International commercial contracts: the five most common mistakes and how to avoid them

The five mistakes that cause most trouble in international commercial contracts are a missing or careless choice of law, a jurisdiction clause that cannot be enforced where the assets are, payment terms that ignore the statutory rules on commercial interest and security, termination and force majeure clauses copied from a common law model that does not fit Dutch law, and general terms and conditions that never validly became part of the agreement. Each of these is avoidable at the drafting stage and expensive to repair afterwards. For a Dutch business, or for a foreign business contracting with a Dutch counterparty, the governing framework is the Dutch Civil Code together with the European regulations on applicable law and jurisdiction.

What follows sets out where those five errors come from, what the law actually says, and how to draft around them. The emphasis is on Dutch law, because that is the law that applies to most contracts concluded by businesses established in the Netherlands, and because several of its rules differ sharply from the assumptions built into English-language contract templates. Our guide to contracting with Dutch parties covers the negotiation side of the same problem.

Why cross-border contracts fail more often than domestic ones

A domestic contract is read against a single body of law that both parties broadly understand. A cross-border contract is not. The same clause can produce different outcomes depending on which law governs it, which court or tribunal reads it, and whether the resulting decision can be enforced where the other party keeps its assets. Those three questions are separate, and the most common structural error is to answer only the first.

The practical consequences follow from that. A supplier who wins a judgment in a court whose decisions cannot be enforced against the debtor has won nothing. A buyer who assumed that a penalty clause would be applied as written discovers that a Dutch court may reduce it. A seller who never excluded the Vienna Sales Convention finds that a treaty, rather than the Civil Code they had in mind, governs conformity and remedies. None of these outcomes involves bad faith on either side; they follow from clauses that were never tested against the law that actually applies.

Language, translation and interpretation

Contracts in international trade are usually drafted in English even when neither party is English-speaking and the governing law is not English law. That is workable, but it creates a specific risk: English contract terminology carries meanings from common law that Dutch law does not reproduce. Terms such as consideration, best endeavours, indemnity, warranty and condition precedent have no settled equivalent in the Dutch Civil Code, and a Dutch court will interpret them by asking what the parties could reasonably attribute to one another in the circumstances, not by importing English doctrine.

That interpretive standard is the Haviltex rule, and it is the single most important thing to understand about a contract governed by Dutch law. Dutch courts do not read a commercial contract purely literally. They look at the wording, but also at the negotiations, the parties, their expertise and the commercial purpose of the arrangement. A heavily negotiated contract between two well-advised businesses, with an entire agreement clause and professional drafting on both sides, will be read closer to the text; a short contract between unequal parties will not. If your contract is governed by Dutch law, put the commercial logic in the recitals, because they will be read.

Where the contract exists in two languages, state which version prevails, and mean it. A clause saying that both versions are equally authentic is an invitation to litigation, because no two translations of a commercial contract are identical in effect.

The cost of getting it wrong

The financial exposure is not limited to legal fees. Unclear allocation of transport, insurance and customs costs shifts real money on every shipment. An unenforceable jurisdiction clause means parallel proceedings in two countries. An invalid set of general terms and conditions removes your liability cap, your limitation period and your retention of title in a single stroke, which is usually a much larger number than the dispute that exposed it.

Reputational and relational cost follows. Most commercial relationships that end in litigation were salvageable at the point where the parties first disagreed about what a clause meant. Building a workable escalation route into the contract, rather than leaving it to whoever is angriest, is the cheapest form of risk management available.

Mistake one: leaving the applicable law to chance

A contract without a choice of law clause is not a contract without a governing law. It is a contract whose governing law is decided by a conflict rule, after the dispute has arisen, by whichever court is seised. Within the European Union that rule is the Rome I Regulation on the law applicable to contractual obligations, and it applies in the Dutch courts regardless of whether the law it points to is the law of a member state.

