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An outline of pre contractual obligations in relation to the Netherlands.

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Pre contractual negotiations, is there an implied duty of good faith to continue to negotiate.

Under Dutch law, the relationship between parties in negotiations is governed by the principles of good faith, reasonableness and fairness. Generally, parties are free to break off negotiations unless they have led the counter-party to have justified expectations.

If such expectations exist, ending the negotiations may be regarded as frustrating the reasonable expectations of the other party that an agreement would be reached. This is treated as a breach of good faith principles.

In Dutch case law, four separate negotiating phases are identifiable. The rights and obligations of the parties to the negotiations - and in particular whether unilateral termination is possible (with or without compensation for damages) - differ depending on which negotiation phase the parties are in. During the negotiations the parties may shift from one phase to the other and back depending on the specific circumstances. The four phases are:

  • phase 1: introductory discussions:  the discussions between the parties have not reached the stage where breaking off the negotiations would constitute a wrongful act
  • phase 2: discussions between the parties have reached such a stage that breaking off the negotiations would constitute a wrongful act if the breaking party did not compensate the other party for its costs
  • phase 3: discussions between the parties have reached such a stage that the non-breaking party has developed a justified expectation that an agreement will be reached
  • phase 4: the parties have reached a binding agreement on the transaction. Note that this phase may even be reached before the parties have executed a written agreement.

The parties are, however, free to specifically agree on the negotiations process to be followed and the stage at which binding obligations will arise, so that the aforementioned phases and accompanying rights and obligations do not apply.

Typically, this would be agreed upon in writing through a letter of intent or similar document before negotiations commence in earnest. Such document may state that no binding obligations will arise until, for example, an agreement in writing is executed or certain specific conditions have been met. It should be noted that these arrangements on the transaction process are subject to the requirements of reasonableness and fairness, and the fair expectations of the other party. Breach of these arrangements may again lead to liability for damages.

If, for example, the letter of intent provides that no agreement will be deemed to have been reached until a written agreement has been executed, then walking away from the transaction may still constitute a wrongful act if all conditions precedent (e.g. satisfactory outcome due diligence) are fulfilled and the parties have (more or less) reached full agreement on the wording of the agreement.

In such case the breaking party has to have a good reason for breaking off the negotiations, e.g. an unexpected development of results below budget or other unexpected material adverse change.

Generally, specifically agreed conditions precedent will be upheld by the courts if they are objective conditions. Conditions precedent such as availability of bank financing, a satisfactory outcome of the due diligence and prior board or shareholder approval are regular and will generally be upheld. However, invoking such conditions may still constitute a wrongful act if the withdrawing party has caused the non-fulfillment of the conditions, or if the justified expectation was created in the opposite party that conditions will be fulfilled.

For instance, if the party invoking the conditions has throughout the process referred to the conditions as 'a mere formality', or if it becomes clear that the corporate body whose approval was required, was actively involved in the entire process, invoking the conditions may still constitute a wrongful act. In other words, the principle of law applied is 'substance over form'.

The factual behavior of the parties and the expectations they have raised with each other as to the outcome of the negotiations will be taken into account in judging whether breaking off the negotiations was acceptable or not.

What are the consequences of termination of negotiations by one party unilaterally?

Under Dutch law, the breach of a binding agreement may give rise to liability on the part of the breaching party.

Even where there is no binding agreement, an unacceptable termination of negotiations could lead to liability for costs (negative contractual value) and - in extreme circumstances - for loss of profits (positive contractual value).

The consequences of unilaterally terminating negotiations will depend on which negotiating phase the negotiations are in:

  • phase 1 - the parties are free to terminate the negotiations at will without consequence
  • phase 2 - the parties may terminate the negotiations, but the terminating party may be required to compensate for the costs incurred by the non-terminating party
  • phase 3 - If a party terminates the negotiations, it may be compelled to resume the negotiations by court order given in injunction proceedings. Terminations of discussions will constitute a breach of contract and may result in liability for damages, including loss of profit. Courts tend to be more reluctant to order a party to continue negotiations or to attribute damages on the basis of positive contractual value than on the basis of negative contractual value, and these will only be attributed under exceptional circumstances, and
  • phase 4 - a binding agreement has been reached, and a termination of the negotiations will be considered a breach of contract. The non-breaching party may claim specific performance and/or compensation of damages.

What is the potential impact on third party rights?

Unless specifically stipulated otherwise, agreements and negotiations do not create third party rights. However, if certain expectations were created in a third party (for instance that a transaction would take place) on the basis of the conduct or verbal or written undertakings of a party, the party breaching those expectations may be liable on the grounds of tort.

Confidentiality agreements

Are there implied confidentiality obligations where there are no formal confidentiality agreements entered into by the parties.

Under Dutch law, there is no implied duty of confidentiality. In the absence of an express commitment, the aggrieved party can only make a claim on the basis of a wrongful act ( onrechtmatige daad ) by the other party.

This carries with it a heavy burden of proof, so it's therefore common to specifically agree on confidentiality before entering into negotiations.

A confidentiality agreement will be binding on the parties to it. Penalty clauses pursuant to which the party in breach forfeits a penalty to the aggrieved party, are allowed and in fact customary. The court may mitigate the amount of the penalty if excessive.

What are the consequences of breach?

In the event of a breach, the aggrieved party may seek specific performance (forcing the party in breach to stop using or disclosing confidential information) and/or compensation of damages. If a penalty clause was agreed, the party in breach may forfeit a penalty.

