Dissolving a Contract in the Netherlands

Under Dutch law, ontbinding van overeenkomst is the formal legal process for dissolving a contract when one party doesn’t hold up their end of the bargain. It’s a termination based on a breach of contract, giving the wronged party a way to end the agreement and seek remedies for the failure.

What Is Contract Dissolution

Think of a contract as a detailed set of rules for a shared venture. Both sides agree to follow these rules precisely. But what happens when one party starts to ignore their duties, putting the whole project at risk? This is where ontbinding van overeenkomst comes in. It’s the legal lever you pull to officially end the venture because the fundamental rules have been broken.

This isn’t the same as just walking away or cancelling an order. It’s a specific legal action under the Dutch Civil Code (Burgerlijk Wetboek) that is triggered by a failure in performance, legally known as wanprestatie. This failure gives the affected party a legitimate way out of their commitments.

Why It Matters for Businesses and Individuals

Understanding contract dissolution is vital for anyone entering into a formal agreement. For businesses, it’s a crucial tool to protect against unreliable suppliers, clients who don’t pay, or partners who fail to deliver. For individuals, it offers a safeguard when a service provider doesn’t meet expectations, like a builder who leaves a job half-finished.

The core principle of ontbinding van overeenkomst is that it allows a contract to be ended from the moment of dissolution forward. Unlike annulment (vernietiging), it does not retroactively erase the contract as if it never existed.

In essence, ontbinding provides a structured path to a fair resolution. It ensures that if one party doesn’t honour their obligations, the other isn’t stuck in a failing agreement. Knowing how this process works gives you clear advantages:

• Protecting Your Rights: It empowers you to take decisive action when a contract is breached.
• Limiting Financial Loss: You can stop pouring resources into a partnership that clearly isn’t working.
• Creating Legal Clarity: It formally releases both parties from any future obligations under the contract.

This is fundamentally different from other ways a contract can end, such as mutual agreement or annulment. For instance, annulment (vernietiging) applies when a contract was flawed from the very beginning—perhaps due to fraud or duress—and voids it retroactively. By contrast, ontbinding deals with a failure that happens during the life of an otherwise valid contract. Knowing the difference is crucial, as the legal and financial consequences vary significantly. This guide will walk you through the practical steps and implications.

Legal Grounds for Dissolving a Contract

You can’t just walk away from a contract because you’ve had a change of heart. Under Dutch law, dissolving an agreement—an action known as ontbinding van overeenkomst—demands a solid legal reason. Almost without exception, this reason is a significant failure by the other party to uphold their end of the bargain. This failure is called wanprestatie, or breach of contract.

But not every minor slip-up counts as a breach serious enough to tear up the whole agreement. The problem must be substantial. Think of it less like a single misplaced nail on a construction site and more like a fundamental flaw in the building’s foundation—a defect that compromises the entire structure.

Common examples of a serious breach (wanprestatie) include:

• Defective Products: A supplier delivers a key piece of machinery that constantly breaks down and defies repair.
• Late or Non-Delivery: A vendor fails to deliver goods by a critical, agreed-upon deadline, causing your own operations to grind to a halt.
• Subpar Service: A consultant you hired delivers a market analysis so full of errors that it’s completely unusable for its intended purpose.

For the dissolution to hold up, the breach must be clearly attributable to the party at fault.

The Crucial Step of Issuing a Notice of Default

Before you can pull the trigger on dissolution, you generally have to give the other party one last chance to fix the problem. This is done through a formal written notice called an ingebrekestelling, which officially puts them in default (in gebreke). This isn’t just a strongly worded email; it’s a legal prerequisite.

The ingebrekestelling must clearly lay out two key things:

1. A precise description of how the party has failed to meet their obligations.
2. A reasonable, specific deadline by which they must correct the failure and perform as promised.

If the other party ignores this notice or doesn’t fix the issue by the new deadline, they are now legally in default. This is the green light you need to start the dissolution process.