What Rome I does when you say nothing

Rome I gives the parties a free choice of law, which the courts respect, and which can be made expressly or can follow clearly from the terms of the contract or the circumstances. Absent a choice, the Regulation applies fixed rules for the most common contract types. A contract for the sale of goods is governed by the law of the country where the seller has its habitual residence; a contract for services by the law of the country where the service provider has its habitual residence; a distribution contract by the law of the distributor’s habitual residence; a franchise contract by the law of the franchisee’s habitual residence. Only where the contract fits none of those categories does the residual test, the characteristic performance, come into play, with a correction where the contract is manifestly more closely connected to another country.

Two consequences follow that surprise people. First, silence favours the supplier in a sale of goods and the provider in a service contract, so a Dutch buyer who leaves the question open in a purchase from a German seller will usually find German law applying. Second, the default rules are not the same as the rules on jurisdiction, so it is entirely possible to end up in a Dutch court applying foreign law, which is slower and more expensive than either party expected. Our guide to the applicable law in international agreements works through the mechanics in more detail.

The Vienna Sales Convention applies unless you exclude it

The most frequently missed point in international sales contracts is the United Nations Convention on Contracts for the International Sale of Goods, known as the CISG or, in Dutch practice, the Weens Koopverdrag. The Netherlands is a contracting state. Where both parties have their place of business in contracting states, or where the conflict rules lead to the law of a contracting state, the Convention applies to the contract of sale automatically. Choosing Dutch law does not exclude it, because the Convention is part of Dutch law.

The Convention can be excluded, and Article 6 says so expressly, but the exclusion must be made. A clause reading that the agreement is governed by the law of the Netherlands leaves the CISG in place; a clause reading that the agreement is governed by the law of the Netherlands and that the applicability of the Vienna Sales Convention is excluded does not. Which of the two you want is a commercial decision rather than an automatic one. The Convention has a genuinely international body of case law, a workable notion of fundamental breach, and a duty on the buyer to examine the goods and give notice of non-conformity within a reasonable time. Dutch domestic sales law has a shorter and stricter complaint duty. Sellers often prefer the domestic regime; buyers frequently prefer the Convention.

Rules you cannot contract out of

A choice of law is not unlimited. Rome I preserves the overriding mandatory provisions of the forum, and allows effect to be given to those of the country of performance. It also protects certain categories of party, most importantly consumers and employees, so that a choice of law cannot deprive them of the protection of mandatory rules of their home country. For a business-to-business contract that protection rarely bites, but neighbouring regimes do. Competition law, sanctions and export controls, product safety, anti-money-laundering and data protection all apply irrespective of the law chosen in the contract.

Commercial agency is the classic trap. The European directive on self-employed commercial agents, implemented in the Dutch Civil Code, gives an agent operating in the European Union a right to a goodwill indemnity on termination and minimum notice periods, and those protections cannot be avoided by choosing the law of a non-member state where the agent works in the Union. A distribution agreement drafted as an agency, or an agency dressed up as a distribution agreement, does not change that: the courts look at the substance of the relationship. Where you are choosing between structures, our overview of the different types of commercial agreement sets out the consequences of each.

Drafting the clause

A usable choice of law clause names one law, states whether the CISG applies, and says nothing else. Splitting the contract so that different parts are governed by different laws is permitted under Rome I but is almost never worth the complexity. Referring to general principles of international commercial law, or to the UNIDROIT Principles alone, without an underlying national law, works in arbitration but is unhelpful before a state court. And a choice of the law of a country with no connection to either party or the transaction is valid, but it means neither party’s lawyers know the answer to any question without instructing local counsel.

Mistake two: a dispute resolution clause that cannot deliver an enforceable outcome

The test of a dispute resolution clause is not whether it sounds authoritative but whether the decision it produces can be enforced against the other party’s assets. That question has a different answer inside the European Union than outside it, and the difference should drive the drafting.

