Force majeure - under Dutch contract law
Non-imputable failure to perform - under Dutch law
Force majeure refers to a situation where the performance of a contractual obligation has become impossible for a party due to an event which was beyond their control. Force majeure is sometimes used synonymously with Act of God, common examples include earthquakes, floods, hurricanes or tsunamis.
Contracts commonly include so-called force majeure clauses. A Dutch lawyer can advise you in relation to force majeure under Dutch Law and the (benefits of) inclusion and effects of including a more specific force majeure clause.
Force majeure clauses can be appropriate in contracts for the sale of goods, contracts for the provision of services, distribution contracts, agency contracts, etc.
Acts of God under Dutch law - non-attributable non-performance
Under Dutch law, the general rule is that a contracting party is liable for all damages resulting from their breach of contract unless the breach cannot be attributed to them (art. 6:74 Dutch Civil Code). According to Article 6:75 of the Dutch Civil Code a breach cannot be attributed if the contracting party is not to blame for the breach according to law, legal act or generally accepted principles (common opinion).
It follows from article 6:75 of the Dutch Civil Code that non-performance cannot be attributed to the debtor if he is a) not at fault and b) if the non-performance does not fall within his sphere of risk.
When is the party to blame? The first question is therefore whether the debtor can be blamed for the non-performance. He cannot be blamed if he could not have reasonably prevented the event that led to non-performance and hereby avoided its consequences.
The next question is whether the non-performance can be attributed to him, i.e. whether he was bearing the risk for it.
Grounds for attribution of non-performance under Dutch law
Article 6:75 of the Dutch Civil Code lays down three grounds on which attribution can be based.
Firstly, a specific statutory provision can create liability (e.g. liability for third persons or things).
Secondly, a legal act, e.g. contractual agreements can amount to attribution. Parties can stipulate in their contract who will bear the consequences of the failure to perform. Thus, liability can be extended by contract by guaranteeing performance or it can be limited or even entirely excluded by a limitation of liability clause.
Lastly, there are circumstances in which the debtor is held responsible on account of common opinion, such as in the case of financial incapacity, incompetency or inexperience.
Force majeure will only apply if liability for the breach cannot be attributed to the contracting party.
Effect of force majeure under Dutch law
If one party is hindered from performance due to force majeure, the other party is nevertheless entitled to set aside the contract or to suspend its own performance. The other party is however not entitled to demand specific performance or damages unless the other party would enjoy an advantage from their breach that they would not have enjoyed if the contract had been properly performed.
Force majeure clause under Dutch law
Under some Common Law jurisdictions, parties to a contract who wish to have force majeure relief, must spell out the terms in the contract. Under Dutch law the statutory force majeure provisions apply automatically to all contracts. Parties can nevertheless include an express provision on force majeure if they wish to override or deviate from the statutory provisions. However, liability for non-performance attributable to a party’s own fault or gross negligence can never be excluded.
Examples of a force majeure clause in a contract under Dutch law
Under some Common Law jurisdictions, parties to a contract who wish to have force majeure relief, must spell out the terms in the contract. Under Dutch law the statutory force majeure provisions apply automatically to all contracts. Parties can nevertheless include an express provision on force majeure if they wish to override or deviate from the statutory provisions. However, liability for non-performance attributable to a party’s own fault or gross negligence can never be excluded.
Example 1: force majeure clause in a contract subject to Dutch law
Force majeure
[-].1 In this Agreement the term force majeure is understood to mean: prevention of fulfillment of the Agreement as a result of fire, explosion, embargo, uprising, riot, war (whether or not declared), natural disasters (including storm) and flood.
[-].2 In the event of force majeure, performance of the Agreement shall be suspended.
[-].3 In case of force majeure the Parties shall inform one another as soon as possible in writing of the nature of the force majeure, the date on which the force majeure situation starts or started and, if possible, the expected duration.
[-].4 If the force majeure has lasted longer than thirty (30) calendar days or may reasonably be expected to last longer than thirty (30) calendar days, either Party shall be entitled to set aside the Agreement by written notice with immediate effect and without recourse to the courts. In this situation, the Party affected by the force majeure shall be obliged to effect compensation to the extent that he has derived benefit from the force majeure which he would not have enjoyed in the normal performance of the Agreement.
Example 2: force majeure clause in a contract subject to Dutch law
1. Under this contract “force majeure” means: any circumstance which is independent of the will of the parties, as a result of which performance of the contract cannot reasonably be required of [Party A], whether temporarily or permanently. Force majeure shall in any event include: (civil) war and the threat of (civil) war, natural disasters, strikes, excessive absenteeism of [Party A’s] employees, transport problems, fire, lack of raw materials, government measures by any government whether in the Netherlands or elsewhere, in any event including import and export prohibitions, quota schemes, and breakdowns at [Party A] or at suppliers of [Party A], as well as non-performance or force majeure on the part of suppliers as a result of which [Party A] is not or no longer able to meet its obligations to the Customer.
2. In the event of force majeure [Party A] is entitled to terminate the contract, or suspend performance of the contract until the circumstance that causes the force majeure has ceased to exist, and the Customer shall not be entitled to any compensation or damages for any such loss or damage.
3. Party A is entitled to require payment for any acts carried out in connection with execution of the contract prior to the force majeure having occurred.
Example 3: force majeure clause in a contract subject to Dutch law
Each party will be excused from performance (other than the performance of payment obligations) for any period and to the extent that it is prevented from performing its obligations, in whole or in part, as a result of delays caused by the other party or an act of God, war or civil disturbance and such non-performance will be neither a default hereunder nor a basis for termination hereof.