Dutch law also includes the possibility that contractual obligations are not recognised under the law itself. An agreement to break the law, for instance, is not valid and cannot therefore be enforced by a judge. Such a situation seldom arises in professional contracts between businesses, but nevertheless it is advisable to seek legal advice if there is a lot at stake.
In the Netherlands verbal agreements are just as valid as written contracts, although it can be difficult to prove a verbal agreement. For some types of agreement a written contract is mandatory.
General contract law
Book 6 of the Dutch Civil Code sets out the general rules for agreements. In other sections of the Code, rules are given for specific forms of agreement. The law thus comprises of a general section that applies to all agreements and a specialised section that applies only to specific forms of agreement. Examples of agreements that are subject to many imperative clauses are rental and labour contracts. In such cases the contracting parties are not in an equal position, so the weaker party is protected by law.
Breach of contract
Under the Dutch Civil Code, if a contracting party does not fulfil his side of the agreement the other party can choose what action he wishes to take; dissolution or fulfilment. Before this right can be exercised, the breach must be legally established. This is pre-eminently a job for the lawyer: the breach must be legally proved to be valid in view of the severe consequences that follow. The most important characteristic of establishing a breach is the period which is set for fulfilment of the original agreement. This term must be reasonable. It is the last chance to comply with the terms of the contract.
Dissolution
If the period for fulfilment of the contract expires and the terms of the contract have not been complied with, the injured party is entitled to exercise his legal rights. The first possibility is dissolution of the contract. The consequence of dissolution is that the actions of both parties must be undone. This means, for example, that a non-functioning machine must be returned to the seller, who in turn must refund the purchase price.
Fulfilment
Requesting fulfilment of the contract is the other possibility. Fulfilment leaves the contract intact and the injured party requests the judge to order expedition of the agreed conditions. The judge can impose a fine as an incentive to fulfilment. Fulfilment is often applied for in summary proceedings, a fast and effective procedure that is often used in the Netherlands.
Reasonableness and fairness
Reasonableness and fairness is the modern Dutch name for the legal concept “goede trouw” (Latin: bona fides). This concept, set out in articles 6:2 and 6:248 of the Dutch Civil Code, plays an important role in legal procedures relating to clarification of contracts. A judge can, with the aid of these clauses, close loopholes in a contract and not take the contract literally but rather interpret it on the basis of the contracting parties´ original intentions. These clauses deviate materially from the legal tradition in Anglosaxon and some other European countries, where contracts are taken literally and the judge has less freedom to come to a reasonable settlement. Reasonableness and fairness clauses are mainly applied in cases of unprofessional contracts or unforeseen circumstances.
Terms and conditions
Businesses that contract on a large scale often use general terms and conditions. These conditions form part of the agreement. Dutch law recognises diverse limitations: not every clause is permitted. This especially applies if an agreement is entered into between a business and an individual. Moreover, such terms and conditions must be declared applicable in the correct manner.
Nullification of contracts
Not only does Dutch law include the possibility to terminate a contract if there is breach, but it is also possible that the agreement itself is unsound. For example, the agreement is based on an inaccurate representation of matters (misrepresentation), circumstances have been misused, or one party has used the threat of violence to force the other party into agreement. In the Netherlands a judge can declare the contract invalid (nullify) in such situations.
Public interest and good behaviour
Finally, Dutch law also includes the possibility that contractual obligations are not recognised under the law itself. An agreement to break the law, for instance, is not valid and cannot therefore be enforced by a judge. Such a situation seldom arises in professional contracts between businesses, but nevertheless it is advisable to seek legal advice if there is a lot at stake.
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