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Termination of a supply contract under Dutch law

Termination of a supply contract under Dutch law

Are you facing the challenging task of terminating a supply contract under Dutch law? In this article, our Dutch lawyers will guide you through the process and requirements of ending a supply contract in Holland. We will explain the legal aspects, notice requirements, and grounds for termination under Dutch law that you need to be aware of. By the end, you’ll have an understanding of how to navigate this complex process with ease.

When navigating the intricate landscape of contract termination in the Netherlands, it’s essential to be well-versed in its nuances. This guide will delve into the key considerations surrounding contract termination, focusing on implied terms, notice periods, force majeure, and other relevant factors. Termination of a supply contract under Dutch law can be done in various ways. In this blog post, our Dutch attorneys will outline the most important ways.

Understanding Termination Under Dutch Law

When it comes to ending a supply contract in the Netherlands, there are specific grounds for terminating a supply contract. These grounds include, but are not limited to, breach of contract, non-performance, and force majeure events. It is important to carefully review the termination clauses in Dutch supply contracts, as they outline the conditions under which either party can terminate the agreement. Failure to comply with these clauses may result in legal consequences and potential damages being awarded. The termination consequences in Dutch supply contracts can vary depending on the circumstances of the termination. It is advisable to seek legal advice before proceeding with any termination actions to ensure compliance with the applicable laws and minimize potential risks.

Implied Terms: The Rules of Termination in the Netherlands

Contracts, unless explicitly stipulated, naturally align with the Dutch Civil Code’s general provisions. Contracts can be concluded in multiple ways:

  • Accomplishment of Performance: When the specific duty or service agreed upon is accomplished.
  • Expiration of the Agreed Term: Contracts might have a predetermined duration and naturally terminate once this period concludes.
  • Recission: As per article 6:265 of the Dutch Civil Code, one party can rescind the contract if the other party defaults under specified circumstances:
Article 6:265 Rescission of a mutual agreement for a breach of contract

– 1. Every failure of a party in the performance of one of his obligations, gives the opposite party the right to rescind the mutual agreement in full or in part, unless the failure, given its specific nature or minor importance, does not justify this rescission and its legal effects.
– 2. As far as performance is not permanently or temporarily impossible, the right to rescind the mutual agreement only arises when the debtor is in default.
  • Court-Ordered Termination: In special cases, if one party breaches, the other can seek termination through a court order.
  • Annulment: This happens when the court doesn’t grant retroactive effect to an annulment.
  • Termination for Cause or Convenience: Law or agreement may provide for this type of termination.

The intricacies of recission under Dutch law dictate that if a party defaults, the counterparty may rescind the contract, given that the breach justifies the decision.

Moreover, contracts entered into for an indefinite period (like ongoing supply contracts) may be terminated based on reasonableness and fairness. This often requires a compelling reason, a reasonable notice period, or financial compensation to the counterparty.

Notice Period under Dutch law: How is it Defined?

Make sure you clearly state your intention to end the agreement and comply with any specified notice period when providing a written notice. In the Netherlands, contract termination laws are governed by the Dutch Civil Code, which outlines various provisions regarding supply agreement termination. When it comes to termination deadlines in Dutch supply contracts, it is crucial to adhere to the agreed-upon notice period mentioned in the contract. Failure to comply may result in severe consequences for breach of contract, such as potential liability for damages incurred by the other party. The termination notice requirements for supply contracts in the Netherlands typically involve sending a written notice that includes explicit language expressing your intent to terminate the agreement and complying with any specific notice periods stated within the contract. It is essential to follow these requirements diligently to avoid any legal complications or disputes during the termination process.

Absent a notice period clause in a contract, Dutch law doesn’t offer a specific formula. While fixed-term contracts typically require mutual consent for termination, contracts of an indefinite term can generally be unilaterally terminated with notice. However, this action must adhere to the principles of reasonableness and fairness. This could entail observing a reasonable notice period or providing financial compensation.

Specific Circumstances: Insolvency and Financial Distress

Automatic Termination due to Insolvency

A common misconception is that commercial contracts automatically end upon one party’s insolvency. This is not the case in the Netherlands. Despite a party’s bankruptcy, contract obligations remain. The bankruptcy trustee holds the discretion to honor the agreement based on the estate’s interests.

If the trustee opts not to honor the agreement, the counterparty can claim a breach of contract, possibly leading to contract rescission and damage claims.

Termination Amidst Financial Distress

The Dutch Civil Code’s principle of reasonableness and fairness (article 6:248 DCC) may play a pivotal role in such scenarios. Although there are no direct restrictions to terminate a contract if the counterparty faces financial distress, terminating might be deemed unreasonable or unfair if it leads to severe repercussions for the distressed party.

Force Majeure: A Crucial Component

In the Netherlands, the concept of force majeure, or “overmacht,” holds significant weight. Force majeure events are those unforeseeable circumstances that prevent someone from fulfilling a contract. Under Dutch law, as specified in article 6:75 of the Dutch Civil Code, if a party breaches the contract due to circumstances beyond their control, they’re typically not held liable:

Article 6:75 Legal excuse for a non-performance (force majeure)
A non-performance cannot be attributed to the debtor if he is not to blame for it nor accountable for it by virtue of law, a juridical act or generally accepted principles (common opinion).

The inclusion of a force majeure clause in contracts, while not mandatory, can provide clarity. It allows parties to define, expand, or limit the term by listing specific events that constitute force majeure.

Ending a supply contract in the Netherlands

To end a supply agreement in the Netherlands, you must follow a specific process and meet certain requirements. The termination process in the Netherlands is governed by the Dutch Civil Code, which sets out the rights and obligations of both parties involved. As the terminating party, you have termination rights under Dutch supply contracts, but it is crucial to adhere to the termination provisions outlined in your agreement. One important requirement is providing a written termination notice to the other party. The notice should clearly state your intention to terminate the contract and comply with any specified notice period. It is also essential to consider the termination implications for ongoing projects in the Netherlands, as ending a supply agreement may have consequences for existing commitments and obligations. Therefore, it is advisable to seek legal advice before initiating any termination proceedings.

Contact our Dutch contract lawyers

Navigating contract termination in the Netherlands requires an in-depth understanding of its legal landscape. At MAAK Advocaten, we advocate for clarity, ensuring that parties are well-informed about their rights, responsibilities, and the intricacies that the Dutch Civil Code brings. Whether it’s understanding implied terms, navigating termination amidst insolvency, or comprehending the implications of force majeure, a thorough grasp is indispensable.

If you have any questions or require legal assistance regarding the termination of a supply 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.

Remko Roosjen

Remko Roosjen

Remko Roosjen is a Dutch contract attorney in the Netherlands and creates close working relationships with clients, providing pragmatic solutions across on all legal matters in the Netherlands. Remko is a partner of our commercial law firm in Amsterdam, the Netherlands. His specialist areas include Dutch contract law, including Dutch commercial contracting and legal disputes, including civil litigation, arbitration and mediation. Remko is a sharp, creative Dutch attorney with extensive cross-border experience representing both foreign plaintiffs and defendants. Visit Remko's profile via the website or via his LinkedIn Profile.