The Coronavirus (COVID-19) and implementation of agreements under Dutch law

11-03-2020

The Coronavirus (COVID-19) may also have consequences for the implementation of agreements under Dutch law. In this context, compensation for damages, fulfilment of obligations, termination of an agreement by cancellation or dissolution and unforeseen circumstances are discussed here. The specific circumstances and provisions of the agreement are relevant and should always be considered. Under Dutch law, reasonableness and fairness may also affect the consequences or application of clauses of an agreement or a statutory provision.

Compensation

In principle, the damage caused by a shortcoming does not have to be compensated in the event of force majeure. For example, government measures or health risks due to the Coronavirus could prevent the implementation of an agreement and therefore, under circumstances, result in force majeure. Agreements often contain specific provisions related to force majeure.

Fulfilment of obligations

If a party to a mutual agreement does not fulfil an obligation, for example due to the consequences of the Coronavirus, the other party will under specific circumstances be entitled to suspend the implementation of (an) obligation(s). Under exceptional circumstances, for example due to the Coronavirus, a right of suspension may not apply due to reasonableness and fairness.

Termination of the Agreement by cancellation

Under specific circumstances, an agreement can be cancelled. In principle, the consequences the Coronavirus does not change such possibility of cancellation. A party cancels an agreement by notification to the other party. A cancellation does not result in obligations to undo the performances that have been received. Agreements often contain specific provisions related to cancellation. For example, an agreement can state that, in the event of force majeure, termination can only take place after a certain period. As stated, consequences of the Coronavirus may constitute force majeure.

Termination of the Agreement by dissolution

In principle, an agreement can (wholly or partially) be dissolved in the event of a shortcoming. In general, this is also possible in the case of a situation of force majeure caused by consequences of the Coronavirus. The parties have to undo the fulfilled obligations that are affected by the dissolution. As far as the implementation is not permanently or temporarily impossible, the right to dissolve the agreement only arises when the debtor is in default. The consequences of the Coronavirus may make the implementation of an agreement temporarily impossible. Furthermore, dissolution is not possible if the shortcoming, given its specific nature or minor importance, does not justify this dissolution and its legal effects. Finally, the possibility of dissolution may be excluded in the agreement.

Unforeseen circumstances

Finally, the judge can change the consequences of an agreement or dissolve an agreement in whole or in part due to unforeseen circumstances of such a nature that the opposite party, according to standards of reasonableness and fairness, may not expect an unchanged continuation of the agreement. The consequences of the Coronavirus may possibly result in such circumstances.

Please contact Rens Kloppenburg for more information.