As everyone knows, the whole world is under the spell of the coronavirus and the consequences that the coronavirus causes. Many entrepreneurs in the Netherlands are now faced with situations where fulfillment of the contractual obligation is no longer possible in part or in whole. How can one deal with this and what options does the entrepreneur have if compliance is no longer possible in whole or in part?
Freedom of contract
In the Netherland the principle of contractual freedom applies as starting point. The principle of freedom of contract means that the parties may decide for themselves what they agree to and can freely design the content of the contract, as long as it is not prohibited by law or in violation of public order or morality. Between the parties there must be an offer and acceptance of what the parties agree. There is an agreement between the parties when the explanation for both the offer and the acceptance arises from the free and conscious will to do so. Parties can enter into the agreement both orally and in writing as long as it is not prohibited by law or in violation of public order or morality.
Fulfillment of agreement
Parties are obliged to fulfill agreements. When parties have entered into an agreement, they must also follow it (pacta sunt servanda).
Shortcoming in the fulfillment of the agreement
If the contractual obligations are not met, this is a "shortcoming". If someone fails imputably (in other words, culpably), this can have far-reaching consequences, namely:
• obligation to pay compensation;
• Obligation to fulfill;
• The right to terminate the agreement.
Whether someone has actually failed, depends on what parties have included in the agreement about the contractual obligations. The shortcoming is not attributable in case of force majeure. An entrepreneur who cannot fully or partially fulfill the contractual obligation due to force majeure is not obliged to pay compensation.
Force majeure provision in the agreement
There may be provisions about force majeure in the agreement between the parties. The agreement can describe which concrete situations are subject to force majeure. Think of cases such as "flooding, earthquake, strike, war or changed government measures."
In order to invoke force majeure, the concrete situation 'pandemic' must be included in the agreement to cover the coronavirus.
In addition, the entrepreneur can also include the case of coronavirus under "the amended government measures." An example of such government measures are, for example, the closing of borders or the ban on flying, so that the delivery of certain services is no longer possible. Think of the travel organizations that can no longer offer trips and can no longer fulfill the already concluded contractual obligations.
In addition, the agreement can also contain a very broad description as "all external causes over which the company has no influence". The entrepreneur may also include force majeure under this description.
If the agreement does not contain provisions or stipulations about force majeure, the entrepreneur can look at other legal possibilities.
Force majeure under Article 6:75 of the Dutch Civil Code
If nothing is arranged in the agreement with regard to force majeure, the provision of the law applies. Force majeure is defined in the law as follows:
"A shortcoming cannot be attributed to the debtor if it is not due to his fault, nor is he responsible for it by law, legal act or general accepted practice."
If a shortcoming cannot be attributed to a debtor, then there is force majeure. The debtor may then not be at fault for - the occurrence of - the shortcoming. The shortcoming may also not be borne by the debtor on the basis of the law, a legal act or the general accepted practice.
There is only debt if the debtor can be blamed. If the shortcoming comes at the risk of the debtor, there is no force majeure.
Whether the corona crisis justifies an appeal to the legal concept of force majeure depends on all the circumstances of the case. The question is whether fulfillment of the agreement has become impossible due to the corona crisis or is so objectionable that no fulfillment can reasonably be required. If the debtor meets all legal conditions that justify an appeal to force majeure, he is in principle not obliged to perform or to pay any form of compensation. It is important here that the person who invokes force majeure will have to declare and also demonstrate that the requirements set by law are met. If this is not successful, the debtor will in principle remain liable to the creditor.
However, it has become apparent in the past that the Dutch judges have also appealed to force majeure in other epidemics, such as bird flu. The appeal to force majeure will have to be assessed by the judge on a case-by-case basis.
In the event of a successful appeal to force majeure, the other party will have the right to dissolve the agreement.
Unforeseen circumstances (6: 258 Dutch Civil Code)
If an appeal to force majeure is not possible, an appeal to "unforeseeable circumstances" is still a possibility. Under article 6: 258 paragraph 1 of the Dutch Civil Code, unforeseen circumstances include:
"The judge may, at the request of one of the parties, amend the consequences of an agreement or dissolve them in whole or in part on the basis of unforeseen circumstances which are of such a nature that the other party cannot expect unaltered maintenance of the agreement according to standards of reasonableness and fairness. The change or dissolution can be given retroactive effect. "
The execution of an agreement is governed by reasonableness and fairness (Article 6: 2/6: 248 Dutch Civil Code). On the grounds of reasonableness and fairness, parties must observe each other's legitimate interests.
Unforeseen circumstances within the meaning of art. 6: 258 paragraph 1 of the Dutch Civil Code applies if circumstances arise after the conclusion of the agreement that are not included in the agreement. The foreseeability of circumstances is not important in itself. The question is whether the parties have taken this risk into account in their agreement. It can be stated that, as a rule, the parties have not taken into account the far-reaching consequences of the corona virus. So there is an unforeseen circumstance.
The starting point in the case law is that an appeal to unforeseen circumstances must be cautiously accepted. According to the case law there is an entrepreneurial risk that remains for the account of the party that takes it. If, as a result of the corona virus, a company gets into serious financial and / or business problems, there is no normal entrepreneurial risk that the injured party must bear according to the general accepted practice. The injured party is then entitled to change or dissolve the contract.