29 May 2015

Breach of Contract In Dutch Law

Category: Contract law

Depending on the specifics of the Dutch contract, a breach can occur when a party fails to perform on time, does not perform in accordance with the terms of the agreement, or does not perform at all. Accordingly, a breach of contract will usually be categorized as either “material” or “immaterial” for purposes of determining the appropriate legal solution or “remedy” for the breach. One or both of the parties tot the contract may wish to have the contract enforced on its terms, or may try to recover for any financial harm caused by the alleged breach.

Late performance under Dutch Contract

Contracts generally specify a time for performance; late performance is usually not a breach of contract that would allow the other party to be excused from performance. However if time is of the essence late performance will be considered a material breach of contract that can give rise to damages or cause the cancellation of the contract. A typical remedy  if performance is late and useless is not of any value is Cancellation and Restitution; the other party should be brought in a position it was prior to the breach of contract.

Anticipatory breach of contract in the Netherlands

When your contract partner communicates that they will not perform the contract, the contract can be considered breached under Dutch law. The aggrieved party may take remedial action to mitigate damages and bring a lawsuit to recover damages for a breach. A Dutch Court my grant an injunction or other remedial relief in case of urgency and threat of serious damage to a company. In case there is doubt on the ability for the other party to perform under the contract. In this situations where a breach of the contract is anticipated the other party may request adequate assurances that the other party will perform it’s contractual duties adequately. For example, in case of a contract for the delivery of equipment, if the manufacturer finds out that the buyer’s company has lost significant money through bad transactions it may give reasonable cause to doubt the buyer’s ability to pay. The manufacturer would have the right to demand adequate assurances that payment under the contract will be given at the time of delivery of the equipment. If the buyer fails to respond in a specific time frame the manufacturer could treat the contract as breached.

Remedies Netherlands Law in case of Breach of Contract

If money cannot fix the performance problem under the Dutch Contract other remedies are available under Dutch law. Instead of asking for damages, you can also seek actual performance or modification of performance of the original contract. Performance remedies for breach of contract are for example:
Specific Performance: a Dutch Court order requiring performance exactly as specified in the contract
Rescission of the contract: the contract is cancelled and both sides are excused from further performance and any money advanced is returned.
Reformation of the contract: the terms of the contract are changed to reflect what the parties actually intended.
Cancellation and Restitution: the non-breaching party may cancel the contract and sue for restitution if the non-breaching party has given a benefit to the breaching party.

Time Limits on Enforcing Dutch Contract

Any claim for breach of contract in the Netherlands must be brought before the Dutch court within a certain period of time. This is called a limitation period and is set in a statute of limitations incorporated in the Dutch Civil Code. Every jurisdiction has its own deadlines. For example in the case of contract, the standard limitation is five years from the date the party would have first been entitled to bring action (i.e. the date of breach). However, for specific situation such as building contracts, consumer sle contracts and in case of absence of consensus (error) shorter time limits exist. Always contact a Dutch contract lawyer to check to time limits under Dutch law.