Choice of court inside the European Union

Within the Union, jurisdiction is governed by the Brussels I recast Regulation. Parties may agree that the courts of a member state have jurisdiction, and such an agreement is exclusive unless they say otherwise. The form requirements matter: the agreement must be in writing or evidenced in writing, or in a form that accords with practices the parties have established between themselves, or with a usage of international trade that the parties knew or ought to have known. A jurisdiction clause buried in general terms that were never provided to the other party is vulnerable on exactly this point.

Where there is no choice of court, the Regulation gives the claimant the defendant’s domicile as a general rule and, for contracts, the place of performance of the obligation in question: the place of delivery for a sale of goods and the place where the services were or should have been provided for a service contract. That is why a Dutch supplier delivering to France can find itself before a French court even though its invoices refer to Dutch law.

The great advantage of the Regulation is enforcement. A judgment given in one member state is recognised in the others without any special procedure and is enforceable without a declaration of enforceability. In practice a Dutch judgment can be enforced in Spain or Poland on the strength of the judgment and a certificate. Nothing comparable exists outside the Union.

Enforcement outside the European Union

This is where most contracts are weakest. Under Dutch procedural law a foreign judgment cannot simply be enforced in the Netherlands unless a treaty or a European regulation provides for it. Article 431 of the Dutch Code of Civil Procedure states the rule and gives the alternative: the case can be brought again before the Dutch court, which may in practice adopt the foreign decision if the foreign court had a jurisdiction ground that is internationally acceptable, the proceedings met basic due process standards, the decision does not conflict with Dutch public policy, and it is not irreconcilable with an earlier decision between the same parties. That is workable, but it is a second set of proceedings, with the cost and delay that implies, and the mirror image applies to a Dutch judgment taken abroad.

Two Hague conventions narrow the gap. The 2005 Convention on Choice of Court Agreements binds the European Union and requires contracting states to give effect to exclusive choice of court agreements and to recognise the resulting judgments. The 2019 Judgments Convention, which entered into force for the European Union on 1 September 2023, extends recognition and enforcement more broadly between the states that have joined it. Both are useful, but the list of contracting states remains far shorter than the membership of the New York Convention, so the practical answer for a counterparty outside the Union is usually arbitration. Our guide on how to avoid jurisdiction and enforcement problems sets out the checks to run before signing.

Arbitration and the New York Convention

Arbitration is chosen in international contracts primarily for enforcement. The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards binds well over 160 states, including almost every significant trading nation, and obliges their courts to recognise arbitration agreements and to enforce awards subject only to a short and narrow list of refusal grounds. For a contract with a counterparty in a state with which the Netherlands has no judgments treaty, an arbitration clause is often the only realistic route to a decision that can actually be collected.

Dutch arbitration law is set out in Book Four of the Code of Civil Procedure and was modernised in 2015. The Netherlands Arbitration Institute administers arbitrations under its own rules and is the usual domestic choice; the ICC, the LCIA and, for particular sectors, specialised institutes are common in larger cross-border transactions. Whichever you choose, the clause needs four things to work: the institution and its rules, the seat of arbitration, the number of arbitrators, and the language. Omitting the seat is the most damaging omission, because the seat determines the supervisory court and the law governing the arbitration itself.

Arbitration is not automatically cheaper or faster. The parties pay the tribunal and the institution, there is effectively no appeal on the merits, and an award can be set aside only on limited grounds. Those are features rather than defects, but they mean arbitration suits contracts where confidentiality, technical expertise and cross-border enforcement matter more than the right to a second opinion. Where the relationship is worth preserving, a stepped clause requiring negotiation and then mediation before arbitration is sensible, provided the steps have deadlines. A clause requiring the parties to resolve disputes amicably, with no time limit and no consequence for refusing, achieves nothing except delay.

The Netherlands Commercial Court

For parties who want a state court but not a Dutch-language procedure, the Netherlands Commercial Court in Amsterdam has heard international commercial disputes in English since 1 January 2019, with a specialist chamber and an appeal court in English as well. It requires the parties to have agreed to it expressly and in writing, it charges higher court fees than the ordinary courts, and its judgments circulate within the European Union in the ordinary way under the Brussels I recast Regulation. For a dispute between a Dutch party and another European party, it is frequently a better answer than arbitration, and our overview of litigation under Dutch law explains how the ordinary route compares.

