Termination for breach of contract under Dutch law (ontbinding): Article 6:265 of the Civil Code

Termination for breach under Dutch law (ontbinding, often translated as "setting aside" or "rescission") is governed by Article 6:265 of the Dutch Civil Code: every failure to perform gives the other party the right to terminate the contract in whole or in part, unless the failure is of such a special nature or minor importance that it does not justify termination. Dutch law does not require a fundamental breach, and the failure need not be attributable: termination is also available in a case of force majeure. Termination usually takes place by written notice, without going to court, and requires that the defaulting party is in default where performance is still possible.

Termination for breach at a glance

• Any breach gives the right to terminate, unless it is minor or of a special nature (Article 6:265(1)).
• Default first: if performance is still possible, the right arises only once the debtor is in default (Article 6:265(2)).
• By written notice, or by court judgment (Article 6:267).
• No retroactive effect: performance already made must be undone (Articles 6:269 and 6:271).
• Partial termination reduces both performances proportionally (Article 6:270).
• Damages for the loss caused by termination, if the breach is attributable (Article 6:277).
• Limitation: five years from knowledge of the breach, twenty years at most (Article 3:311).

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What Remedies Does Dutch Law Offer for Breach of Contract?

The creditor can claim performance, claim damages (together with or instead of performance), suspend its own performance, or terminate the contract, possibly combined with damages. Termination is the remedy that ends the contract's obligations for the future.

Suspension is only allowed insofar as the failure justifies it, in the case of partial or improper performance (Article 6:262(2)). More on damages: damages for breach of contract.

Which Breach Justifies Termination Under Dutch Law?

In principle, any failure to perform: Article 6:265(1) of the Dutch Civil Code. The exception is a failure that, given its special nature or minor importance, does not justify termination with its consequences.

The structure of the article matters: the right to terminate is the rule, and the exception must be invoked by the party that failed to perform. The creditor does not have to show that the breach is "fundamental" or "material", as is common in other legal systems. Whether a failure is minor depends on the circumstances of the case.

The failure does not need to be attributable to the debtor. Termination is also possible when the debtor cannot perform because of force majeure; attributability matters only for the claim for damages.

Does the Debtor Have to Be in Default First?

Yes, insofar as performance is still possible. If performance is permanently or temporarily impossible, the right to terminate arises at once; otherwise only once the debtor is in default (verzuim): Article 6:265(2).

Default usually requires a written notice of default (ingebrekestelling) giving a reasonable period to perform. It arises without notice in the cases of Article 6:83, for example when a fatal deadline passes, or when the creditor must infer from a statement by the debtor that the debtor will fail to perform.

How Is a Contract Terminated Under Dutch Law?

By a written statement from the party entitled to terminate, addressed to the other party, without the need for a court (Article 6:267(1)). A contract concluded electronically can also be terminated electronically. Alternatively, the court can pronounce the termination at the creditor's request (Article 6:267(2)).

Extrajudicial termination is quick, but it carries a risk: if a court later finds that the right to terminate did not exist, the terminating party may itself be in breach. The right to terminate extrajudicially lapses when the claim for termination is time-barred (Article 6:268): five years after the creditor became aware of the breach, and in any case twenty years after the breach (Article 3:311). Termination as a defence against a claim based on the contract remains possible even after that.

Can a Contract Be Terminated Partially?

Yes. Partial termination means a proportional reduction of both parties' performances, in quantity or in quality (Article 6:270).

This allows a buyer who received only part of the goods, or goods of lower quality, to keep them and pay a correspondingly reduced price, without ending the whole contract. It is the Dutch functional equivalent of a price reduction.

What Are the Effects of Termination?

Termination releases the parties from the obligations it affects, but has no retroactive effect (Articles 6:269 and 6:271). Performance already made keeps its legal basis, but each party must undo what it received.

• Undoing: each party returns what it received (Article 6:271).
• Value instead of return: if the nature of the performance makes return impossible, such as services, its value at the time of receipt is paid instead; if the performance was defective, only the value it actually had for the recipient (Article 6:272).
• Duty of care: from the moment a party must reasonably take termination into account, it must take care that it can return what it received (Article 6:273).
• Limitation: the claim to undo performance becomes time-barred five years after the termination (Article 3:311(2)).

Can the Creditor Also Claim Damages?

Yes. The party whose failure gave rise to the termination must compensate the loss the other party suffers because the contract is terminated instead of performed on both sides (Article 6:277(1)).

If the failure cannot be attributed to the debtor, for example in a case of force majeure, damages are only due within the limits of Article 6:78, which concerns benefits the debtor obtained from the failure (Article 6:277(2)).

When Is Termination Not Possible?

• Minor breach: when the failure, given its special nature or minor importance, does not justify termination (Article 6:265(1)).
• No default yet: when performance is still possible and the debtor is not yet in default (Article 6:265(2)).
• Creditor's own default: no termination can be based on a failure regarding an obligation for which the creditor itself is in default, for example by not cooperating (Article 6:266).
• Contractual exclusion: parties can limit or exclude the right to terminate in the contract, subject to reasonableness and fairness.

A contractual exclusion is tested against the standards of reasonableness and fairness; a termination right can also be limited by them when exercising it would be unacceptable.

How Does This Differ From Termination Under English Law?

Under English law, whether a breach allows termination depends largely on the classification of the term: breach of a "condition" allows termination, breach of a "warranty" gives only a claim for damages. Dutch law does not classify terms in this way; under Article 6:265 any failure allows termination unless it is minor.

For contracts under Dutch law that use English-law drafting, such as "time is of the essence" or labels like "condition", "warranty" and "indemnity", the court interprets the clause according to Dutch standards. Parties who want a particular breach to justify termination, or not, should say so explicitly. On warranties and indemnities under Dutch law, see warranties and indemnities.

Terminating a Contract: What Should You Check?

1. Is there a failure to perform, and is it more than minor?
2. Is performance still possible? Then put the other party in default first, with a reasonable period, unless default arises automatically.
3. Are you yourself in default, for example by not cooperating?
4. Does the contract limit or exclude termination, or prescribe a procedure?
5. Terminate in writing, clearly and addressed to the other party; for full or partial termination, say which.
6. Prepare for undoing: what must be returned, and what value applies if return is impossible?
7. Claim damages under Article 6:277 if the failure is attributable, and keep the five-year limitation period in mind.

Dutch Civil Code in English: Article 6:265 (termination for breach), Article 6:262 (suspension), Article 6:74 (damages for non-performance), Article 6:82 (notice of default). All translated articles.

Key Legal Sources

• Articles 6:265 to 6:277 of the Dutch Civil Code, termination for breach and its effects
• Article 6:262 of the Dutch Civil Code, suspension
• Article 6:83 of the Dutch Civil Code, default without notice
• Article 3:311 of the Dutch Civil Code, limitation of the claim for termination and undoing