Sale of Goods - under Dutch law
International sale of goods in the Netherlands
A definition - what is a contract of sale?
A contract of sale codifies the terms of a transaction of goods, services or property. It can be either absolute or conditional in its determination of such terms. These terms range from identifying the goods/services in question, deadlines for their provision, inspection periods, details relating to payment, delivery instructions, warranties and the remedies in case of a breach of contract.
The breadth of these terms is dependent on the specific nature of the goods or industry in question. In addition, which jurisdiction the contract is drafted in and the laws applicable are key in determining the operation of these terms, with a prime difference being the distinction between common and civil law styles.
However, despite these variations, they are usually upheld to a certain universal standard. Essentially, its main function, is to instigate and formalise the process by which the goods (or services) are exchanged for monetary value, per the rules of consideration.
Contracts of sale under the laws of the Netherlands
The Netherlands is a Contracting State to the United Nations Convention on Contracts for the International Sale of Goods (CISG), sometimes referred to as the “Vienna Sales Convention.”
The CISG is an international convention providing uniform rules on formation of contract, performance and the consequences of breach.
When both the buyer and seller are from Contracting States the CISG applies. The CISG will also apply if Dutch law is applicable to a contract for the international sale of goods, for example when the parties to the contract have chosen Dutch law in their contract.
The parties can however choose to expressly exclude the application of the CISG (or specific provisions thereof) in their contracts. It is advisable to seek the services of a Dutch lawyer to advise you about the advantages and disadvantages of excluding the CISG in your contract for the international sale of goods.
Contracts for the international sale of goods to which the CISG is not applicable
As explained above, the CISG is applicable to contracts for the international sale of goods that are subject to Dutch law. There are however a number of situations in which, despite Dutch law being applicable, the rules of the CISG will not apply:
- if the parties have expressly excluded the application of the CISG in their contract
- if the contract is a business-consumer contract
- to contracts for certain types of goods, for example aircraft.
Dutch Law on Contracts for Sale and Exchange (excluding the CISG)
Contracts for sale and exchange are special contracts, which have their own legal regime contained in Title 1 of Book 7 of the Dutch Civil Code. Title 1 is mostly concerned with the respective rights and obligations of the parties. The general law of obligations contained in books 3 and 6 od the Dutch Civil Code covers the more general questions regarding formation, voidability and legal consequences of sale contracts.
Fundamental breach - CISG compared to Dutch law
Either the Seller or the Buyer may wish to terminate the contract where the other party has breached its obligations. For example, if the goods delivered to not meet the contractual description, the buyer may wish to return the goods and obtain a refund.
Under the CISG, a fundamental breach of contract by one party will give the other party the right to avoid the contract. Unfortunately, the CISG does not define what a fundamental breach is.
The position under the CISG can be contrasted from the position under Dutch law (excluding the CISG). Article 6:265 of the Dutch Civil Code provides that “every breach” give rise to a right to terminate a contract fully or in part. The implication of this is that under the CISG it is more difficult to establish a right to terminate on the basis of breach.
Regardless of whether the CISG is applicable, it may be possible to include a clause specifying what kind of breach or the particular breaches that will give rise to a right to terminate for either or both parties.
Clauses to include in a contract for the international sale of goods
Inspection - Buyer has been given proper opportunity to inspect the [Goods] to satisfy himself as to their condition, quality, specification and fitness for the purpose before entering into this Agreement. In choosing to enter into this Agreement the Buyer expressly and definitively waives all implied warranties or conditions whatsoever to the [Goods] statutory or otherwise, to the fullest extent permitted by law.
Retention of Title - Title to {the Goods} shall remain vested in the Seller and shall not pass to the Buyer until the purchase price for the Goods has been paid in full and received by the Seller.
Transfer of Risk - Until Delivery of the [Goods] from the Seller to the Buyer, the [Goods] shall be at the risk of the Seller who shall make good, if reasonably practicable to do so, all damage (other than ordinary wear and tear) sustained to her after the date of this Agreement and before the date of delivery. If the [Goods] be lost or become a constructive total loss before delivery, this Agreement shall be null and void and the Purchase Price shall be returned to the Buyer with interest (if any) and the Buyer shall have no claim against the Seller for damages or otherwise.
Applicable Law - This Agreement shall be governed exclusively by Dutch law. The United Nations Convention on Contracts for the International Sale of Goods (the "Vienna Treaty") is not applicable to the Agreement. This Agreement shall be governed by Dutch law. For the avoidance of doubt, the United Nations Convention for the International Sale of Goods (the “Vienna Treaty”) is applicable to the Agreement.
Business-to-consumer sale contracts under Dutch law
If you wish to sell your product directly to consumers in the Netherlands it is important to be aware of the mandatory consumer protection laws that will apply. Article 6:230g of the Dutch Civil Code defines a consumer as any natural person who deals for purposes other than their business or profession.
Mandatory consumer laws can have important implications for the rights and obligations of the parties to a sales contract. For example, there is a reversal in the burden of proof in relation to defective goods. Where goods are found to be defective within the first six months of delivery, it is presumed that the defect existed at the time of delivery, the burden is on the seller to prove otherwise (art 7:18(2) of the Dutch Civil Code).