Are specific terms/formalities required for a binding confidentiality agreement?

Exclusivity arrangements, can an obligation to negotiate exclusively be implied where no formal agreements are entered into by the parties.

Under Dutch law there is no implied duty of exclusivity. Exclusivity agreements are customary in Dutch law.

Are any specific terms/formalities required to make exclusivity arrangements enforceable?

Subject to the overriding principles of reasonableness and fairness, there are no legal constraints or requirements on those agreements and they will be binding.

Heads of agreement

Are they legally binding.

The fact that a document is called letter of intent or heads of agreement is in itself not decisive under Dutch law as to whether or not the document contains binding and enforceable commitments.

Even remarks in the headings, such as 'subject to contract', may be mitigated by the text of the document itself and more importantly by the factual behavior and the content of communications between the negotiating parties (substance over form).

It is therefore very important to carefully word letters of intent or similar pre contractual documents so that there can be no misunderstanding about the extent of their desired binding effect. Compensation may be awarded if a party who terminates the negotiations clearly disappointed the non breaking party's justified expectations that an agreement would be reached.

In that case the non binding agreement provision or a condition precedent will have no effect. In order to prevent such justified expectations arising it is advisable to first of all include clear and objective conditions precedent and secondly clearly communicate on the conditions precedent and the (expected) fulfillment thereof.

Breach of pre contractual agreements may result in liability for the defaulting party. In general, damages will be the remedy but actions for specific performance may also be brought. In exceptional circumstances, compensation for "lost opportunity" can be claimed.

A pre contractual agreement may also set out a specific basis on which damages will be payable (eg liquidated damages). The courts tend to be more reluctant to order a party to continue negotiations or to award damages on the basis of positive contractual value.

The courts would be less reluctant to award compensation of costs (e.g. of professional advisers) but again only where the party that terminates the discussions has clearly disappointed the non breaking party's justified expectations that an agreement would be reached, or has caused the other party to incur extraordinary costs in the negotiation process.

Letters of intent which are intended to be legally binding are enforceable by and against the parties to the agreement. A third party (e.g. the target company) may in some circumstances make a claim on the basis of a wrongful act ( onrechtmatige daad ).

Can heads of agreement have any tax implications/adverse consequences?

Letters of intent serve the valuable purpose of setting out the commercial reasons for the transaction, especially those transactions that are tax driven. This might assist the parties in avoiding any tax avoidance challenges by the local tax authorities under applicable anti abuse provisions.

Depending on the content of the letter of intent, signing of such a letter could be considered as constituting an obligation and/or alienation which could trigger Dutch tax consequences, such as the termination of a fiscal unity, or the use of existing losses of the target company, etc. 

Are break fees usually payable?

Termination of pre contractual agreements such as letters of intent may result in the payment of a break fee, if this is specified in the agreement.

What are the main legal issues to be considered e.g. enforceability?

The pre contractual agreement may set out specific termination events in which break fees are payable. An arrangement for the payment of break fees in pre contractual agreements is legally binding and enforceable. Break fees may increase as negotiations become more advanced.

In public takeovers, standard market practice is a doctrine that the extent of break fees payable by a target company should be reasonable in the given circumstances and should not act as a de facto block to terminating negotiations.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

Rob Hendriks

Partner Amsterdam, The Netherlands

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Andrei Babiy

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8 December 2020

Lending focus – December 2020 – 6 of 8 Insights

Non-assignment clauses in Dutch law: the end of the road?

On 2 June 2020, an act to abolish the practice of contractually agreeing prohibitions/restrictions on the transfer or pledging of receivables – insofar as they have been obtained in the exercise of a profession or business – was submitted to the House of Representatives (the Act).

If the Act is passed by the Dutch Parliament and enters into force, any such contractual clauses will be null and void.

What are the policy objectives?

The Act aims to stimulate the growth and development of smaller businesses.

Smaller businesses commonly assigned or pledged their receivables to a lender, who might then lend them up to 80% of the value of such receivables. This assisted them with raising capital for growth. However, other parties contracting with SMEs have begun to insist on barring such assignments or pledges, making invoice financing a near-impossibility for smaller traders.

The Act will counter this recent practice, making it easier once more for SMEs to raise capital.

Current law

In principle, under Dutch law, the ownership of receivables is transferable, unless the law or the nature of the receivable prevents a transfer. Contracting parties are therefore free to determine the parameters and limitations of such receivables.

Exclusively for receivables, s3:83 paragraph 2 of the Dutch Civil Code (DCC) determines that their transferability can be prohibited contractually. If a contract prohibits the transfer of receivables, then they can neither be transferred nor pledged.

A transfer contrary to such clause will, depending on the exact wording of the clause and its interpretation, result in a default (under contract law) or the non-transferability of the receivable, and thus the invalidity of any attempted transfer or pledge (under property law). 

To stimulate the provision of loans to SMEs, the Dutch legislator intends to amend s3:83 of the DCC. 

The Act states that the transferability or pledging of a business’s receivables can no longer be contractually excluded. Any such clause will be null and void. The expectation is that this will increase the credit potential of borrowers, enabling them to use these receivables as security for their borrowings. 

Any transfer or pledge of receivables arising from a business or profession must be in writing. Furthermore, notification of transfer or pledge to the third party (debtor of the receivable) must also be in writing. These latter requirements are not particularly onerous, since written agreements are the norm in international financing practice.

