Under Dutch law you may dissolve (ontbinden) a reciprocal contract, wholly or in part, if the other party fails to perform, unless the failure is too minor to justify dissolution (Article 6:265 of the Dutch Civil Code, BW). Where performance is still possible, the other party must first be in default (verzuim), which usually requires a written notice of default with a reasonable deadline.
Dissolution takes effect by a written declaration (Article 6:267 BW) or by a court order. It does not work retroactively: both parties are released from obligations still to be performed, and what has already been performed must be undone.
Table of contents
How does dissolution differ from annulment and termination?
Dissolution ends a valid contract because of a failure to perform. Annulment (vernietiging) attacks a defect in how the contract was formed; termination by notice (opzegging) ends a continuing contract for the future without any breach.
| Route | Trigger | Effect on past performance |
|---|---|---|
| Dissolution (ontbinding) | Failure to perform by the other party | No retroactive effect; performances are undone or their value paid |
| Annulment (vernietiging) | Fraud, threat, abuse of circumstances, mistake or lack of capacity | Retroactive; the contract is treated as never having existed |
| Termination by notice (opzegging) | A contractual or statutory basis, or reasonableness and fairness | Only for the future; past performance stands |
| Mutual agreement | Both parties agree | As agreed in the settlement |
Annulment is subject to a limitation period of three years, usually running from the moment the ground was discovered (Article 3:52 BW). Choosing the wrong route is not a technicality: a party that dissolves where it should have given notice exposes itself to a damages claim.
When is a failure serious enough to dissolve?
Any failure to perform in principle justifies dissolution. The exception applies only where the failure, because of its special nature or minor significance, does not justify dissolution and its consequences.
No fault is required: a supplier who cannot deliver because its own supplier failed is still in breach for this purpose. The Hoge Raad confirmed in its preliminary ruling of 28 September 2018 (ECLI:NL:HR:2018:1810, Eigen Haard) that Article 6:265(1) BW is a rule with an exception, and that the court weighs all circumstances when applying the exception. Relevant factors include the extent of the failure, whether it can still be remedied, what has already been performed and the consequences for both parties.
A single late delivery in a long supply relationship rarely justifies ending the whole contract. A complete failure to deliver the core of what was bought almost always does.
When is partial dissolution the better choice?
Partial dissolution is often the most proportionate answer. If 20 of 50 delivered machines are defective, you can dissolve for those 20, keep the 30 that conform and recover the corresponding part of the price.
Partial dissolution can also reduce both parties’ obligations proportionately, which works like a price reduction. It is considerably easier to defend than dissolving the entire contract.
Why must you complain in time?
You lose the right to rely on a defect if you do not complain within a reasonable time after you discovered it, or should have discovered it (Article 6:89 BW). For sales contracts, Article 7:23 BW applies the same rule; a consumer who notifies within two months of discovery is always in time.
For commercial contracts there is no fixed period. Businesses that spend months trying to solve a problem informally regularly find that the right to invoke the defect has gone. Complain in writing as soon as you identify the problem, describe it specifically and reserve your rights.
How do you put the other party in default?
Send a written notice of default (ingebrekestelling) that gives a reasonable period to perform (Article 6:82 BW). Only after that period has passed is the other party in default.
The notice must state precisely which obligation has not been performed and set a specific date; “as soon as possible” is not a deadline. Send it in a way that lets you prove receipt. If the period is too short, it is extended to a reasonable period, which means a dissolution declared on the original date may be premature.
When is no notice of default needed?
Default arises without notice in the cases listed in Article 6:83 BW, and no default is needed where performance is permanently or temporarily impossible (Article 6:265(2) BW).
- A fatal deadline (fatale termijn) has passed without performance. A delivery date in an order confirmation is not automatically fatal; say so explicitly in the contract.
- The other party has stated in writing that it will not perform. An expression of difficulty is not such a statement.
- The obligation arises from an unlawful act or is an obligation to pay damages.
- Performance has become impossible, for example because the unique object sold has been destroyed.
While the other party is in default, you may suspend your own performance under Article 6:262 BW, as long as the suspension is proportionate to the failure. Communicate it in writing with the reason.
How do you dissolve the contract?
In most cases you dissolve by a written declaration to the other party (Article 6:267 BW). It takes effect on receipt and needs no court approval.
State in one sentence that the agreement is dissolved, identify the contract by date and subject, describe the failure and refer to the notice of default. Say whether the dissolution is total or partial and reserve your right to damages. Letters that only threaten or propose dissolution are regularly held not to have dissolved anything.
