THE BOTTOM LINE
- Dissatisfaction is not a defense: Simply being unhappy with a supplier’s or subcontractor’s work is not, by itself, a legal reason to refuse payment of their invoice under Dutch law.
- Formal notice is mandatory: Before withholding payment or claiming damages, you must formally notify the supplier of the defects in writing (a “notice of default“) and give them a reasonable opportunity and deadline to fix the issues.
- Failure to notify is costly: If you don’t provide a formal notice of default, a court will likely order you to pay the original invoice in full, plus interest and legal costs, regardless of the quality of the work performed.
THE DETAILS
In a straightforward but important ruling, the District Court of Noord-Holland recently examined a dispute between a main contractor and a subcontractor. The subcontractor submitted an invoice for €2,500 for work performed. The main contractor refused to pay, arguing the work was sloppy, had to be redone, and had caused reputational harm and financial damages with their own client. This is a common commercial scenario, but the contractor’s approach proved to be a critical, and costly, mistake.
The court’s reasoning provides a clear lesson for any business operating in the Netherlands. It held that a payment obligation under a contract does not automatically disappear just because one party believes the other has underperformed. Dutch contract law requires the dissatisfied party to take specific, formal actions to alter their legal obligations. These actions could include officially suspending payment, terminating the contract for cause, or claiming a set-off for damages. The main contractor in this case failed to invoke any of these legal remedies, instead simply choosing not to pay.
The fatal error was the failure to put the subcontractor formally in “default” (verzuim). The court highlighted that before a party can legally claim damages or terminate an agreement due to poor performance, the underperforming party must be given a final chance to comply. This is done via a written notice of default (ingebrekestelling) that clearly outlines the shortcomings and sets a reasonable deadline for correction. Because the main contractor never sent such a notice, the subcontractor was never legally in default. As a result, the contractor lost its right to withhold payment, and the court ordered it to pay the full invoice, plus statutory interest and collection costs.
SOURCE
Source: Rechtbank Noord-Holland