The amended s3:83 of the DCC will not only apply to new agreements but also to existing ones, as from three months after the Act comes into force. 

The legislator intends to include several exceptions to the new rule. The following receivables are excluded and may therefore still be subject to transferability and pledging restrictions:

  • receivables arising from a current or savings account
  • receivables arising from syndicated loans
  • receivables from or on a clearing institution, centralised counterparty, settlement agent, clearing institution, or central bank, and
  • pecuniary claims which are to be paid on the basis of an agreement as referred to in s34(3), s35(5) or s35a(4) of the Collection of State Taxes Act 1990 into a bank account held for the payment of wage tax, turnover tax and social insurance contributions.

As noted above, receivables arising in the context of syndicated loans concluded on standard LMA documentation will not fall within the scope of the new rule.

The ability to provide collateral for credit facilities should boost lending sources for SMEs and provide a much-needed stimulus for growth.

Find out more

To discuss any of the issues raised in this article in more detail, please contact a member of our Banking & Finance team.

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Contract Law in the Netherlands

Contract Law in the Netherlands

Table of Contents

The principles of the Dutch contract law

The contract law in the Netherlands is based on a few key principles and each contract must observe them in order to have binding force. Each party may enter into a contractual agreement out of his or her own will: this is the freedom of contract . This is important as neither party can force the other to agree upon certain terms that do not suit them. The principle of reliance is also important for the binding force of the contract : the party making the offer must stand up to the expectation created and meet his contractual obligations.

In order to be legal, a contract concluded in the Netherlands must not violate any basic values of the society, otherwise it can be considered null and void. When entering into an agreement , as a business owner in the Netherlands or as a citizen you must pay attention to the contractual provisions and liabilities.

Mandatory provisions

The contractual parties have the right and freedom to express their wishes in contract and agree to whichever degree they consider fit. However, in some business fields the type of the contract is conditioned by other laws and regulations. This is the case of employment contracts that must, according to law, state the type of work, number of working hours, remuneration and the rights the employee is entitled to.

Rental contracts or those signed when selling a property in the Netherlands must also observe the applicable regulations, like those expressed in the tenancy law.

Contracts in the Netherlands do not need to be written, although this is recommended because in case of any dispute they can be used as evidence in a Dutch court , as opposed to the oral agreements.

Assistance for drawing up contracts in the Netherlands

All contracts in the Netherlands should be drawn up in such a manner that they observe the basic principles of reasonableness and fairness. Because the two parties do not always have the same social position, there are certain additional provisions acceptable through the Dutch Civil Law that can protect the weaker party.

The consultants at our Dutch law firm can help you draw up and conclude any types of agreements. You can contact our lawyers for professional legal assistance.

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Prins Bernhardplein 200, 1097 JB Amsterdam, Nederland    [email protected]    +31 (0)20 24 00 710

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Termination of contracts or agreements under Dutch law

Verscheurde overeenkomst

In a short period of time the economic mood has evolved drastically due to the coronavirus: in the beginning of March 2020, the focus was on collaboration, transactions and new projects. However, in that same month, the central question became what legal measures can be taken during the corona crisis. No one was prepared for this situation, which requires solidarity and a helping hand in managing the crisis as effectively as possible.

One of the themes that we are now dealing with on a daily basis concerns the termination of agreements in accordance with Dutch law. After all, in times of crisis everyone needs to save costs which often results in the termination of a contract. For the avoidance of misunderstandings: the terms ‘contract’ and ‘agreement’ will be used as synonym throughout this blog.

How to terminate an agreement under Dutch law?

This question is relevant at all times and in every context. However, in times of crisis, ‘business-as-usual’ may become uncertain and this question becomes one of the most frequently asked questions. During the past few weeks we already received the following examples:

  • The buyer of a company desired to cancel the acquisition;
  • The tenant of a new office building wanted to terminate the just signed Letter of Intent (LOI) because the unexpected mitigated forecast following the corona virus outbreak;
  • A client had to cancel all its assignments with freelancers;
  • Due to the lack of funding a proposed collaboration concerning the development of software had to be terminated; · A loan agreement became due because the collateral decreased in value too much; and
  • An important investor pulled back the day before the execution of an agreed share issuance.

There will be many more examples involving the termination or cancellation of contracts the upcoming weeks and months. In view hereof, the question remains:

What are the possibilities for termination? Will such termination lead to liability for damages?

In answering this question, we will not discuss situations where a party relies upon ‘force majeure’, ‘changed circumstances’ or ‘material adverse events’. Although very relevant indeed, we will discuss these themes separately soon.

Preliminary question: is there a breach of contract?

If you desire to terminate an agreement, the first question is, whether there exists a breach of contract or default. A default situation generally exists if a party does not fulfill its contractual obligations. In such event, under Dutch law, the other party has the option to dissolve (in Dutch: ontbinden) the agreement (unless such option has been explicitly excluded in the agreement).

A prerequisite for invoking the right to dissolve the agreement, is that the defaulting party has been given written notice of the default (generally through a reminder or summons), thereby setting a reasonable term to fulfill its obligations under the agreement. If the defaulting party still fails to comply with the agreement after that notice term, the defaulting party will be in default and the agreement may be dissolved. In addition, the defaulting party can be held liable for damages resulting from the breach of contract.