Mistake three: payment terms that ignore the statutory rules

Payment clauses are usually drafted as though the parties were writing on a blank page. They are not. For business-to-business contracts, European and Dutch law already regulate late payment, and a clause that departs from those rules without saying so simply produces confusion about which regime applies.

Payment periods, statutory commercial interest and recovery costs

The European directive on combating late payment in commercial transactions is implemented in the Dutch Civil Code. Three rules matter in practice. Where the parties agree no payment period, payment falls due within thirty days of receipt of the invoice or of the goods or services, whichever is later. Between businesses a longer period can be agreed, but the Civil Code caps it at sixty days unless a longer period is expressly agreed and is not manifestly unfair to the creditor; against a public authority the ceiling is thirty days. And once the debtor is late, statutory commercial interest runs by operation of law, without a reminder being necessary.

Statutory commercial interest is not the same as the ordinary statutory interest that applies to non-commercial obligations. It is considerably higher, and the rate for each half-year is fixed by the government and published; do not write a rate into the contract unless you intend to displace the statutory one, and check that the contractual rate is genuinely higher, because a lower one will simply be ignored in favour of the statutory floor. In addition, the creditor is entitled to a fixed minimum sum in respect of extrajudicial collection costs without having to prove them, again set by regulation.

The drafting lesson is straightforward. Say when the invoice may be sent, what it must contain, when payment falls due, in which currency and to which account, and whether interest is the statutory commercial rate or a higher contractual one. Ambiguity like payment upon completion is the single most common source of collection disputes, because completion is exactly what parties disagree about. Our guide on how to sign a contract without hidden legal issues covers the traps in the surrounding clauses.

Security: retention of title, guarantees and advance payments

Dutch law offers a supplier a strong and cheap security interest that many international contracts fail to use. Retention of title (eigendomsvoorbehoud) allows the seller to keep ownership of delivered goods until payment has been made, and it survives the buyer’s bankruptcy, so the goods can be reclaimed from the trustee rather than ranking as an ordinary claim. It has to be agreed in advance, ideally in the general terms, and it has to be drafted with care: an extended retention of title covering all claims arising from the relationship is valid under Dutch law within limits, while a clause purporting to extend ownership to goods that have been processed or mixed generally is not. Its effectiveness against goods that leave the Netherlands depends on the law of the country where the goods are situated, which is a reason to know where the goods are going.

Beyond retention of title, the usual instruments are a bank guarantee, a parent company guarantee, a documentary letter of credit, and payment in tranches against milestones. Advance payments and deposits should state expressly whether they are refundable and in what circumstances, because Dutch law has no default rule that makes a deposit forfeit. If the intention is that the seller keeps the money on cancellation, the contract must say so, and it should be drafted as a fixed sum for cancellation rather than as a penalty, for reasons set out below. Where the counterparty’s solvency is doubtful, the risk is not theoretical: our guide on the bankruptcy of your contract partner sets out what survives an insolvency and what does not.

Currency, indexation and long-term price risk

In a contract running for more than a year, the price is a risk allocation as much as a number. State one currency of account and one currency of payment, and say who bears the cost of conversion and of bank charges. If the exchange rate risk is to be shared, define the reference rate, the source and the time of day at which it is read, because the difference between a central bank reference rate and a commercial rate is real money on a large invoice.

Indexation clauses should name a published index, specify the base period, the review date and the formula, and state what happens if the index ceases to be published. Open-ended clauses allowing one party to adjust prices at its discretion are enforceable between businesses but sit badly with the requirements of reasonableness and fairness that Dutch law applies to every contract, and a court will read them narrowly. A clause allowing renegotiation if a defined threshold is exceeded, with a right to terminate on notice if renegotiation fails, is more robust than a clause giving one party the pen. Note also that the consumer protection rules in Dutch contract law are stricter still where the counterparty is not acting in the course of a business.

