Article 37 of the Dutch Bankruptcy Act (Faillissementswet) applies to reciprocal contracts (wederkerige overeenkomsten) that neither the bankrupt nor the other party had fully performed at the time of the bankruptcy order. The other party can give the bankruptcy trustee (curator) a reasonable term in writing to declare whether he will perform the contract (gestanddoening).
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What can the other party do?
Send the trustee a written letter setting a reasonable term for his decision. What is reasonable depends on the contract and the urgency, but it is often a matter of days or a few weeks. Keep proof of sending, because the legal consequence depends on it.
What if the trustee does not respond?
If the trustee does not declare in time that he will perform, he loses the right to demand performance from the other party. The contract does not end automatically, but the other party can then usually dissolve it and file a claim for damages in the bankruptcy as an unsecured creditor.
What if the trustee chooses to perform?
He must provide security for the performance when he makes that declaration. The obligations arising from that performance are debts of the estate (boedelschulden), which are paid before ordinary creditors. This protects the other party when it continues to deliver after the bankruptcy.
What should businesses do in practice?
Act quickly after a customer or supplier is declared bankrupt. A party that keeps delivering without clarity risks building up a claim that will not be paid. Also check the contract for a right of suspension, retention of title or a termination clause. Special rules apply to some contracts, such as leases (Article 39 Bankruptcy Act) and employment contracts (Article 40 Bankruptcy Act).
Frequently asked questions
Can I terminate the contract because of the bankruptcy itself?
Often the contract allows this, but courts can limit reliance on such a clause in specific situations.
Does Article 37 apply to contracts already fully performed by me?
No. If you have fully performed, you simply file your claim with the trustee.
Related terms
- Article 6 Dutch Bankruptcy Act (bankruptcy order)
- Right of suspension
- Rescission of a contract
- Retention of title
Our corporate lawyers help suppliers and customers protect their position when a contracting party goes bankrupt. Want to know what this means for your situation? Book a free introductory meeting.