In the event it is no longer possible for a party to fulfill the contractual obligation, or if that party directly indicates that he will not going to (be able to) fulfill the contractual obligation, the other party may immediately dissolve the agreement, without first having to provide written notice of the default.

Termination for convenience (“opzegging”)

Most agreements under Dutch law may also be terminated for convenience. However, some contracts cannot be terminated for convenience, for example: or a perpetual leasehold or a shareholders agreement (unless indicated otherwise in the agreement).

How do you terminate an agreement for convenience under Dutch law?

In most cases, contracts under Dutch law contain a provision that provides for the termination of the agreement for convenience. Therefore, a first step would be to verify the contract (including the general terms and conditions that may apply) and inspect the termination provisions. In many contracts, the termination notice must be provided in writing thereby taking a notice period into account. If such formalities have not been properly applied, the termination will in principle not take effect.

Important: check the law too!

For some specific types of agreements, Dutch law contains obligatory termination provisions. This for example applies to employment contracts, lease contracts and agency contracts. Consequently, in certain cases, additional rules or restrictions may prevent an easy termination.

What if the contract does not contain a termination clause?

If the agreement does not contain a termination clause, the termination of the agreement could be effected on the basis of applicable legal provisions. Under these circumstances, the following principles apply:

  • if the agreement has been entered into for a definite period of time, the agreement will terminate after the expiry of that period;
  • if the contract has been entered into for the performance of a specific assignment (for example, for building certain software), the agreement will terminate after that assignment has been completed;

Does this mean that there are no opportunities for early termination of such agreement? No, the following options remain available:

  • a first option may be to come to a mutual termination arrangement in consultation with the other party. This requires the consultation with the other contracting party and potentially also some financial compensation as a result of the early termination;
  • a second option can be to rely upon force majeure or changed circumstances (e.g. the corona virus outbreak). This may trigger the possibility to dissolve the agreement (in case of force majeure) or to terminate, or amend the consequences of the agreement (in case of changed circumstances).

The termination of continuing performance agreements under Dutch law

Continuing performance agreements are agreements that have been an ongoing or perpetual nature. Distribution agreements, license agreements, (indefinite) employment contracts, (indefinite) lease agreements and franchise contracts are examples of continuing performance contracts.

Either the law (i.e. employment or lease agreement) or the contractual terms (i.e. general terms and conditions) generally determine the termination conditions. Even in the event the ongoing performance agreement or the law do not provide for termination conditions, the starting principle is that such ongoing agreement could be terminated for convenience. Depend on the circumstances of the specific case, special attention must be paid to (i) the length of the notice period that should be taken into account and (ii) the possible duty for the terminating party to compensate the other party financially.

Would you like to know more about the termination of contracts under Dutch law, do not hesitate to contact us at [email protected] or Lukas Witsenburg directly at [email protected] .

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New interpretation of non-assignment clauses relevant for securitisation and factoring.

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Supreme Court 21 March 2014, ECLI:NL:HR:2014:682 (Coface/Intergamma)

On 21 March 2014, the Supreme Court ruled that a breach of a non-assignment clause results in a breach of contract, but is unlikely to affect the valid transfer (and pledge) of the assigned rights.

The judgement is relevant to parties involved in various types of financing, such as securitisations, factoring and reverse factoring, in which the assignment of rights is an essential requirement. Rights governed by Dutch law subject to a non-assignment clause were traditionally considered unsuitable for these types of financing. This judgement challenges that traditional thinking. The judgement has the potential to significantly expand the number of claims that are suitable for securitisations, factoring and reverse factoring.

Since 2005, Intergamma had been purchasing electronics from the AFK group on Intergamma's general terms and conditions of purchase. The non-assignment clause in these terms and conditions prohibited the vendor (AFK Group) from transferring all or part of its rights and obligations to third parties without Intergamma's prior written consent. In violation of that prohibition, AFK Germany, the entity in the AFK group to which Intergamma made payments, assigned its claims against Intergamma to Coface in 2008 under a factoring agreement without seeking Intergamma's consent.

When Intergamma made payments early in 2009 to AFK Holland, another part of the AFK group, Coface invoked the assignment and asserted that the payments to AFK Holland did not release Intergamma from its payment obligations. Intergamma refused to pay Coface, and relied on the non-assignment clause which, according to Intergamma, meant that the assignment of AFK Germany's claims to Coface in 2008 was void.

Interpretation of the non-assignment clause: presumption that it only affects contracting parties

The key issue before the court was the effect of the non-assignment clause. Did it have the effect of invalidating the entire transfer of rights to Coface (ie did it have proprietary effect)? Or did it merely mean that AFK Germany was in breach of contract, but that the rights remained with Coface (ie that the clause had only contractual effect)?

The Supreme Court ruled that, in principle, there is a presumption that a non-assignment clause only takes effect under the law of obligations:

" A clause like the one at issue, which is also intended by its nature to affect the legal position of third parties that have no knowledge of the intention of the contracting parties, and which serves to uniformly govern their legal position, must be construed according to objective standards, with due observance of the Haviltex standard. 1

The point of departure when interpreting clauses that exclude assignment of a claim must be that they only have effect under the law of obligations, unless their wording - construed according to objective standards – indicates that they were also intended to have effect under the law of property as referred to in Article 3:83, paragraph 2, of the Dutch Civil Code. "

The case will now be referred back to the Hague Court of Appeal for it to decide whether the non-assignment clause in Intergamma's general terms and conditions was intended to have effect only under the law of obligations, or to have proprietry effect too.