Mistake four: termination and force majeure drafted on the wrong model

Dutch law does not have a single concept of termination. It has several, and they have different requirements and different consequences. Templates written for a common law system compress them into one clause, and the result frequently does not do what the party invoking it expects.

Rescission for breach requires default first

Rescission for breach, ontbinding, is available under the Civil Code whenever one party fails to perform, unless the failure is too minor to justify it. The important qualification is that, where performance is still possible, the other party must first be in default, verzuim, and default normally only arises after a written notice of default (ingebrekestelling) that grants a reasonable period for performance. Skipping that notice is the most common procedural mistake in Dutch commercial disputes, and it converts a good claim into a bad one.

There are exceptions. No notice is required where a fixed deadline agreed as such has passed, where performance has become permanently impossible, or where the debtor has made clear that it will not perform. A contract can also stipulate that specified breaches put the other party in default automatically, and doing so is usually worth the two lines it takes. What a contract cannot sensibly do is treat rescission as something that happens by sending an email calling the contract terminated: the effect of ontbinding is that both sides must return what they have received, which is often not what the terminating party wants.

Terminating a continuing relationship

A continuing contract for an indefinite term, a duurovereenkomst, can in principle be terminated by notice even where the contract itself says nothing about it. But Dutch case law makes that right conditional on the requirements of reasonableness and fairness: depending on the duration of the relationship, the investments the other party has made and its dependence on the contract, a court may require a sufficiently long notice period, a compelling reason, or compensation. A distributor who has built a market over ten years cannot be dismissed on thirty days’ notice merely because the contract is silent.

The answer is to regulate it. Set the notice period explicitly, in writing and with a defined method of delivery, state which events allow immediate termination, and deal with what happens afterwards: payment for work performed, return of materials and confidential information, run-off of existing orders, and which clauses survive. Our guide to termination and notice periods deals with the mechanics, and the contract should distinguish clearly between termination for convenience and rescission for breach so that neither is accidentally invoked in place of the other.

Force majeure and unforeseen circumstances

Under the Dutch Civil Code a failure to perform is not attributable to the debtor if it is not due to its fault and does not fall within its risk under the law, a legal act or generally accepted practice. That is force majeure, overmacht. Its effect is limited but important: it excuses the debtor from paying damages, but it does not by itself end the contract, and the other party can still rescind, because rescission does not require fault.

Because the statutory rule turns on the allocation of risk, a contractual force majeure clause is not decoration. It defines what falls within whose risk, and it therefore changes the outcome. After the pandemic, the sanctions packages and the energy price shocks of recent years, generic wording about events beyond a party’s control is plainly inadequate. Name the events: epidemic and government measures taken in response, war and sanctions, export and import restrictions, cyberattack, failure of a named critical supplier, strike, and extreme weather. State the notice period, in days rather than weeks. Impose a duty to mitigate and to resume performance. Say which obligations continue during the suspension, and in particular whether payment obligations do. And set a long-stop: if performance remains suspended after an agreed number of days, either party may terminate.

Alongside force majeure, Dutch law has a separate and unusual remedy for unforeseen circumstances. On the application of a party, the court may modify the effects of a contract or set it aside, in whole or in part, where circumstances have arisen that the parties did not provide for and that are of such a nature that the other party cannot reasonably expect the contract to be maintained unchanged. The threshold is high and the courts apply it sparingly, but it exists, and it cannot be excluded entirely by contract. A hardship clause providing for renegotiation on defined triggers is a better way of controlling that risk than pretending it is not there.

Penalty clauses can be reduced by the court

A contractual penalty (boetebeding) is valid under Dutch law and is a useful instrument, particularly for confidentiality and non-competition obligations where the actual loss is hard to quantify. But the Civil Code gives the court the power to reduce a penalty if the application of the clause would in the circumstances lead to a manifestly unreasonable result. That power cannot be excluded by agreement. The Supreme Court has made clear that it is to be used with restraint, and a court will look at the relationship between the penalty and the actual damage, the nature of the contract, the wording of the clause and the circumstances in which it is invoked.

