Legal advice on contracts under Dutch law: what should it cover?

Legal advice on contracts under Dutch law answers four questions: whether a contract has come about at all, whether its terms hold up against mandatory law, whether your general terms and conditions actually bind the other party, and what you must do procedurally before you can terminate or claim damages. Dutch contract law is largely found in Books 3 and 6 of the Burgerlijk Wetboek (Civil Code), and it differs from Anglo-American contract law on points that matter every day: there is no requirement of consideration, most contracts are form-free, and a clause that is valid on paper can still be set aside because relying on it would be unacceptable by standards of reasonableness and fairness.

One preliminary point clears up a common misunderstanding. Giving legal advice is not a reserved activity in the Netherlands: anyone may do it. What is regulated is representation in court, which in most civil proceedings before the district court, the court of appeal and the Supreme Court is reserved to advocaten, and the drawing up of the deeds that only a notaris may execute. Only advocaten and notarissen are bound by professional conduct rules, are required to carry professional indemnity insurance and enjoy legal professional privilege. If a template site or an unregulated consultant gets your contract wrong, you have no professional liability to fall back on. That is the practical reason to take the choice of adviser seriously, not a matter of titles.

When has a contract come about under Dutch law?

A contract is formed by an offer and its acceptance, as article 6:217 of the Civil Code puts it. An agreement requires an intention that corresponds with a declaration, and where they diverge, the other party may still rely on what it reasonably understood from your words or conduct. A negotiator who agrees the commercial terms while privately intending to keep haggling can find that the deal is done. Silence is not acceptance, unless a prior course of dealing or trade usage makes it so.

There is no consideration requirement. Dutch law does not ask what each side gave in return; the old requirement of a lawful causa disappeared with the current Civil Code. What replaced it is a nullity rule: a contract whose content or purpose conflicts with mandatory statutory provisions, public order or good morals is void or voidable. So the right advice question is not whether something of value was exchanged, but whether the agreement crosses a mandatory rule.

Most contracts are form-free and an oral agreement is binding, but the exceptions are absolute. The transfer of Dutch real estate and the transfer or pledge of shares in a Dutch BV require a notarial deed; real estate transfer additionally requires registration in the public registers, and prenuptial and cohabitation agreements require notarial form. Failing to observe a form requirement does not just make the contract harder to prove; it makes it invalid. Where no deed is required, the eIDAS Regulation and the Civil Code together mean that an electronic contract, including a qualified electronic signature, can satisfy a written-form requirement, provided the method used is reliable enough given the purpose of the document.

Two formation traps recur. The first is the battle of forms: where both parties refer to their own general terms, article 6:225 of the Civil Code gives priority to the terms referred to first, unless the second party expressly rejects the first set; a rejection buried in the small print does not count as express. The second is walking away from negotiations. Dutch law does not treat negotiation as risk-free: depending on how far talks have advanced and what expectations were created, breaking them off can oblige a party to compensate the other side’s costs, and in exceptional cases to continue negotiating. Our note on contract negotiation strategies explains how to manage that exposure with a well-drafted letter of intent.

Do your general terms and conditions actually apply?

This is one of the most productive areas of contract advice in the Netherlands, because many businesses assume their algemene voorwaarden (general terms and conditions) are in force when they are not. Two questions matter. First, do the terms form part of the contract: a reference in the offer is generally enough, and the other party is bound even without reading them. Second, did you give the other party a reasonable opportunity to take note of them. Under article 6:233 of the Civil Code a term is voidable if that opportunity was not given, and article 6:234 sets out how to give it, in principle by handing the terms over before or at the moment the contract is concluded, or by making them available electronically in a way that allows storage.

Getting this wrong is severe and one-sided: the other party can annul the individual clauses it dislikes, typically your limitation of liability, while the rest of the contract stands. Referring only to a deposit at the Chamber of Commerce or the court registry is permissible only where handing the terms over is not reasonably possible, which is rarely the case in an era of email and websites. For contracts concluded electronically, the terms must be provided in a form the other party can save and reproduce; a link that later goes dead is a real risk.

