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    Duty of a buyer to report a breach of warranty

  • NL EN
  • According to article 7:23 of the Dutch Civil Code ("DCC"), a buyer must notify a seller of a lack of conformity within a reasonable period (for consumers two months is a reasonable period) after he has or reasonably should have discovered the lack of conformity. If the lack of conformity is not reported by the buyer within a reasonable time period after it has been discovered or should have discovered the lack of conformity, the buyer can no longer claim non-conformity.

    On 7 February 2014, the Dutch Supreme Court (ECLI: HR2014/260) rendered a judgment regarding the interpretation of article 7:23 DCC with regard to a breach of the warranties in a share sale and purchase agreement (SPA). In this case, parties agreed to deviate from article 7:23 DCC in the SPA. Instead of "within a reasonable period", parties agreed that the buyer would notify the seller of a breach of the warranties "as soon as possible".  

    Prior to the judgment of the Supreme Court, the Court of Appeal argued in the same matter that the wording "as soon as possible" implies a greater urgency to notify, meaning that the buyer of the shares in this case had not notified the seller in time and had no longer a right to claim. However, the Supreme Court overruled this decision and decided that despite the fact parties explicitly agreed that the buyer should notify "as soon as possible", two things should be taken into account: (i) the significant legal consequence of the late notification and (ii) to which extent the specific interests of the seller are affected by the notification at such a late stage.

    The Supreme Court considered that a late notification can only result in a loss to claim, if the seller can prove that he has suffered damages as a result of such late notification. As a consequence, the possible loss of the right to claim as a result of not complaining within a reasonable period, is practically undermined. The decision of the Supreme Court emphasizes the reason why it is common practice to explicitly mention in the SPA that if the buyer does not notify the seller of a breach of the warranties "as soon as possible", buyer will (immediately) lose his right to claim.

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