Think of the ingebrekestelling as a final, formal warning shot. It documents the breach and gives the defaulting party one last chance to avert the contract’s termination, strengthening your legal position if you must proceed.

When Is a Formal Notice Not Required?

While the notice of default is the standard route, there are a few specific situations where the law says it’s not needed. In these cases, outlined in the Dutch Civil Code (Article 6:265 BW), the party is considered to be in default automatically. You can move straight to dissolving the contract.

These key exceptions include:

• A Strict Deadline Was Missed: The contract specified a “fatal” deadline (fatale termijn) for performance. If a caterer fails to show up for a wedding on the specified date and time, the opportunity is gone forever. No second chances are needed.
• Performance Becomes Impossible: The core obligation can no longer be fulfilled. For example, if you agreed to buy a unique piece of art that is then destroyed in a fire before delivery, performance is now literally impossible.
• The Party States They Won’t Comply: The other party clearly communicates—verbally or in writing—that they have no intention of fulfilling their side of the deal. Their own words put them in default.

Understanding these grounds is essential. It ensures that when you move to dissolve a contract, your actions are built on a firm legal footing.

Your Step-by-Step Guide to the Dissolution Process

Once you’ve identified a clear legal ground for ending a contract—typically a breach (wanprestatie)—and have sent a formal notice of default (ingebrekestelling), you arrive at a critical junction. You must now decide which path to take to formalise the ontbinding van overeenkomst. Dutch law provides two distinct routes for this, each suited to different circumstances.

The choice you make hinges on the complexity of the situation, the other party’s cooperation, and whether a dispute seems likely. Navigating these options correctly is essential for achieving a clean and legally sound resolution.

Path 1: Extrajudicial Dissolution

The most direct and common method is buitengerechtelijke ontbinding, or extrajudicial dissolution. This path allows you to dissolve an agreement without involving the courts. It is achieved through a simple, yet legally significant, written declaration sent to the defaulting party.

This declaration is the official act of dissolution. It must clearly state:

• That you are dissolving the contract.
• The specific reasons for the dissolution, referencing the breach of contract.
• The effective date of the dissolution.

This approach is fast, cost-effective, and ideal for straightforward cases where the breach is undeniable. Think of it as the standard procedure when the facts are clear and the other party is unlikely to contest it.

However, its effectiveness depends on the other party accepting the dissolution or, at the very least, not legally challenging it. If they dispute your right to dissolve the contract, you may find yourself having to defend your decision in court anyway, which leads us to the second path.

Extrajudicial dissolution is your first and best option for an efficient exit from a broken contract. It puts the power in your hands, provided the legal grounds are solid and a dispute is not anticipated.

Path 2: Judicial Dissolution

When a case is more complex or when the other party disputes the breach, you must turn to gerechtelijke ontbinding—judicial dissolution. This involves petitioning the court to formally dissolve the contract. While it is more time-consuming and expensive, it provides a definitive, legally binding judgment that cannot be easily challenged.

You would typically choose this route if:

• The other party refuses to accept an extrajudicial dissolution.
• There is a significant disagreement over whether a breach actually occurred.
• The financial stakes are very high, and you need the certainty of a court order.

Recent legal reforms are aiming to make court action more accessible. For instance, a simplified procedure for certain low-complexity civil employment disputes was introduced on 1 March 2025, which is intended to help vulnerable workers get quicker and cheaper access to justice. This reflects a broader trend toward making legal recourse more practical for both individuals and small businesses.

Understanding the nuances between termination processes and the applicable notice periods is crucial in these matters. You can learn more about termination and notice periods in our detailed article.

What Happens After a Contract Is Dissolved?

Successfully triggering an ontbinding van overeenkomst (dissolution of an agreement) doesn’t just end the contract; it kicks off a very specific legal process. Think of it less like a simple stop and more like hitting the rewind button. The most immediate result is that both you and the other party are freed from any future commitments. The deal is officially off from that point forward.

