Annulment of a voidable contract - under Dutch law
Nullities and annulment of a contract - in the Netherlands
When can a contract be annulled under Dutch law?
Under Dutch law there are several situations in which a contract (or legal act) will be either void or voidable.
If a contract or contractual stipulation is void (nietig) it will be treated as if it never existed – it will not have legal force between the parties. If a contact or contractual stipulation is voidable (vernietigbaar) it means that it can be avoided and may be declared void.
There are a number of situations in which a contract will be void. For example Article 3:39 of the Dutch Civil Code provides that contracts under Dutch law are null and void if they have not been executed in the form dictated by law. An example could be an agreement for the sale of land that is not in writing. A Dutch lawyer can advise you on the formal requirements for specific transactions which you wish to enter into to ensure legal effectiveness.
Under article 3:40 DCC, contracts that are contrary to good morals or public order are also null and void under Dutch law. For example, a contract for the sale of a knife will be null and void if the seller knows that the buyer intends to use the knife to kill someone. Similarly, contracts that are in breach of the law will be void. For example, a contract for the sale of illicit drugs.
Voidable contracts under Dutch law
Under Dutch law a contract entered into by a person who lacks capacity (handelsombekwaam) such as a minor or a person with impaired mental faculties will be voidable. The same applies for contracts entered into as a result of duress, fraud or undue influence, in these instances there is said to be a lack of intention (wilsgebreken).
Contracts entered into under the influence of error
Where one or both of the parties was influenced by a mistake in their decision to enter into a contract, that contract may be annullable.
Article 6:228 of the Dutch Civil Code provides that a contract entered into under the influence of a mistake will be voidable when a series of conditions are met. One of conditions is that the mistaken party would not have entered into the contract but for the mistake. Another condition is that the other party must have known or ought to have known about the circumstances surrounding the mistake and have been obliged to inform the mistaken party. Crucially, not all mistakes will be sufficient to make a contract voidable, for example, mistakes that solely concern future circumstances or mistakes as to the nature of the agreement will not suffice.
There are a number of conditions that must be satisfied in order for a contract to be voidable due to mistake. Therefore, it is advisable to seek the advice of a Dutch lawyer if you wish to avoid a contract which you have entered into under the influence of a mistake.
General terms and conditions which may be annulled under Dutch law
Article 6:233 of the Dutch Civil Code regulates the situations in which stipulations contained in General Terms and Conditions will be voidable.
The Dutch Civil Code provides that stipulations contained in general terms and conditions are voidable if they are unreasonably onerous to the other party or if the party supplying the general terms and conditions has not given the other party a reasonable opportunity to take cognizance of these general terms and conditions.
Legal effects of void contract stipulations
If a legal act is null and void, the intended legal effects are non-existent. Nullity operates automatically, ex lege. In common law jurisdictions this is sometimes referred to as void ab initio. Under Dutch law, nullity does not need to be invoked, essentially the stipulation has legally never existed. For this reason there is no period within which the nullity must be invoked.
That a contractual stipulation is null and void does not necessarily mean that the whole contract is without legal effect. It is possible that the remainder of the clauses in the contract are effective. The remainder of the clauses will remain effective unless the provision that is null and void is inextricable from the agreement, taking into account the purpose and content of the agreement (art. 3:41 DCC).
Conversion under Dutch law of a void legal act
Under certain circumstances a void legal act is replaced (converted) with another (corresponding) legal act, unless this would be unreasonable to a third, interested person (who is not party to the converted legal act).
Validation of a void legal act under Dutch law
Furthermore, Dutch law provides that null legal acts may later be validated. For example if the nullity resulted from the non-fulfilment of a legal conditions and these conditions are later fulfilled (article 3:58 DCC).
The validation of a legal act under Dutch law has retroactive effect.
Undue payments under a void contract
Payments or other performance made of a contract which is null under Dutch law, are considered to be unduly made. Restitution of such performance can be claimed from the other party.
A voidable contract is valid until annulment
Under Dutch law, a voidable legal act which has not been annulled, is valid. If a legal act is annulled, the annulment has retroactive effect, and the situation of the parties prior to the annulled act should be restored. Such an annulment under Dutch law not only has effect against the parties involved, but also against every other person (except in certain situations provided by law, such as annulment on the grounds of prejudicial acts – based on the so-called ‘actio pauliana’).
Annulment of a contract under Dutch law can take place by an extra-judicial declaration or by a judgment. If the annulled legal act concerns the transfer of registered property and not all parties to the legal act agree to the annulment, a judgement is required to give the annulment effect.
Invoking voidability of a contract as a defence to a claim
If a supplier of general terms and conditions makes a claim against the other party based on the general terms and conditions, that party may consider invoking the nullity to avoid the claim (See above: general terms and conditions that may be annulled).
Such an annulment takes affect through a judgment in which a ground for annulment is accepted (art 3:51 DCC).
Limitation of actions to annul under Dutch law
A three-year limitation period applies to actions to annul a voidable contract or legal act. This means that an action to annul must take place within three years of the execution of the contract. Following this period, annulment can only arise as a defence in legal proceedings. For example, if the voidability resulted from the lack of legal capacity of one of the parties, the window for annulment of the contract will end one that party has had legal capacity for three years or once a legal representative of this person has been aware of the legal act for three years (article 3:52 DCC).
Losing the possibility to annul under Dutch law
Under Dutch law the right to invoke annulment lapses in a number of situations. Fundamentally, the right to annul lapses when the party with the right to avoid the obligation confirms the legal act once the period of voidability has commenced (art 3:55(1) DCC). Another situation is when the party with the right to annul has been given a reasonable period to choose between confirmation and annulment, and no choice has been made within that period (art. 3:55(2) DCC).