Two drafting consequences follow. First, a penalty that bears some visible relationship to the harm it is meant to deter will survive; a round number set at a level nobody can justify may not. Second, state whether the penalty replaces damages or comes in addition to them, because the statutory default is that the penalty replaces damages and many parties intend the opposite. The same clause should say whether performance can still be demanded alongside the penalty.

Liability caps and exclusions

Limitation and exclusion of liability between businesses is permitted under Dutch law and is routinely upheld. The limit is the requirement of reasonableness and fairness: a clause cannot be relied on where reliance would be unacceptable, and the courts consistently refuse to allow an exclusion to protect a party against its own intent or conscious recklessness, and generally against that of its senior management. The seriousness of the breach, the nature of the harm, the extent to which the risk was insured and the negotiating positions of the parties all feed into that assessment. A cap tied to the contract value or to the insured sum, with carve-outs for the categories the parties genuinely intend to exclude from the cap, is far more likely to hold than a blanket exclusion of all liability.

Mistake five: general terms and conditions that never became part of the contract

Standard terms carry the liability cap, the retention of title, the limitation periods, the jurisdiction clause and the choice of law. They are also the part of the contract most often handled carelessly. Under Dutch law two questions decide whether they apply at all: whose terms won, and were they made available in time.

The battle of forms: Dutch law follows the first shot

When each party refers to its own standard terms, the Dutch Civil Code resolves the conflict in an unusual way. The second reference has no effect unless it expressly rejects the applicability of the first party’s terms. In other words, Dutch law follows the first shot: the terms referred to first apply, unless the party responding explicitly rejects them, and merely printing its own conditions on the back of an order confirmation is not an explicit rejection.

This is the opposite of the last shot rule found in many other systems, and it is also different from the position under the Vienna Sales Convention, where a reply containing materially different terms is a counter-offer. So the same exchange of documents can produce different results depending on whether the CISG has been excluded. The practical answer is simple and worth building into the sales process: refer to your own terms in the first document you send, in clear wording, and expressly reject any terms of the other party. Our guide to drafting general terms and conditions works through the wording.

Making the terms available before the contract is concluded

Dutch law requires the user of general terms to give the other party a reasonable opportunity to take note of them, in principle by handing them over before or at the time the contract is concluded. If that does not happen, the individual clauses are voidable, and the other party can invalidate the very clause the user is relying on. Depositing the terms with the Chamber of Commerce or a court registry, and mentioning where they can be obtained, is only a fallback for cases where handing them over is genuinely not reasonably possible.

For contracts concluded electronically the Civil Code allows the terms to be made available electronically before the contract is concluded, in a way that lets the other party store them and access them later. A link in the footer of a website is not automatically enough; a link presented before the order is placed, in a form that can be downloaded, generally is. In practice, attaching the terms as a PDF to the quotation and referring to them in the covering email disposes of most of these arguments.

The exception that catches international contracts

There is a further point that international contracts frequently overlook. The protective regime on general terms and conditions in the Dutch Civil Code does not apply to a contract between parties acting in the course of a business or profession where not both of them are established in the Netherlands. The consequence is that a foreign business contracting with a Dutch supplier cannot invoke the Dutch rules on unreasonably onerous clauses, and its position depends on the ordinary rules of contract and on reasonableness and fairness instead. Whether that helps or hurts depends on which side of the transaction you are, but it should be a conscious choice rather than a surprise. Larger Dutch companies exceeding statutory size thresholds are likewise excluded from parts of the protective regime.

Delivery terms, Incoterms and the transfer of ownership

Incoterms are the standard trade terms published by the International Chamber of Commerce. They allocate the costs and the risk of transport, and they say who arranges carriage, insurance, export clearance and import clearance. They do not transfer ownership, they do not decide the applicable law, and they are not a substitute for a sales contract. The current edition is Incoterms 2020, and the contract should say so, because earlier editions remain in circulation and some terms changed between them.