Implications

A non-assignment clause which prohibits a party from assigning its rights (eg "the Seller shall not assign its rights") will, if breached, generally result in a breach of contract but will not affect the assignee's rights. The rights subjected to the clause are still transferred. Should a proprietary effect, ie actual non-transferability, be required, the non-assignment clause will need to explicitly state this (eg "The rights under this agreement are non-transferable").

The Supreme Court's ruling places increased emphasis on the precise wording of a non-assignment clause. Obligors who want a non-assignment clause to have absolute effect vis-à-vis third parties and contracting parties should review their contracts or general terms and conditions and make changes if necessary. The text must either explicitly state that an assignment prohibition has effect under the law of property. A clause must state that the claim itself cannot be transferred.

The ruling also affects finance parties. Before this judgment, it was generally assumed that every non-assignment clause took effect under the law of property unless the text of the clause contained indications that the prohibition only had consequences under the law of obligations. This judgment suggests the opposite, thus potentially widening the pool of rights suitable for securitisations, factoring etc.

Under Dutch law, if there is a dispute about the meaning of a contract provision, a Dutch court will ascertain this meaning by applying the following standard: what could the parties reasonably have understood that provision to mean and what could they reasonably have expected from each other? For this "Haviltex standard", all facts and circumstances are relevant, including the conduct of the parties before and after entering into the contract. For more information, please see our article "Plain Meaning of the Words Not Always Determinative for Commercial Contracts" in the EFLR of June 2013.

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Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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  • Practical Law

Assessing Assignability: Transferring Contractual Rights or Obligations

Practical law legal update 5-546-6326  (approx. 7 pages).

  • An intended transfer is of the type that is prohibited by law or public policy (see Practice Note, Assignability of Commercial Contracts: Statutory and Public Policy Exceptions ).
  • The parties expressly agree to restrict transferability (see Practice Note, Assignability of Commercial Contracts: Contractual Anti-assignment and Anti-delegation Clauses ).
  • Breaching the contract.
  • Making an ineffective and invalid transfer.

Distinguishing Between Assignment and Delegation

  • The assignment of rights to receive performance.
  • The delegation of duties to perform.

Characteristics of Assignments

  • The right to receive performance from the assignor.
  • Its remedies against the assignor for any failure to perform.

Characteristics of Delegation

The general rule governing assignment and delegation.

  • Most assignments of contractual rights.
  • Many delegations of contractual performance.
  • Assignments and delegations that violate public policy or law.
  • Assignments of rights or delegations of performance that are personal in nature.
  • Contracts with anti-assignment or anti-delegation clauses.

Contracts That Present the Greatest Challenges

  • Personal services contracts (see Personal Services Contracts ).
  • Non-exclusive intellectual property licenses (see Intellectual Property Licenses ).
  • Contracts with anti-assignment and anti-delegation clauses (see Contracts With Anti-assignment and Anti-delegation Contract Clauses ).

Personal Services Contracts

Intellectual property licenses, contracts with anti-assignment and anti-delegation clauses, is a change of control an assignment.

  • Contains an anti-assignment and anti-delegation clause expressly restricting a change of control.
  • States that a change in management or equity ownership of the contracting party is deemed to be an assignment.

When Does an Involuntary Transfer Trigger a Restricted Transfer?

  • A contractual anti-assignment and anti delegation clause applies to a specific type or transfer.
  • The transfer is permissible, with or without a contractual anti-assignment and anti-delegation provision.

Drafting and Negotiating Anti-assignment and Anti-delegation Clauses

  • Directly addressing assignment of rights and delegation of performance.
  • Clarifying the universe of restricted transfers.
  • Designating the non-transferring party's consent rights.
  • Specifying any exceptions to non-transferability.
  • Requiring notification of a permitted transfer.
  • Including a declaration that impermissible transfers are void.
  • Adding a novation to the anti-assignment and anti-delegation provision.
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  • Dismissal under Dutch law

Dismissal under Dutch Law

Under Dutch law, an employment contract can be terminated in various ways, depending on the reason for termination.

Dissolution by the subdistrict court

If the employer wishes to terminate the employment agreement on the basis of a reasonable ground for dismissal, such as underperformance, culpable action or failure to act, or a disrupted working relationship, he may apply to the subdistrict court. The subdistrict court can only grant a request for termination if the legal conditions have been met. The subdistrict court is bound by the grounds for dismissal, the termination- and the discrimination prohibitions.

UWV procedure

If the employer wishes to terminate the employment agreement on the grounds of dismissal on economic grounds and long-term disability, he should apply for dismissal to the UWV (Employee Insurance Agency). The UWV assesses the substantiation and reason for dismissal and the efforts to redeploy the employee.

The employee has the right to defend himself against the dismissal in both the subdistrict court and the UWV proceedings.

Termination by mutual consent

Employer and employee can jointly agree to end the employment contract, so-called “termination by mutual consent”. The parties then lay down the terms of termination in a termination agreement. These include the severance payment, the (fictitious) notice period, the end date, any costs for legal assistance and, for example, continuation or expiry of the non-competition clause. If the reason for termination is correctly described, the employee also retains entitlement to unemployment benefit.

