Failure in the performance of a contractual obligation under Dutch law
What is non-performance of a contract in the Netherlands?
Under Dutch contract law, failure in the performance of a contractual obligation (tekortkoming in de nakoming) may give rise to a number of remedies. When a contractual debtor does not fulfil his contractual obligation on time and in a proper way, or when the obligation is not fulfilled at all, this debtor fails in the performance of his obligation, and is in breach of contract (wanprestatie).
What is the Netherlands Commercial Court of Appeal?
The Netherlands Commercial Court of Appeal (NCCA) is a specialist chamber within the Dutch court system that handles international commercial disputes in the English language. It opened on 1 January 2019, together with its first-instance counterpart, the Netherlands Commercial Court (NCC).
Both chambers operate as dedicated divisions within the existing Dutch judiciary. They do not form a separate court system. Consequently, their judgments carry the same legal force as any other Dutch court decision, and Dutch civil procedural law governs the proceedings throughout.
The NCC and NCCA were created in direct response to demand from international businesses for a neutral, English-language forum that still produces enforceable judgments under Dutch law. In practice, parties who have agreed to Dutch law as the governing law of their contract can now litigate in the language of their contract drafting, without needing to translate documents or engage local counsel purely for linguistic reasons.
How does the Netherlands Commercial Court select its judges?
Judges assigned to the NCC and NCCA are selected specifically on the basis of English-language proficiency and demonstrated experience in international commercial matters.
This selection criterion distinguishes the NCC from ordinary Dutch chambers, where language skills in English are not a formal appointment requirement. The result is a bench familiar with the contractual concepts that commonly appear in cross-border transactions, including Anglo-American drafting conventions such as entire agreement clauses, representations and warranties, and indemnity provisions.
Leading Dutch commentators note that this judicial profile is deliberate. International parties frequently present contracts drafted in English under Anglo-American models, even when Dutch law governs. A judge who understands those models can interpret contested clauses more accurately within the Dutch legal framework.
What procedure applies before the Netherlands Commercial Court?
Proceedings before the NCC follow standard Dutch civil procedural law, supplemented by modern case management elements that are more flexible than traditional Dutch court practice.
The NCC Regulations introduce structured case management, including options for early hearings, document production, and witness examinations conducted in English. This procedural design draws on practices common in international commercial arbitration, though the NCC remains a state court and not an arbitral tribunal.
As a rule, hearings are public. However, parties may request confidential treatment of sensitive commercial information, such as trade secrets or proprietary financial data. The court weighs the general principle of open justice against the legitimate interest in protecting genuinely confidential business information.
Court fees at the NCC are approximately four times higher than standard Dutch court fees. That premium reflects the specialist nature of the chamber and the additional costs associated with fully English-language proceedings.
Why do international businesses choose Dutch law for commercial contracts?
Dutch law attracts international parties because it offers a well-developed body of commercial contract law, strong freedom of contract, and relatively limited mandatory rules that could override agreed terms.
Research among international businesses shows that the perceived neutrality and independence of a legal system rank as the primary factors when choosing governing law, followed by the suitability of that system for the type of transaction and the parties' own familiarity with the law. Dutch law scores favourably on neutrality: the Netherlands is a small, open trading economy without the geopolitical associations that sometimes make English or American law a politically sensitive choice.
English law remains the most frequently chosen governing law for international commercial contracts overall, with roughly 40% of international contracts selecting it. However, English law's dominance partly reflects historical momentum and the large volume of contracts drafted by Anglo-American law firms. Dutch law offers comparable predictability for parties who want an enforceable, neutral framework, and the NCC now provides an English-language forum that closes the practical gap between the two systems.
When can you claim damages because of default under Dutch contract law?
In the Dutch Civil Code (Burgerlijk Wetboek) the term "failure in the performance" is used for both attributable and non-attributable non-performance. When a failure in the performance cannot be attributed to the debtor or when performance is permanently impossible, there is a failure in the performance right away. In all other cases, there is only a failure in the performance of a debtor, when the debtor is in default (verzuim). When failure in the performance can be attributed to the debtor, the creditor may (under certain conditions) claim damages. The creditor can also use a statutory interest calculator to determine the interest owed on the outstanding amount.
In case of an attributable non-performance the debtor is responsible.
What are the legal remedies in case of non-performance under Dutch law?
In case of a failure in the performance which is not attributable to the debtor, the only remedies available are:
- performance, and
- setting aside of the contract.
In case of attributable non-performance the creditor may seek more remedies under Dutch law:
- performance
- performance and compensation for late performance
- damages instead of performance
- setting aside of the contract (in Dutch: "ontbinding wegens niet-nakoming")
- setting aside of the contract and damages.
Is the Netherlands Commercial Court suitable for disputes involving warranties and indemnities?
The NCC is particularly well suited to disputes that involve Anglo-American contractual concepts such as warranties, representations, and indemnities, because its judges combine expertise in Dutch law with familiarity with international commercial drafting practice.
In Dutch law, breach of a warranty (garantie) gives the buyer a range of remedies, including a claim for performance, dissolution of the contract, and damages. If the warranty also qualifies as a statement by the seller within the meaning of Article 6:228 of the Dutch Civil Code, the buyer may additionally invoke error (dwaling) and seek annulment or modification of the contract. However, annulment has a retroactive effect: it removes the warranty itself, so a subsequent damages claim for breach of that warranty is no longer available.
One practical consequence concerns the relationship between annulment and breach remedies. The Dutch Supreme Court has confirmed that annulment of a contract in principle also affects the warranties contained in it, so that no further breach claim can be brought on those warranties. Parties in acquisition contracts typically address this risk by expressly excluding the right to annul the contract on grounds of error.
An indemnity clause adds another layer of complexity. Under English law, an indemnity is an independent, primary obligation: the indemnifier must pay regardless of the principal debtor's position vis-à-vis a third party. Whether a clause labelled "indemnity" produces the same outcome under Dutch law depends on how the court interprets the parties' intent. If the clause amounts to a promise to pay a determinable sum, it may function as a direct payment obligation. If instead it promises to "hold harmless", Dutch courts may treat it as a breach-based damages claim, with all the consequences that follow, including mitigation obligations and remoteness rules. Consulting a Dutch lawyer is advisable when drafting or contesting such clauses.