Choosing the right rule

The most common error is using a maritime term for containerised cargo. Under FOB, risk passes when the goods are on board the vessel, but a container is normally handed to the carrier at the terminal several days earlier, which leaves an uninsured gap in which neither party is clearly at risk. For containers the right rules are FCA, or CPT and CIP where the seller pays for carriage and, under CIP, for insurance. Reserve FOB, CFR and CIF for bulk and breakbulk cargo actually loaded onto a ship.

Name the place with precision. FCA followed by a city is not enough: name the terminal, the depot or the address, because the named place determines where risk passes and who pays terminal handling charges at each end. EXW deserves particular caution, because it obliges the buyer to complete export formalities in the seller’s country, which a foreign buyer often cannot lawfully do; FCA at the seller’s premises achieves nearly the same commercial result without that problem. DDP is the mirror image: it makes the seller responsible for import clearance, duties and import VAT in the buyer’s country, which requires a presence or a fiscal representative there and is regularly agreed by sellers who have not checked whether they can perform it. Where goods travel by road within Europe, the CMR Convention applies to the carriage contract and sets its own liability limits and time bars, and our guide to the CMR Convention for international road transport explains how that interacts with the sales contract.

Ownership passes under national law, not under Incoterms

Under Dutch law ownership of movable goods passes on delivery pursuant to a valid title, by a transferor with the power to dispose. Risk and ownership are therefore separate questions, and a contract that regulates one and ignores the other is incomplete. This is precisely where retention of title belongs: it postpones the transfer of ownership until payment while leaving the Incoterm to allocate risk in transit. Set out in the sales contract when ownership passes, when risk passes, who insures the goods and for what amount, and what the inspection and complaint procedure is on arrival, including the period within which the buyer must give notice of defects.

Confidentiality, intellectual property and personal data

Dutch law does not impose a general duty of confidentiality on commercial parties outside particular relationships, so confidentiality has to be created by contract. A workable clause defines what is confidential by category rather than by listing documents, sets out the permitted purpose, names the persons to whom disclosure is allowed and obliges the recipient to bind them, states how long the obligation lasts after the contract ends, and deals with return or destruction of material. Attaching a penalty to the obligation is normal, for the reason given above: proving loss from a leak is close to impossible. Trade secrets additionally enjoy statutory protection under the Dutch implementation of the European trade secrets directive, but only if the holder has taken reasonable steps to keep the information secret, which means the contract has to be matched by actual access controls. Our guide to the non-disclosure agreement sets out the standard structure.

Intellectual property does not transfer because it has been paid for. Under Dutch law copyright and other rights created by a contractor remain with the contractor unless they are assigned, and an assignment of copyright requires a deed. Rights created by an employee in the performance of the employment usually vest in the employer by operation of law, but that rule does not extend to freelancers or to subcontractors. An international contract should therefore state who owns pre-existing material, who owns what is newly created, what licence each party receives over the other’s background material, and in which territories. Moral rights of the author cannot be assigned under Dutch law, though they can be waived to a limited extent. Where third-party rights may be infringed, allocate the defence and the indemnity expressly, and cap it. Our intellectual property practice can review the allocation before signature, and an IT services agreement in particular needs the licensing and source code position spelled out.

Where personal data cross a border, the General Data Protection Regulation applies to the processing regardless of the law chosen for the contract. If one party processes personal data on behalf of the other, a data processing agreement with the content prescribed by the Regulation is mandatory, and transfers to countries outside the European Economic Area need a legal basis, in most cases the standard contractual clauses together with a transfer impact assessment. A confidentiality clause is not a substitute for either.