Reassignment

The employer may only terminate the employment contract if the reasonable grounds for dismissal are sufficiently substantiated and it is not possible to reinstate the employee in another suitable position within a reasonable period of time, even with the help of training. The employer must make an active effort to redeploy the employee before dismissal.

Transition payment

An employee whose employment is terminated at the employer’s initiative is entitled to transition payment (“transitievergoeding”). This right arises on day 1 of the employment contract so that even temporary employees are entitled to this at the end of their employment. The amount of this severance payment depends on the salary and the duration of the employment. The calculation method for the transition payment can be found : .

A transition payment is not payable if:

  • the dismissal is the result of serious culpable action or omission on the part of the employee;
  • the employee has reached the AOW or pensionable age;
  • the employer is in a state of bankruptcy;
  • employee is younger than 18 and works less than 12 hours per week;
  • when the employee terminates the employment contract himself.

Additional payment

The transition payment can, under special circumstances, be supplemented by an additional payment (“billijke vergoeding”). In calculating the transition payment, the employer’s culpable behavior is not taken into account. Therefore, the legislator has offered the possibility of an additional payment in case of serious culpable acts or omissions by the employer. This includes, for example, discrimination, giving a false ground for dismissal, violating reintegration regulations, etc. The amount is determined by the court.

Urgent dismissal

It could happen that the employer wants to terminate the employment because of an urgent reason. For example, the employee has stolen, committed fraud or refuses to work without good reason. In such cases, the employer may proceed directly with dismissal. The employer must immediately inform the employee and communicate the reason for the dismissal to the employee. The employee must also have been heard. The employee must have been given the opportunity to tell his or her side of the story. The requirements for a valid urgent dismissal are strict under Dutch law, so it is wise to seek legal advice at an early stage.

If you have any questions about dismissal or related matters, please feel free to contact Blenheim’s team of employment law attorneys .

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Contract law in the Netherlands

Contents of a contract, performance, breach, remedies, types of contract under dutch law.

  • Employment law in the Netherlands

Employment termination

Dismissal of an employee, employment law - miscellaneous.

  • About the Dutch Law Institute

Employment law - in the Netherlands

Navigating dutch employment law: a guide for employers and employees.

Employment law in the Netherlands

Dutch employment law centers around strong worker protections. It covers work contracts, termination rights, work hours, and leave entitlements, accommodating both fixed-term and permanent contracts. The distinct 'polder model' involves all parties—employers, employees, and the government—in labor negotiations. Understanding its intricacies is critical due to its comprehensive scope.

This comprehensive guide aims to shed light on the key aspects of Dutch employment law, providing valuable insights for both parties involved in the employment process. Topics covered include contracts, working hours, minimum wage, employee benefits, dismissal procedures, and more. By delving into the intricacies of the Dutch employment landscape, this article will serve as an indispensable resource for navigating the ever-evolving legal framework that shapes the world of work in the Netherlands.

The first section details the most important aspects of employment law in the Netherlands, including topics such as minimum wages and working hours, collective labour agreements, discrimination prevention measures and health & safety considerations. It also outlines other facets of employee rights that must be taken into account when hiring new staff or negotiating changes to existing contracts under Dutch employment law. Furthermore, this article covers some key points about dismissal procedures under Dutch employment law and explains why employers need to take special care when carrying out dismissals lawfully.

Finally, the last section looks at various ways in which employers can ensure they remain compliant with current legal requirements concerning employment relationships. By understanding the complexities of Dutch employment law and taking steps towards compliance accordingly, both employers and employees can create mutually beneficial work environments that adhere to all applicable legal provisions.

Overview of employment regulations in the Netherlands

Dutch employment law governs the rights and obligations of employers, employees, temporary workers and other categories of persons employed in the Netherlands. As an example, consider a case study involving an employer who hired a foreigner to work for them on a short-term contract without providing any further information about Dutch labour laws or protections. This is against the law in the Netherlands, as anyone working in the country must be informed of their rights under Dutch legislation.

Employment law in the Netherlands covers areas such as worker health and safety, discrimination protection, minimum wage requirements and benefits entitlements. Employers are required to comply with all relevant regulations regarding employee rights; failure to do so can result in significant penalties. Employees have certain legal protections that they must be aware of, including workplace discrimination provisions, holiday entitlements and termination notice periods. Temporary workers also have specific rights that are protected by Dutch employment laws.

Overall, knowledge of both employer obligations and employee rights is essential in order to ensure compliance with Dutch employment law. Understanding these regulations helps to create a safe working environment for all involved parties while ensuring that everyone’s interests are respected according to applicable rules and procedures. From there we will now turn our attention towards understanding minimum wage and benefits requirements in the Netherlands.

Minimum wage and benefits in the Netherlands

The Netherlands has established a minimum wage to ensure that all employees are paid fairly for their work. In addition to wages, employers must also provide certain benefits to their staff. These include sick pay and holiday allowance which can equate to 8% of an employee’s salary each month or 1/12th of the annual leave entitlement.

Employees may be entitled to additional benefits such as a bonus at Christmas or on national holidays, company cars and reimbursements for travel expenses. It is important for both employers and employees to understand exactly what entitlements they are due so that any discrepancies can be rectified quickly and amicably.

