What are the possibilities of backing out of contractual obligations?
The Dutch government has taken far-reaching measures to battle the COVID-19 virus. Hotels, restaurants and cafes have been closed for a certain period of time and large groups of employees are forced to work from home. This will inevitably impact certain existing commercial contracts. One of the consequences may be that you as a contracting party are no longer able to perform your contractual obligations, for example delivering certain products or providing services. The question arises as to whether there are, either temporarily or permanently, any possibilities of backing out of such contractual obligations.
In order to answer that question, it is important to note that under Dutch law contractual provisions (included in the agreement or applicable terms and conditions) are leading. It is therefore important to first assess whether the agreement or general terms and conditions contain any provisions that pertain to the situation at hand. Whether this is the case, depends on the interpretation of the contract. Only if the contract should not include any specific provisions, the safety net provided by the Dutch Civil Code (DCC) comes into play. In this case the statutory provisions of force majeure (Section 6:75 DCC), suspension (Section 6:262 DCC) and unforeseen circumstances (Section 6:258 DCC) may prove useful.
Whether a contractual party can rely on any of these statutory provisions cannot, unfortunately, be answered with a straightforward “yes” or “no”. The answer will always depend on the specific circumstances of the case. Consequently, the entire situation needs to be assessed. Essential for such an assessment are answers to such questions as: what are parties’ mutual obligations (does it concern payment obligations or rather the delivery of products)? And: what is the actual cause of the alleged force majeure (is it a case of a contractual party not wishing to perform the contract – due to current circumstances – or is he actually unable to perform it)? It is paramount to have these questions answered simply because a party relying on force majeure or suspension where it does not have the right to do so will lead to such party being in breach of its contract and, as a result, liable to pay damages.
Van Doorne’s Commercial team has, further to the above, drafted an exhaustive memorandum dealing with the possible effects that the Coronavirus outbreak in the Netherlands may have on the performance of commercial contract tat are governed by Dutch law. Should you wish to receive that memorandum or have any questions about this subject, then please contact Lisette Bieleveld and/or Florence Verbeek.
