30 October 2016

Remedies and conseqeunces when changing a Dutch contract

Category: Contract law

Three different types of remedies can be distinguished in cases unexpected circumstances which justify an intervention; the contract may be renegotiated, adjusted or terminated. The most common remedy for the change of circumstances is the termination of the contract. This is an all-or-nothing remedy. Priority issue between these remedies is left to the courts’ discretion. In such cases, the courts shall provide adjustment of the contract and only if an adjustment is in concreto not appropriate, the contract should be terminated.

How to change a disappointing contract under Dutch law?

The legal consequences (remedies) when changing a contract in favour of the disadvantaged party are as follows:

  1. invitation to renegotiate, regarding the possible means in order to find a compromising solution against the suddenly changed circumstances,
  2. adjustment of the contract according to the unexpectedly changed circumstances or;
  3. the termination of the contract, as an ultimate remedy, probably combined with a compensation of equity for sacrifice in favour of the party who endures the termination of the contract. From the other perspective; the party who is released from the binding force of the contract has to compensate his relief.

Renegotiation is the most efficient remedy for the change of circumstances under a Dutch contract since it enables the parties to find a mutual resolution. Renegotiation is not an all-or-nothing remedy like the termination of the contract since it provides the parties with the full discretion of reallocating the risk and regenerating the contractual balance.

Duty to renegotiate Dutch Contract?

The duty to renegotiate under Dutch law is based on the principle of good faith as well as on the principle of loyalty or fairness. A faithful partner has to take all efforts to settle the dispute fairly. A Dutch business lawyer can also ask the Court for an injunction to order the other party to renegotiate in good faith. Violation of the duty to renegotiate in good faith will not lead to compensation, but to the loss of the right to adjust and terminate the contract. The ideal remedy specified for the change of circumstances is indeed the adjustment of the contractual balance. If renegotiation does not lead to the preferred change of the Dutch Contract, a request can be filed with the Dutch Court to modify the contract.