WHAT IS DUTCH CONTRACT LAW'S RIGHT TO SUSPENSION?
Article 6:52 (the Dutch Civil Code) states that a debtor with an unpaid claim against a creditor may suspend performance of his obligation until the claim is settled. This applies if there's a sufficient connection between claim and obligation to justify such suspension. This relationship can be presumptive if it arises from the same legal relationship or is based on business that the parties regularly conduct with one another.
A recent District Court of Rotterdam judgment is an example of a legal conflict between two professionals. Ballast Nedam, the contractor and De Vijf Heeren were caught in an "apparent" impasse by a right to suspension in the Netherlands. After numerous legal (emergency), proceedings and seizures the Rotterdam District Court issued (first) its ruling in proceedings on merits. Our Dutch law office highlights a number points that entrepreneurs in the manufacturing industry should consider.
CONTRACTOR BALLASTNEDAM MAKES LAWFUL REFERENCES
Here's a quick description of the impasse. De Vijf Heeren said that Ballast Nedam felt forced to sign an additional agreement with Ballast Nedam, at a price De Vijf Heeren felt was too high. Ballast Nedam had suspended all of its obligations to De Vijf Heeren and signed the additional agreement at the proposed price. De Vijf Heeren could not sell the property if Ballast Nedam is suspended. De Vijf Heeren, as a result, would be unable to pay its own payments, which could lead to bankruptcy.
De Vijf Heeren claimed that it would have refused to sign the additional work contracts if it hadn't been for the coercion by Ballast Nedam. This was the basis for the Vijf Heeren's request to have a portion of the contract price paid back to Ballast Nedam. (See also link to MAAK's partial termination blog).
RELIEF ON CIRCUMSTANCES UNDER DUTCH LAW IS NOT SUFFICIENT
District Court found that developers' claim of relying upon abuse of circumstances was ineffective. A party can withdraw from an agreement only if they are in a special situation, such as a condition of emergency or a mental disorder. A party must also be incinduced into entering into the contract.
These circumstances are not relevant in this case. Ballast Nedam indirectly forcibly makes its contracting partner owe its obligations by suspending them. However, the use of an apparent coercive situation does not constitute an abuse of circumstances. Rotterdam District Court also stated that Devijf Heeren also has the advantage of concluding the contract to do additional work. However, it is not unilateral.
SUSPENSION in PRACTICE IN NETHERLANDS
Practice often leads to confusions regarding the Netherlands' right to suspend. Remko, a contract lawyer, is frequently asked questions by players from the manufacturing sector. Here's an example.
A client orders a machine or production system. Imagine that the machine does not reach the production speed after it passes the factory test. Is it possible for the principal to suspend its payments obligations?
GET IN TOUCH WITH A DUTCH CONTRACT LAWYER
We would love to talk with you about your issue. Do you want to know more about suspension rights? Remko, our Dutch contract lawyer is available to answer any questions.
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