Signing: authority, formalities and electronic signatures

A contract signed by someone without authority does not bind the company unless the company has created the appearance of authority or subsequently ratifies it. For a Dutch counterparty, authority is a matter of public record: the trade register kept by the Chamber of Commerce shows the directors and any registered restrictions on their signing powers, and a third party acting in good faith is generally protected against facts that should have been registered but were not. Checking the register before signature costs nothing and settles the question. For a foreign counterparty, ask for a board resolution or a power of attorney, and for the equivalent register extract.

Most commercial contracts require no particular form under Dutch law, but some do. Transfer of registered property requires a notarial deed and registration; the assignment of copyright and the transfer of shares in a Dutch private limited company likewise require a deed. A non-competition clause in an employment contract must be in writing. Where a formality is prescribed and not observed, the act is void, and no amount of agreement repairs it.

Electronic signatures are governed by the eIDAS Regulation, which is directly applicable in the Netherlands, together with the Civil Code provision equating an electronic signature with a handwritten one where the method used is sufficiently reliable in view of the purpose and the circumstances. A qualified electronic signature has the same legal effect as a handwritten signature by operation of the Regulation. For a high-value cross-border contract, the reliability of the method is worth the extra effort: use a qualified or at least an advanced signature with an audit trail, state in the contract that electronic signing is agreed, and keep the signed file with its verification data.

Templates, customisation and the review cycle

A template is a checklist, not a contract. It saves time on structure and reminds you of clauses you would otherwise forget, and it is dangerous for exactly the same reason: it produces a document that looks finished. The clauses that decide cases, the description of what is being supplied, the price mechanism, the acceptance criteria, the liability cap and the dispute clause, are precisely the ones a template cannot fill in.

Start from the transaction. Specify the goods or services with measurable criteria, quantities, technical specifications, acceptable defect rates and inspection procedures; for services, define the standard, how performance is measured and what happens when it is not met. Link deliverables to dates and build in a change procedure that says who may request a change, who must approve it, and how it is priced, because scope change without a procedure is where fixed-price contracts turn into disputes. Our guide to contract negotiation strategy deals with how to hold that line in negotiations, and the specific structures differ by contract type: a supply agreement, a consignment agreement, a franchise agreement and a participation agreement each carry their own mandatory rules and their own standard traps.

Contracts also age. Legislation changes, sanctions lists change, index series are discontinued, the people named in the notice clause leave. Review long-term contracts annually against a short checklist: has the applicable law or the regulatory position changed, are the payment and price terms still commercial, are the delivery terms still the current Incoterms edition, are the notice addresses correct, and does the liability cap still bear a relationship to the value at risk. Keep the signed originals in one place, with the general terms that were actually attached at the time, because in a dispute the version that applied on the date of contracting is the only one that matters.

What to do before you sign

Before signing an international commercial contract, settle five questions in writing. Which law governs, and is the Vienna Sales Convention in or out. Which forum decides, and can its decision be enforced where the other party’s assets are. When does payment fall due, what interest and what security apply. How does the contract end, and what survives its ending. And whose general terms apply, and were they provided in time to become part of the agreement. If you can answer those five from the face of the document, the contract will survive most of what commercial life does to it.

Get the review done before signature rather than after the first invoice goes unpaid. Involving a contract lawyer at the term sheet stage costs a fraction of what it costs to argue about a clause that was never adapted to the deal, and it is the point at which the allocation of risk can still be changed.

Law & More advises Dutch and international businesses on drafting, reviewing and negotiating cross-border commercial contracts, on general terms and conditions, and on the disputes that follow when they fail, from the choice of law and forum through to enforcement. If you are preparing an international agreement or dealing with a counterparty who is not performing, our lawyers will review the documents and set out the options. Please contact us to discuss your situation, or read our wider legal advice for businesses and corporate law guides.

Frequently asked questions

The questions below deal with the practical issues that arise most often when a Dutch business contracts across a border: language and interpretation, currency risk, cultural differences in negotiation, dispute resolution clauses and intellectual property.

These mistakes are largely a question of who drafts and reviews; see our criteria for choosing a Dutch law firm for international contracts.