In terms of working hours, Dutch employment law states that full-time employees should not exceed 40 hours per week while part-time workers should not exceed 24 hours weekly. Overtime compensation is required if these limits are exceeded; however, there are many other factors that need to be taken into account when it comes to calculating overtime payments including collective agreements and union regulations. To sum up, understanding Dutch minimum wage requirements as well as employee benefits in the Netherlands is essential for creating a transparent system where everyone's interests are respected according to thereto applicable rules and procedures. This will help pave the way towards correctly navigating working hours & overtime regulations in this country moving forward.

Working hours & overtime under employment law in the Netherlands

To ensure a fair and equitable workplace, the Netherlands has established certain employment standards that must be met by employers. These include working conditions such as hours of work, payment for overtime and rest periods. They also provide information on social security benefits available to employees who are injured or become ill while in service. It is important to understand these regulations so that they can be adhered to accordingly.

Dutch law requires all employers to provide their staff with adequate breaks throughout the day and weekly rest periods. This ensures workers have sufficient time off from work to rest and recuperate before returning to their duties refreshed and ready for action once more.

Employers also need to pay attention to statutory entitlements related to illness and injury sick leave payments, rehabilitation funds and disability benefits when applicable. Adhering strictly to Dutch employment standards helps create a safe environment where both employers & employees benefit equally according thereto applicable laws & regulations set out by the government thus providing stability for businesses operating within this country moving forward.

Vacation time & leave under Dutch labour law

The Netherlands has established certain vacation time and leave entitlements for employees that must be respected by employers. In particular, labour law in the Netherlands requires that all workers receive a minimum of four weeks paid annual holiday each year. Additionally, maternity and paternity leave are also provided for and allowances can be claimed in this regard. Sickness benefits may also apply to those unfortunate enough to suffer from an illness or injury while working during their contractual period.

Employees should be aware of their rights under Dutch dismissal law which governs unfair dismissals as well as providing protection against discrimination when it comes to hiring or promotion decisions. This legislation is designed to ensure fairness in the workplace and upholds employee’s right to seek compensation through legal action if necessary. Employment disputes are best resolved out-of-court but there are strict rules outlined in Dutch labour laws governing these situations - such as maximum notice periods & procedures required prior to termination etcetera - which need to be taken into account first before taking any further action accordingly.

Temporary employment contracts lasting no longer than two years are increasingly common across various industries in the Netherlands; especially within technology sectors where demand often fluctuates unpredictably throughout the calendar year thus requiring flexible staffing solutions on occasion thereby allowing businesses some flexibility without being tied down long term whilst still respecting applicable national labor regulations relating thereto accordingly.

Employee termination process under Dutch employment law

As employment lawyer in the Netherlands , I advise that employee termination is a sensitive and potentially legally complex issue for employers in the Netherlands. In accordance with Dutch employment law, if an employee’s employment contract is terminated by their employer or they are made redundant then they can be eligible for the so called 'transition fee', roughly 1/3 month per worked year. Additionally, redundancy laws protect workers against unjustified dismissal and discrimination on grounds such as age, gender or ethnicity - meaning those affected can challenge unfair dismissals through legal action accordingly.

When negotiating terminations under Dutch labor law it is important to bear in mind rules regarding notice periods which vary depending on how long the individual has been employed.

These procedures serve both parties interests ensuring fair treatment across all cases of potential separation between employers & employees whilst upholding applicable national regulations relating thereto respectively.

Employment contracts under Dutch law

Employment contracts are a vital part of the employment relationship between employers and employees in the Netherlands. The Dutch Civil Code requires that all permanent or fixed-term contracts must be written down, with details such as job title, duties and salary specified in order to ensure legal compliance. Furthermore, minimum wage is mandatory for all positions within the country - setting an important baseline for employee rights & protections which cannot be circumvented by any contract agreement. Additionally, particular attention should also be paid if hiring foreign workers; since additional regulations apply for those coming from outside of Holland including obtaining work permits before commencement of service respectively.

Equal opportunities should always be upheld regardless of race, gender or age when carrying out recruitment processes as set forth through national legislation accordingly – meaning qualified applicants cannot be passed over unfairly due to their personal characteristics. In addition to this it is essential to create policies aimed at preventing discrimination and harassment given its damaging effects on workplace culture & morale overall. Therefore clear communication regarding expectations surrounding acceptable behavior should be outlined both internally & externally so everyone involved understands what is expected of them moving forward.

Discrimination & harassment policies under Dutch employment law

Discrimination & harassment policies are essential for creating a respectful and positive workplace environment. In the Netherlands, employers have an obligation to protect their employees from any form of discrimination or prejudice under Dutch employment law – meaning that all workers should be treated equally regardless of age, gender or race. Additionally, expats who come to work in Holland must also adhere to these standards.

When it comes to preventing discrimination and harassment in the workspace, there are several steps which need to be taken. Clear rules should be established regarding acceptable behavior. This includes setting out expectations both internally & externally so everyone involved knows what is expected of them moving forward. Such guidelines should also include information on how grievances can be reported if necessary.

In addition to this, employers must adhere to health & safety regulations when employing people in the Netherlands as set forth by national legislation – including providing proper protective equipment (PPE) during certain activities such as welding or operating heavy machinery etcetera. Furthermore, workplaces must meet certain criteria regarding lighting conditions, ventilation systems & temperature levels according to local ordinances respectively - making sure all employees remain safe while performing their duties throughout each shift accordingly.

