12 October 2016

How to get out of Dutch loss contract?

Remedies for a Dutch loss contract

What are the legal remedies for a Dutch loss contract? First the cause for frustration and loss under the Dutch business contract should be established. The central idea that the Dutch contract is legally binding unless there is a fundamental change in the circumstances considered by the parties at the time of the conclusion of the contract. In other words the binding force of contracts persists only to the extent that the basic presuppositions of the contract remain unchanged. The idea of frustration of the contract sets the contract aside if factual or legal circumstances have changed to such an extent that the performance of the contractual obligations of the parties has turned out to be drastically different from what they had initially intended. Also check out: breach of Dutch contract.

Changed circumstances and loss contracts under Dutch law

Evolving from the principle of loyalty and good faith, the classic theorem of “clausula rebus sic stantibus” is an instrument for an intervention into the contract due to changed circumstances. A pre-condition for the intervention is the essential change of circumstances. It should be noted that only basic and important changes may lead to an excessive onerousness and considerable destruction of the reasonable equilibrium of mutual obligations under a contract. The change must have caused severe consequences for the parties to the Dutch Contract. Another requirement for intervention into the Dutch contract is the “extraordinariness” regarding the changed circumstances. Indicating that the changed circumstances must be highly unlikely to occur.

Extraordinary circumstances cause for dissolution of contract

An additional condition is “unforeseeability” ; the supervening extraordinary circumstances and respectively their effects to the must be unforeseeable at the time of the conclusion of the contract. Also, the performance under the changed conditions must seem unreasonable. Dutch law also has the “theory of unpredictability” (). When compared with the above mentioned theories, it is relatively uncomplicated. If an unpredictable event occurs which renders the claim of performance unjust, the victim may according to this theory request termination of the Dutch contract.

Dutch Court ruling on reducing contract obligations

The basis and initial circumstances of a bilateral Dutch contract may have changed subsequently on exceptional grounds that could not have been foreseen and the performance due by the debtor. A Dutch Court may at the request of the debtor and according to its appreciation reduce the debtor’s performance to the appropriate extent or decide the dissolution of the contract wholly or with regard to its performed part. For any question on changing a loss contract under Dutch law please contact Dutch Attorney Mark van Weeren.

Conditions for intervening into the contract

The conditions to modify a contract, may arise from Dutch law or general or special provisions. These conditions can be derived from the basic principle of loyalty and good faith as accepted in Dutch law:

a) Occurrence of the unexpected event after the conclusion of the Dutch law contract,

b) fundamentality of the change of circumstances,

c) extraordinariness,

d) unforeseeability,

e) no compulsory obligation to carry the burden of risk (such an obligation exists for example in warranties and stock market transactions),

f) lack of imputation of emergency regarding the extraordinary circumstance, as to the motive,

g) not having performed the obligation yet or at least performed it with reservation,

h) unreasonableness of the present performance.
More on this subject: Dutch legal principles and business contracts.