But that’s not where the story ends. Dissolution creates a new set of legal duties called ongedaanmakingsverbintenissen, which literally translates to “obligations to undo”. This is a core concept in Dutch contract law. It means both sides must take active steps to reverse whatever has already been done under the contract, aiming to put everyone back in the position they were in before.

Reversing Performances and Hitting ‘Undo’

The idea of ongedaanmaking is easiest to grasp with an example. Let’s say you ordered a custom-made sofa, but it arrives with major defects. After you correctly dissolve the contract, a two-way street of obligations opens up:

• You (the buyer) are now legally required to return the faulty sofa to the seller.
• The seller is legally required to refund your payment in full.

This process ensures no one is left unfairly holding the bag—or the defective sofa. But what happens when you can’t just return something?

If physically reversing a performance is impossible, the law shifts gears. Imagine you hired a decorator who painted your living room the wrong shade of blue. You can’t exactly scrape the paint off and send it back. In situations like this, the obligation to “undo” converts into a duty to pay financial compensation for the value of the service you received.

The essence of dissolution is a clean slate. Future duties vanish, and past actions are unwound, either by returning goods and money or through fair financial compensation. It’s all about a fair reset.

Claiming for Additional Damages

Here’s a crucial point: the consequences of ontbinding van overeenkomst can go beyond just undoing the deal. If the other party’s failure to perform caused you additional financial harm, you have the right to claim damages, or schadevergoeding.

These damages are entirely separate from the “undoing” obligations. They’re meant to compensate you for losses you suffered because of the breach itself. For instance, if a supplier’s late delivery forced you to shut down your production line for a day, you could claim for the lost profits. This right is a powerful tool for achieving full financial justice.

How Ontbinding Works for Employment Contracts

When it comes to employment contracts, the process of ontbinding van overeenkomst—dissolving an agreement—takes on a very different, and much more regulated, character. The core idea is the same: ending a contract because of a breach or failure to perform. However, Dutch employment law wraps a significant layer of protection around the employee, creating a system that carefully balances the rights of both employer and employee. This isn’t like a typical commercial dispute.

You can’t just send a letter and dissolve an employment contract like you would a simple sales agreement. In the Netherlands, terminating an employment contract almost always requires permission from the UWV (Employee Insurance Agency) or dissolution by a court. A critical piece of this puzzle is the transitievergoeding, or transition payment.

The Role of the Transition Payment

Think of the transition payment as a mandatory form of severance pay. It’s not optional. Its purpose is to provide a financial cushion for the employee, compensating them for the loss of their job and helping to finance their transition to a new one. This could mean paying for retraining or simply covering costs while they search for their next role.

Since 2020, this payment has become a nearly universal right for any employee whose contract is terminated by their employer, no matter how long they’ve worked there. This includes part-time and short-term contracts. The amount is calculated based on the employee’s monthly salary and their length of service. The rules are strict and apply across most industries. There are some exceptions, of course, particularly for a dismissal during a probationary period. You can explore our guide on dismissal during the probationary period for more specifics on that topic.

The Dutch government also regularly adjusts the maximum cap for this payment to keep up with wage inflation. For example, in 2025, the maximum transition payment was raised to €98,000, up from the €94,000 cap in 2024. This change really underscores how important this payment is as a protective measure in Dutch employment law.

The transition payment is a cornerstone of Dutch employment termination. It’s not just a courtesy; it’s a legal obligation that transforms contract dissolution from a simple ending into a financially significant event for employers.

For any business, this means the financial side of dissolving an employment contract has become a major strategic consideration. It’s a calculated cost that has to be factored into any decision about workforce changes. This is especially true as global workforces become more common; for a deeper dive into this evolving legal landscape, consider these legal considerations when hiring remote workers. For the employee, it provides a vital safety net, ensuring they aren’t left high and dry after an employer-initiated termination.

Labour Market Trends Affecting Contract Terminations

The decision to end a contract, especially an employment one, is never made in a vacuum. It’s deeply connected to the wider economic climate and evolving government policies. Here in the Netherlands, we’ve seen a major push in recent years to reshape the labour market, and that directly influences how and when employment contracts are terminated.

