The Bottom Line
- Termination clauses are powerful: A clear contractual clause allowing for immediate termination can empower a service provider to halt work, even critical tasks, if a client persistently fails to pay.
- Payment history matters: A history of late payments can justify a service provider’s decision to terminate an agreement, making it difficult for the client to argue the termination is unfair or unreasonable.
- “Full cost” recovery clauses are not guaranteed: A clause in your general terms and conditions seeking to recover all actual legal costs may be challenged and is not automatically enforceable, as a court might deem it “unreasonably onerous.”
The Details
In a recent summary proceeding, the Rotterdam District Court sided with an accounting firm that terminated its service agreement with a client over chronic non-payment. The client, a group of companies under the name Rekoert, had sued its accountant, Struik, demanding the immediate delivery of its 2023 annual financial statements, which were urgently needed for a potential acquisition. Struik refused, stating it had already terminated the contract after months of chasing overdue invoices.
The court’s decision hinged on the terms of the service agreement. While Dutch law provides some protection against premature termination of task-specific contracts, the court noted that the parties’ own agreement is paramount. Struik’s general terms and conditions, which were part of the contract, explicitly allowed either party to terminate the agreement with immediate effect. This specific clause overrode the general legal standard. The court also dismissed the client’s claim that the termination was unfair, pointing to a clear history of late payments and prior warnings. The client’s poor payment discipline effectively gave the accountant the justification it needed to walk away.
Interestingly, the court did not grant all of the accountant’s wishes. Struik filed a counterclaim for its outstanding fees and, more significantly, for the full recovery of its legal costs, citing another clause in its terms and conditions. The court rejected this claim in the summary proceedings. It found no urgent need for an immediate payment order that couldn’t wait for a full hearing. Crucially, the judge noted that the clause for full recovery of legal costs could potentially be “unreasonably onerous” and therefore voidable—a complex issue that could not be settled in this fast-track procedure. This serves as a valuable reminder that even strongly worded clauses in general terms are subject to judicial review and may not be enforced if they are deemed to create an unfair imbalance between the parties.
Source: Rechtbank Rotterdam