Content control comes on top of that. In consumer contracts, the Civil Code contains a black list of terms that are always unreasonably onerous and a grey list of terms presumed to be, both read in light of the EU Unfair Terms Directive, which requires the court to apply them of its own motion. Our article on Dutch law on consumer protection in contracts works through those lists. Between businesses the lists do not apply directly, but a small business facing a large counterparty can invoke their reflex effect, and the general standard that a term must not be unreasonably onerous applies to every contract. Very large companies, defined by reference to their financial reporting obligations or workforce, are excluded from that protection altogether, which is a reason for a substantial business to negotiate its liability cap rather than rely on the statutory route.

Which clauses will a Dutch court not enforce as written?

A Dutch court has more room to adjust a contract than an English or American court, and good advice prices that in rather than ignoring it. An exoneration clause is valid in principle, but a party cannot invoke it where doing so would be unacceptable by standards of reasonableness and fairness, the test the Supreme Court applies and which bites hardest with deliberate or grossly negligent conduct by management. A contractual penalty is enforceable, but the court may reduce it on the debtor’s application where the penalty is manifestly excessive, and it may not be combined with a claim for damages for the same breach unless the contract says so.

Restrictive covenants have their own regimes. A non-competition clause in an employment contract is valid only in writing with an employee of full age, and in a fixed-term contract only if the employer sets out in the clause itself the compelling business interests that require it, which the court will review; our article on the non-compete in a temporary contract explains how that test is applied. A court may limit or set aside such a clause and may award compensation for the period it restricts the employee. Terminating conditions attached to an employment contract are also strictly policed, as we set out separately on terminating conditions in employment contracts. In commercial contracts, clauses letting one party change prices or terms unilaterally, and clauses excluding termination of an indefinite-term agreement altogether, are the ones most often trimmed back by a court.

Who is actually bound by the signature?

A contract signed by someone without authority binds nobody, and this is the cheapest check in the whole process. Under Article 2:240 of the Civil Code, a Dutch BV is represented by its board and, unless the articles provide otherwise, by each director individually. The articles may require directors to sign jointly, and that restriction is registered and binds you; internal limits such as a shareholder approval requirement do not affect the director’s authority towards you. Take an extract from the Handelsregister at the Kamer van Koophandel before signing anything substantial and read the restrictions, not only the names.

Where the signatory lacked authority, the company can still be bound if you reasonably assumed that authority existed on the basis of facts attributable to the company, such as how it behaved in earlier transactions or the title it allowed the signatory to use. That doctrine rescues many contracts, but it is a fallback, not a plan. For share transfers in a BV and for real estate, the notarial deed is the moment that matters, and the notaris performs the authority check as part of the deed. Getting the parties right also means checking who your counterparty actually is: a trading name is not a legal entity, and contracting with the wrong entity in a group leaves you with a claim against an empty company. Our contract lawyers treat this as the first item on the checklist, not the last.

What must you do before you can terminate or claim damages?

Dutch law imposes a procedure, and skipping it is the most common way to lose an otherwise strong case. Where performance is defective, article 6:89 of the Civil Code requires the creditor to complain within a reasonable time after discovering, or should have discovered, the defect, on pain of losing its rights; what is reasonable depends on the nature of the contract and the parties.

Next comes default. Unless performance has become permanently impossible, the contract sets a strict deadline whose expiry itself puts the debtor in default, or the debtor has told you it will not perform, you must send an ingebrekestelling (notice of default) in writing that fixes a reasonable period for performance. Only once that period has passed is the debtor in verzuim, and only then do the rights to damages for delay and to rescind arise. Rescission for breach is available for any failure to perform, unless the failure, given its minor significance, does not justify it, and it can be effected by a written declaration without going to court. Where the parties prefer to close the matter themselves, the result is recorded in a settlement agreement, which binds them even where it departs from their strict legal positions. Finally, watch the clock. A claim for performance is time-barred five years after the day following the day it became due (Article 3:307), a claim for damages five years after the day following the day you became aware of the damage and the liable party (Article 3:310). A written demand or notice that unambiguously reserves your rights interrupts the period under Article 3:317 of the Civil Code.

Cross-border contracts: which law, which forum, and does the sales convention apply?

In a contract with a party outside the Netherlands, three separate choices have to be made, and they are frequently confused. The applicable law is determined by the Rome I Regulation, which lets the parties choose freely; absent a choice, the contract is generally governed by the law of the country where the party who is to effect the characteristic performance has its habitual residence, and a choice of law cannot deprive a consumer or an employee of the protection of the mandatory rules that would otherwise apply. The forum is determined by the Brussels I Recast Regulation within the EU, which upholds a choice of court and otherwise points to the domicile of the defendant or the place of performance, and the resulting judgment circulates in the EU without exequatur.