A declaration without valid grounds does not end the contract. It puts you in breach instead, and the other party may then dissolve against you and claim damages. Where the grounds are likely to be disputed, ask the court to dissolve the contract in proceedings on the merits. In urgent cases, interim injunction proceedings (kort geding) can be used for related orders, such as preventing a call on a bank guarantee.
What happens after dissolution?
Both parties must undo what has been performed (Article 6:271 BW). The party that dissolves must also return what it received.
Goods are returned and payments repaid; each party can suspend its own restitution until the other performs. Where undoing is impossible, as with services already provided, the value of the performance must be paid (Article 6:272 BW). That value is not automatically the contract price: if the work was defective, it is limited to the benefit actually received. In half-finished construction projects, this is where most of the dispute lies.
Dissolution and damages can be combined. Under Article 6:277 BW, the party whose attributable failure led to dissolution must compensate the loss caused by it, such as the extra cost of a replacement transaction. A supplier who can rely on force majeure may face dissolution without owing damages. Clauses meant to survive the contract, such as confidentiality, choice of forum and arbitration, generally continue to apply.
Which time limits apply?
Three clocks run at the same time. The complaint duty of Article 6:89 BW is the shortest; the limitation periods for performance and damages are five years.
- Complaint: within a reasonable time after discovery of the defect (Article 6:89 BW).
- Claim for performance: five years from the day after it became due (Article 3:307 BW). Once it has lapsed, you can no longer dissolve (Article 3:311 BW), although you can still rely on the failure as a defence.
- Damages: five years from the day after you know of both the damage and the liable party, with a long-stop of twenty years (Article 3:310 BW).
A written notice in which you unequivocally reserve your right to performance interrupts the limitation period (Article 3:317 BW).
What should you check before you dissolve?
The preparation matters more than the letter. Check these points before sending the declaration.
- Have you complained in writing in time and described the defect specifically?
- Is the other party in default, through a notice with a clear date or one of the exceptions?
- Is partial dissolution more proportionate than total dissolution?
- What must you return or pay for, and what will you recover? Compare this with keeping the contract and claiming damages.
- Does the contract contain a fatal deadline, a dissolution clause, a liability cap or a forum clause?
What should you check when the other party dissolves?
A dissolution declared against you is not necessarily valid. Check these points before you respond.
- Were you actually put in default, with a reasonable period to perform?
- Is the failure minor enough to fall under the exception of Article 6:265(1) BW?
- Did the other party complain in time under Article 6:89 BW?
- Was the failure attributable to you, or can you rely on force majeure against a damages claim?
- What is the value of what you have already performed, and how will you claim it?
What can we do for you with dissolving a contract?
Our corporate lawyers handle commercial contract disputes; for the wider framework, see contract law in the Netherlands and consumer protection in contracts.
- We draft the complaint and the notice of default with a defensible deadline.
- We draft a dissolution declaration that states the grounds and scope unambiguously.
- We calculate the restitution in both directions and the damages you can prove.
- We assess a dissolution declared against you and respond within the relevant period.
- We conduct proceedings on the merits or interim injunction proceedings before the district court.
Summary
- Any failure to perform can justify dissolution, unless it is too minor (Article 6:265 BW; ECLI:NL:HR:2018:1810).
- Where performance is still possible, the other party must first be in default, usually through a notice with a clear deadline.
- Dissolution works by written declaration (Article 6:267 BW) and is not retroactive.
- Both parties must undo what was performed, or pay its value (Articles 6:271 and 6:272 BW).
- Complain in time (Article 6:89 BW); the claim to dissolve lapses with the claim for performance.
Frequently asked questions
Can I partially dissolve a contract?
Yes. Article 6:265 BW allows dissolution in whole or in part. If only part of the performance is defective, you can dissolve for that part, keep what conforms and recover the corresponding part of the price.
What is the difference between dissolution and annulment?
Dissolution ends a valid contract because of a failure to perform and has no retroactive effect. Annulment addresses a defect in the formation of the contract, such as fraud or mistake, and works retroactively.
Do I always need to send a notice of default?
Not always. No notice is needed if a fatal deadline has passed, if the other party has stated in writing that it will not perform, or if performance has become impossible. If in doubt, send the notice.
How long do I have to dissolve a contract?
The right to dissolve lapses when the claim for performance becomes time-barred, usually five years after the obligation became due (Articles 3:307 and 3:311 BW). You must also complain within a reasonable time after discovering the defect (Article 6:89 BW).
