Enforcing A Breach: An examination of Dutch contract law

Establishing relationships with new suppliers, clients or service pro- viders is always challenging, particularly if it involves a new country, where the subtleties of  negotiation are often very different.

Contracts are always necessary, and inevitably end up in dispute at some stage, so an understanding  of the relevant tort law in the jurisdiction in question is crucial. Depending on the  specifics of the contract in question, a breach can occur when a party fails to perform on time,  does not perform in accordance with the terms of the contract, or a does not perform at all.

Under Dutch contract law, failure in the performance of a contrac- tual obligation gives a  number of remedies for the other party. In the Dutch Civil Code, the term ‘failure in  the performance’ is used for both attributable or non-attributable non-performance. In a  situation where the performance cannot be attributed to the debtor, or where performance is  permanently impossible, there is a failure in the performance right away. In all other cases, there  is only a failure in the performance when the debtor is in default.

There are several remedies in Dutch law in the case of a breach of contract. It is possible to ask  for actual performance or modifi- cation of performance of the original agreement. It is also  possible that a Dutch court orders a definition of performance exactly as specified in  the contract (specific performance), cancels the con- tract and excuses both sides from further  performance. Any money advanced must be returned (rescission of the contract). The terms of the  contract are then changed into the situation as intended by the parties (reformation of the  contract) or the non-breaching party may cancel the contract and sue for restitution.

If there is no contractual obligation, then under Dutch tort law, compensation for losses  due to the other party is required. Article 6:162 of the Dutch Civil Code states that the party who  commits a tort towards another is obligated to compensate the losses, which are the result of the  other party (or it’s servants).

Dutch law also draws a distinction between the infringement of a right, an action or failure to act  in contravention of a statutory duty, and an action or failure to act in contravention of generally  accepted norms. Any claim in the case of the above in the Netherlands must be brought before the  Dutch court within a certain period of time. Every jurisdiction has its own deadlines in the Dutch  Civil Code. It is thereby advisable to contact a Dutch contract lawyer to check.

The Enterprise Division of the Amsterdam Court of Appeal

In the Netherlands there exists a special court for legal disputes within companies. This so-called  Enterprise Division of the Amster- dam Court of Appeal is part of the Amsterdam Court of Appeal.  The Division offers tailor made jurisdiction by highly specialised judges, and, when  necessary, justice is delivered very quickly.

Contrary to popular belief, the Enterprise Division does not only deal with proceedings between large international enterprises, but mainly handles cases of small  and medium-sized enterprises. With its speed, expertise and conflict resolution capacity, the  Enterprise Division is an example of the innovative way in which the judiciary should work.

All legal business disputes that arise internally in private and public limited liability  companies can be assessed and settled by the Enterprise Division by means of a so-called  request for an inquiry. After submission of a petition, the Enterprise Division usually  appoints an expert who will investigate the policy and the course of affairs of the company in  order to issue its advice on the matter.

After the expert has reported on his findings, an oral hearing usually takes place, after which the  Enterprise Division gives its judgment. The Division always participates actively in the  negotiations with the parties in order to reach a mutually acceptable solution for the dispute. In  urgent cases, the Enterprise Division may, at (very) short notice make a provisional measure as  part of an inquiry procedure, which then applies for the duration of the main procedure.

Possibilities of attachment

If an outstanding claim is not paid and the amicable collection process has not led to a  result in the Netherlands, the possibility of attachment exists for the creditor. The creditor can  levy a pre-judg- ment attachment, which requires the bailiff to seize goods prior to the main  proceedings.

The bailiff may seize and freeze all of a debtor’s assets, such as immovable property, movable  property and bank accounts. This prevents the debtor from dispersing their assets during the  main proceedings and thus leaving the creditor empty-handed after- wards.

In order to levy a pre-judgment attachment, prior permission from the preliminary relief judge is  required. Usually this permission is granted quickly after a brief inquiry. If a pre-judgment  attachment is levied, the creditor must, in most cases, start the main proceedings within 14 days.  If he fails to do so, the attachment will expire.

The debtor may request the lifting of the attachment in an interloc- utory proceeding. This is  possible if, for example, the attachment has been levied unnecessarily and / or unlawfully.  Furthermore, lift- ing can also be done if sufficient security is provided for this claim.

A pre-judgment attachment is not entirely without risk. If the court rejects the claim in the main  proceedings, it is established that the attachment was also wrongly levied. If the debtor  furthermore can prove that he has suffered damage as a result of the attachment, the creditor  will become liable for this damage. When the court does grant the claim, the  pre-judgment attachment will be con- verted into an executory attachment, after which, for  example, the sale of the goods that have been seized can take place.

 

This article is taken from the recent IR Digital doucment: IR GLOBAL – MEET THE MEMBERS: The Netherlands.