The third choice is the one most often missed. The Netherlands is a party to the United Nations Convention on Contracts for the International Sale of Goods (CISG), which applies automatically to a commercial sale of goods between parties in different contracting states. A choice for Dutch law does not exclude it, because the Convention is part of Dutch law; if you want the Civil Code rules instead, the contract has to exclude the Convention expressly. Which regime is better depends on which side of the deal you are on, which is a genuine advice question rather than boilerplate. Where the counterparty sits outside the EU, ask the enforcement question before you agree the forum: a judgment you cannot enforce where the assets are is not worth the procedure that produced it. Our checklist before you sign a contract goes through these points in order.

What are the warning signs a contract was never tested against Dutch law?

Some tells are unmistakable: recitals reciting good and valuable consideration, a governing law clause naming a US state, a reference to the Federal Arbitration Act, a representations and warranties structure with an indemnity but no cap, or the phrase “time is of the essence” used as if it replaced the notice of default. Each of these shows a template drafted for another legal system. None is automatically fatal, but each will be interpreted by a Dutch court under Dutch rules of interpretation, which look at the meaning the parties could reasonably attribute to the provisions in the circumstances, not the words alone (the Haviltex standard, Supreme Court 13 March 1981, ECLI:NL:HR:1981:AG4158).

Other signals are commercial: unlimited liability or an uncapped indemnity, a termination right that runs in one direction only, price indexation tied to an undefined market index, a penalty clause without a stated relationship to the damage, general terms referred to but never supplied, and an automatic renewal with a notice period longer than the term itself. If a signed contract contains several of these, the sensible step is a second opinion before the next deal rather than a dispute about the last one.

What should you check as the supplier?

As the party delivering goods or services, your main exposure is liability and payment. Check these points before you sign:

• Your general terms were handed over or sent electronically before or at signing, as Article 6:234 of the Civil Code requires.
• Your limitation of liability has a clear cap and is not undone by an uncapped indemnity elsewhere in the contract.
• The payment term is stated, and you know that statutory commercial interest under Article 6:119a of the Civil Code applies once it is exceeded.
• Any price indexation refers to a defined index, such as a CBS index.
• The contract states which law applies and whether the CISG is excluded.

What should you check as the customer?

As the party buying, your main exposure is a remedy that turns out to be empty. Check these points before you sign:

• The counterparty is the right legal entity, according to a current extract from the Handelsregister.
• The person signing has authority to represent that entity under Article 2:240 of the Civil Code.
• The supplier’s liability cap is in proportion to the damage you could actually suffer.
• Notice periods and automatic renewal dates are workable, and you diarise them on the day of signing.
• The forum clause points to a court whose judgment you can enforce where the supplier’s assets are.

What can we do for you with contract advice?

Our corporate lawyers draft, review and negotiate commercial contracts under Dutch law, in Dutch and English. Specifically:

• We review your draft contract and list the clauses that create uncapped or uninsured liability.
• We check whether your general terms and conditions are validly incorporated under Articles 6:233 and 6:234 of the Civil Code.
• We verify the counterparty and the signatory’s authority in the Handelsregister.
• We advise on choice of law, forum and the CISG in cross-border agreements.
• We draft the notice of default (ingebrekestelling) or the written rescission when the other party fails to perform.
• We record a negotiated outcome in a settlement agreement.

Summary

• A contract is formed by offer and acceptance; most are form-free, but real estate transfers, share transfers and pledges in a BV, and prenuptial or cohabitation agreements require a notarial deed.
• General terms and conditions only bind the other party if they were referred to and reasonably made available before or at the moment of contracting; getting this wrong lets the other party annul unwelcome clauses while the rest of the contract stands.
• Dutch courts can adjust or set aside clauses, such as penalty and exoneration clauses, that would be unacceptable by standards of reasonableness and fairness, and non-compete clauses are reviewed strictly.
• Before you can claim damages or rescind, you generally need to complain in time and send a written notice of default that sets a reasonable period for performance.
• In cross-border contracts, check the governing law, the forum and whether the international sales convention (CISG) applies or has been excluded, before you sign.

Frequently asked questions