The Bottom Line
- Invalid Termination Risk: Terminating a contract over poor performance without first issuing a formal, written notice of default can be deemed unlawful, forcing you to pay outstanding invoices.
- Supplier Protection: This ruling protects service providers from abrupt contract cancellations, emphasizing their right to be given a clear, final chance to remedy any alleged failures.
- Documentation is Not Enough: A long trail of emails and meeting notes detailing dissatisfaction is insufficient. Dutch law often requires a specific, formal notice of default to create the legal grounds for termination.
The Details
This case revolved around a classic business dispute: a client was unhappy with the quality and progress of services delivered by a supplier. After a period of ongoing complaints and expressed dissatisfaction, the client lost patience, terminated the agreement, and refused to pay the remaining invoices. They believed their consistent communication of the issues provided ample justification for their decision. The supplier, in turn, challenged the termination’s legality and sued to recover its fees.
The Arnhem-Leeuwarden Court of Appeal sided with the service provider, focusing its analysis on the crucial Dutch legal concept of default (verzuim). The court clarified that for a party to be legally in default—a necessary prerequisite for termination in many cases—the complaining party must generally issue a formal written notice of default (ingebrekestelling). This is not just another email complaint; it is a specific legal notice that clearly outlines the failures and sets a final, reasonable deadline for the other party to comply with its obligations.
The court found that while the client had frequently complained, they had never sent a formal notice that met these strict requirements. Without this crucial step, the provider was never legally in default. Therefore, the client’s attempt to terminate the contract was unlawful. The court nullified the termination, meaning the contract was considered to be still in effect, and ordered the client to pay the supplier’s outstanding invoices in full. This ruling is a stark reminder that the path to contract termination is a formal legal process, not just the culmination of business frustration.
Source
Gerechtshof Arnhem-Leeuwarden
