Dutch legal principles and business contracts

Dutch attorney on proper documentation when negotiating Dutch contract

Companies are advised to ensure that the negotiation phase is well documented through correspondence, minutes of meetings etc. It is important to identify explicitly the areas that may be considered relevant at a later stage thus demonstrating that these facts and circumstances were actually considered prior to entering into the agreement. The companies involved should limit possible claims on the grounds of reasonableness and fairness. Relevant issues should be discussed and confirmed in writing with a detailed explanation of their background. A properly drafted contract should avoid any possible room for (mis)interpretation beyond the actual text of the contract. Therefor special care should be taken for documentary evidence in case of withdrawal from negotiations or other pre-contract issues arising. A Dutch business lawyer is familiar with these legal issues and advise on (negotiating) a contract with a Dutch company.

Letter of intent with Dutch company binding contract?

Under Netherlands contract law it is possible for a party who has decided during the advanced stages of a contractual negotiation to break off such negotiations and not enter into a contract, to be held liable for the performance of the terms of such contract. Pre-contractual liability does not depend on whether there has been reliance by one party on another's representations - but rather it is a question of contractual "good faith". So, a letter of intent may also be qualified as a legally binding contract under Dutch law. As may be a certain level of agreement between the negotiating contract even if the contract was not signed.

Contract before signature under Dutch law?

According to the Netherlands Supreme Court's pre-contractual good faith principle may prohibit parties from walking away from a contract when the terms of the contract have been negotiated to an advanced level. This Dutch law doctrine allows for a negotiating party to be held liable for the performance of the terms of the agreement even if you who have not signed an agreement. If a Court in Holland rules that this party has broken off negotiations in bad faith then pre-contractual liability applies. Remedies for this aspect of pre-contractual liability have been generally accepted in Netherlands Courts to include variable levels of possible damages. A party found to have negotiated in bad faith may be liable and under a duty to pay compensation. Compensation for pre-contractual liability may vary from reimbursing a counterparty for the costs of the negotiations to full damages for lost profits as if a signed contract was breached.

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