooperation (in which case no defect is required). Another reason could be that the other party has filed for insolvency or its assets have been seized. A pandemic can also hinder further cooperation, as is the case with the corona virus (COVID)-19). For a termination under Dutch law, it is advisable to include the grounds for termination in such an agreement especially as this is also an important indicator of whether and when you can legally terminate the agreement and whether there must be a good cause. Otherwise, you are obliged to pay compensation.

Dispute about terminating an agreement in the Netherlands

If you have a dispute about terminating an agreement, our litigation lawyers will be happy to help. This dispute may be about the non-performance of a contract, but you may also differ on the interpretation of a contractual clause. Together with you, our Dutch lawyers will examine whether we need to conduct negotiations or prepare a procedure in the Netherlands.

Dutch lawyer specialized in commercial contracts

If you have any questions or require legal assistance regarding the termination of a contract under Dutch law, please don’t hesitate to reach out to our knowledgeable and dedicated team at our Dutch law firm.  Our Dutch lawyers are committed to providing exceptional legal services and personalized attention to address your unique needs. You can contact us through our website, via email, or by phone. Our friendly and professional staff will be more than happy to assist you and schedule a consultation with one of our expert attorneys in the Netherlands, for example a Dutch litigation attorney or contract lawyer in the Netherlands in Amsterdam. We look forward to the opportunity to help you navigate the complexities of the legal landscape and achieve the best possible outcomes for your case.

Contact person: Remko Roosjen | attorney-at-law
Office number: +31 (0)20 – 210 31 38

The content provided on this legal blog is intended for general informational purposes only and should not be construed as legal advice or a substitute for professional legal counsel. While we strive to ensure the accuracy and timeliness of the information presented, we cannot guarantee its completeness or applicability to your specific circumstances. We encourage you to consult with a qualified attorney for advice regarding your individual legal matters. The content on this blog may be subject to changes or updates without notice, and we disclaim any responsibility for any errors or omissions in the information provided.

Office:  +31 (0)20 – 210 31 38