As Dutch contract attorneys in the Netherlands, we often advise clients on whether they should withdraw from a contract under Dutch law, what the chances of success and risks are and whether another legal remedy would be more appropriate. After discussing possible alternatives with the client, a declaration of withdrawal can be drawn up and sent to the other party. As a rule, you withdraw from a (purchase) agreement if you are dissatisfied with an (un)delivered item or a (un)purchased service. Whether it is a machine that does not comply with the agreement or a collaboration that is no longer worthwhile, the law offers the party that has suffered a disadvantage as a result of the agreement the opportunity to (partially) withdraw from the agreement. As contract law attorneys in the Netherlands, we often see entrepreneurs who have difficulties in examining the conditions of withdrawal. Questions such as “When can I, as an entrepreneur, withdraw from the contract?” and “what are the consequences of withdrawing from the purchase contract?” are issues we encounter in our daily practice. In the following we will discuss 7 main topics concerning the withdrawal from a contract under Dutch law.
Withdrawal from the purchase agreement
If one party fails to fulfil an obligation incumbent upon it, the other party may withdraw from the contract. This is inadmissible if the defect “because of its special nature or minor importance” does not justify such withdrawal. In other words, it must be possible to give the withdrawal a certain substance. In recent case law this is referred to as “sufficient interest for withdrawal” (‘voldoende gewicht aan de ontbinding’). If your contractual partner could still provide services – e.g. the machine could be repaired or newly delivered – then you can only withdraw from the contract if your contractual partner does not adhere to the agreement after a reasonable period of time to still provide the service and is therefore in default. We will come back to the subject of default later in this blog. It is important to know – and this is often forgotten – that it is only partially possible to withdraw from an agreement.
Withdrawal from the purchase contract: notice of default
Apart from a few exceptions, this usually means that you must put the other party in default and set a reasonable deadline to meet the requirements for withdrawal from the contract. It is important that you carefully name the defects and the reasons that entitle you to withdraw from the contract. An English-speaking lawyer in the Netherlands can help you with this. Our advice is – certainly if there is still time – to first put the other party in default anyway.
Withdrawal from the contract: obligations to withdraw under Dutch law?
Withdrawal releases the parties from their obligations. As far as possible, both parties are obligated to cancel the services received (so-called restitution obligation). This means that in the event of withdrawal from the purchase contract, the purchased product is returned to the seller and the purchase price must be refunded.
Withdrawal from the contract Netherlands: compensation possible?
The party that has not complied with the agreement is obliged to compensate for the damage. In some cases it may be force majeure, for example, if the supplier has not delivered on time, or if there has been a fire, power failure or internet failure. Force majeure is not necessarily a reason for not being able to withdraw from the contract. Non-fulfilment of the contractual agreement does not have to be imputable in order to be able to withdraw from it.
Withdrawal from the contract: in writing or in court?
You can withdraw from a contract yourself (in writing). A declaration of withdrawal is in principle free of form but can be contractually linked to additional conditions. Ensure that you carefully state all the reasons for withdrawal so that you can explain your position if the withdrawal is later questioned. Withdrawal can also be ordered by the court. If you decide to withdraw from the contract out of court and the parties do not agree on the withdrawal, there is a risk that the court will not consider the withdrawal valid. As a result, the contract will usually be continued. You should seek advice in this matter from a English-speaking lawyer in the Netherlands.
Contractually exclude a withdrawal?
In certain agreements, such as a settlement agreement or an acquisition agreement, it is often stated that withdrawal from the contract is not possible. This may be desirable because, in case of failure, rescission can sometimes have an undesirable effect. Reversing a business takeover means that the parties have received a lot of confidential information from each other. This is something that even a withdrawal from the contract cannot undo. Please note: it is possible to exclude withdrawal, but the principle of reasonableness and equity can sometimes thwart the work. Also note that “partial rescission” is a fundamentally different legal concept – under certain circumstances (and this is also often advocated in the literature) it is possible despite the exclusion of complete rescission. The English-speaking contract lawyers at MAAK will be happy to assist you in this matter.
Withdrawal, termination or cancellation: What is the difference?
What we as lawyers in contract law often see is a confusion of terminology. This is not surprising, because legal jargon is something that should largely be reserved for lawyers. How about that?
In English language contracts often use the term termination, which means termination in its pure sense. If you find yourself in a situation where you want to end your cooperation with a contracting party, please do not use the term “termination”. From a legal point of view, this is not a clearly defined term and may lead to discussions under certain circumstances.
If your contractual partner fails to perform properly – i.e. the delivery does not take place, the delivery does not take place on time, the delivery is defective, or it becomes known that the delivery will not take place (properly) – then you may successfully withdraw from the contract. Withdrawal requires a defect and can only take place in case of “non-performance”. Default means that, as a rule, no service will be provided after a reminder.
Termination is another term that we usually see in agreements that aim at continuous performance, so-called continuing obligations. For example, a distribution contract, agency contract or franchise agreement. A chain of sales contract can also lead to a lasting relationship with your contractual partner. For example, you can terminate the contract if you do not wish to continue this long-term relationship (in which case no defect is required). Another reason may be that your contract partner is threatened with insolvency or because their assets have been confiscated, or it could be that a pandemic means a partnership can no longer be maintained, as was the case with the corona virus (COVID-19). It would be wise to include the reasons for termination in such a contract. This will also be an important indicator of whether you can terminate successfully, what deadlines apply to the termination, whether there must be an important reason or whether you have to combine the termination with an offer of compensation. Your lawyer in contract law will be happy to help you with this and will inform you further about the possibilities.
Dutch specialist lawyer specialized in contract rescission
Do you have any questions about Dutch contract law or is a withdrawal from a contract under Dutch law at stake? Do you need specific legal advice in Holland on the subject of withdrawal from a contract under Dutch law? Our Dutch specialist lawyer specialized in contract rescission, Remko Roosjen, will be happy to help you.