Two major policy shifts are really driving this change. First, there’s a serious crackdown on what’s known as ‘false self-employment’ (schijnzelfstandigheid). At the same time, regulations are being tightened to favour permanent employment contracts over flexible ones. The government’s aim is to create more job security and make sure workers get the social protections they’re entitled to, like pensions and disability insurance. For businesses that have long relied on a flexible pool of freelancers and temporary staff, this has created a much more complex environment.

The Impact of Tighter Regulations

As the government clamps down on the rules around self-employment, many companies are finding themselves nudged—or pushed—into converting their flexible workers into permanent employees. While this is great for the worker’s stability, it completely changes the risk calculation for the employer. When the economy takes a downturn, a business with a larger permanent workforce may have no choice but to turn to formal termination procedures far more often than it would have in the past.

Why? Because ending a permanent contract is a whole different ball game than simply letting a freelance agreement expire. It’s a heavily regulated and often expensive process. You’re usually looking at court proceedings or getting permission from the UWV, not to mention mandatory severance payments. This brings the formal process of ontbinding van overeenkomst squarely into the picture.

A Rise in Formal Terminations

The real-world effects of these policies are already showing up in the numbers. As the government has gotten tougher on false self-employment, we’ve seen a parallel increase in formal contract terminations that come with a transition payment.

A key takeaway here is that government policy designed to protect workers is directly changing how companies handle terminations. With flexible work under more scrutiny, employers are being forced down the formal—and often more costly—path of contract dissolution.

Recent legal analyses in the Netherlands bear this out. Sectors that have always leaned heavily on flexible labour, such as temporary staffing, education, and healthcare, have seen a significant shift. Between 2023 and early 2025, these industries saw a 5-10% jump in formal contract terminations that included a mandatory severance payment. This shows a direct line between the policy changes and how often formal dissolution procedures are being used. You can discover more insights about Dutch employment law trends for 2025 from legal experts.

This trend really highlights how crucial it is for both employers and employees to keep up with the evolving legal landscape. For businesses, it means thinking more strategically about workforce planning and getting a firm grip on the costs and procedures involved in termination. For employees, it signals a welcome strengthening of their rights and protections within the Dutch labour market.

Unpacking Common Questions About Contract Dissolution

When you’re dealing with a contract dispute, specific questions always come up. Let’s tackle some of the most common queries about ontbinding van overeenkomst under Dutch law, with clear, straightforward answers.

Can I Just Verbally Tell Them the Contract Is Over?

No, simply stating that the contract is dissolved isn’t legally sufficient. To make it official, you need to provide a written notice. This can be a formal letter sent directly to the other party (known as extrajudicial dissolution) or initiated through a court filing (judicial dissolution). A verbal notice just doesn’t carry the legal weight required for a proper ontbinding.

What’s the Real Difference Between Dissolution and Annulment?

This is a crucial distinction, and it’s one that often causes confusion. Think of it this way:

• Ontbinding (Dissolution): This is for when a perfectly valid contract goes wrong during its lifetime. Because one party fails to meet their obligations, the other party ends it from that point forward.
• Vernietiging (Annulment): This action wipes the contract out as if it never existed in the first place. It’s used when there was a fundamental problem with the contract’s creation—things like fraud, being forced to sign under duress, or a major mistake about the facts.

In short, dissolution deals with a failure during the contract’s performance, while annulment addresses a fatal flaw in its formation.

Do I Really Have to Send a Notice of Default Every Time?

In most cases, yes. Sending a formal notice of default (ingebrekestelling) is the standard procedure. It essentially gives the other party one last, official chance to fulfil their side of the bargain before you take further action.

However, there are a few specific situations where you can skip this step:

• If a critical, non-negotiable deadline has already been missed.
• If the other party has explicitly stated they will not perform their duties.
• When it has become physically or legally impossible for them to perform their obligation.