Health and safety requirements under Dutch employment law

When it comes to the safety of employees in the Netherlands, employers have a duty of care that must be taken seriously. The Dutch labor market is highly regulated and carries stringent health & safety requirements for business operations within the country – meaning both employers and workers alike are responsible for ensuring conditions remain safe at all times. From providing adequate workplace insurance coverage to making sure pension plans are updated regularly; there are numerous obligations which need to be met in order for companies to operate legally within Holland's jurisdiction.

To begin with, employers should take special precautions when dealing with hazardous materials or equipment as these can result in serious injury if mishandled incorrectly. Additionally, they should ensure their company is up-to-date on current legislation regarding data protection regulations so no employee information is ever exposed without consent from either party involved respectively.

Finally, any changes made to existing internal policies should always be communicated clearly amongst colleagues and enforced accordingly; failure to do so could result in legal action against those who neglect their duties moving forward. Employers must maintain proper records pertaining to personnel management including hiring/firing documents, annual performance reviews etcetera – taking into account every detail necessary when running a successful operation throughout the Netherlands successfully.

Data protection regulations and employment law in the Netherlands

Data protection is an important aspect of Dutch employment law. Companies have the responsibility to ensure that their employees’ personal information and data remains secure. This includes not only physical documents, but also digital files such as emails or other records stored in a computer system. The General Data Protection Regulation (GDPR) provides specific guidelines for employers regarding how best to handle employee data responsibly. Furthermore, those wishing to employ foreign workers must obtain a valid Dutch employment visa from the Netherlands Immigration Office prior to any labor migration taking place within the country itself.

Employees themselves are also subject to certain tax requirements while working in Holland; they must pay income taxes on earnings derived through work-related activities, along with health insurance contributions which will be deducted directly from net wages each month. Additionally, individuals should make sure that all necessary paperwork relating to these matters has been completed correctly – failure to do so can lead to severe penalties being imposed upon offenders by the relevant authorities over time.

Finally, businesses are obligated under Dutch tax law for employees to provide social security contributions which go towards funding unemployment benefits and pensions amongst others - thus allowing people access financial support during times of hardship if needed further down life's path. It is essential that companies remain compliant when dealing with this specific area of legislation moving forward; otherwise serious consequences may arise depending on situation presented accordingly.

Social security contributions in the Netherlands

As a result of the social security contributions employers are required to make in accordance with Dutch law, employees benefit from collective labor agreements which regulate such matters as minimum wages and working conditions. Furthermore, businesses may also choose to enlist the services of an employment agency in order to find suitable candidates for job vacancies; this can be especially helpful when recruiting foreign workers or those on temporary contracts.

In addition to collective labor agreements and agencies, there is a range of other legislative provisions which companies must comply with when dealing with their employees collectively – including dismissal law. This encompasses any situation where several individuals are made redundant at once due to business restructuring or insolvency; firms need to ensure that adequate notice periods and severance payments are provided if applicable before proceeding further. Finally, it is essential that employers stay up-to-date regarding changes in legislation surrounding Dutch employment so as not to face potential legal issues down the line associated with compliance failure moving forward.

Company restructuring & insolvency in the Netherlands

The labor regulations in the Netherlands are designed to protect employees' rights, and companies must adhere to them when restructuring or facing insolvency. Dismissal law is particularly pertinent in these scenarios; any proposed changes that would affect a large number of staff should be raised with the relevant trade unions prior to implementation. Furthermore, employers must also provide adequate notice periods and severance payments as applicable before proceeding further.

It is essential that businesses remain up-to-date on all new legislation related to Dutch employment law so they can adequately prepare for potential legal issues down the line associated with noncompliance. This includes staying abreast of collective agreements which may be renegotiated by trade unions at certain intervals – often including provisions regarding minimum wages and working conditions. It is within an employer’s best interests to ensure compliance with such rules from the outset as this helps avoid costly disputes later on.

Unions & collective bargaining in the Netherlands

Employment relations in the Netherlands are heavily regulated by trade unions and collective bargaining agreements. It is important for businesses to understand their legal obligations under these arrangements, as failure to do so can result in increased costs or penalties down the line. Here are some key points to consider when navigating union-related issues:

  • Union recognition & representation : unions represent certain groups of workers within a company, negotiating on behalf of them with employers. Companies should be aware of which employees fall into this category, as well as any regulations regarding recognition and representation rights that must be adhered to;
  • Collective Bargaining Agreements : these agreements often include provisions related to minimum wages and working conditions, amongst other areas. As such, it is essential that companies stay up-to-date on current CBAs negotiated between their respective unions - making sure they remain compliant at all times;
  • Union membership : whilst not obligatory in the Netherlands, many firms still encourage staff members to join trade unions due to the benefits associated with doing so. This includes access to advice about labor law compliance matters along with assistance during disputes – both of which can help protect employers from potential litigation risks later on.

Enforcement & penalties under employment law in the Netherlands

With a clear understanding of unionization and collective bargaining requirements in place, what happens when employers or employees fail to meet their legal obligations?

What enforcement measures are available for ensuring compliance with Dutch employment law?

Any employee who believes they have been treated unfairly may choose to file a complaint with the local court system. This could involve bringing forward claims related to unpaid wages or unlawful dismissal, as well as other matters involving employer negligence or abuse of power. However, it is important to note that before taking this step, workers should inform their employer about any issues and seek advice from trade unions or other professional bodies if necessary – aiming towards a mutual agreement rather than escalating matters further into litigation proceedings wherever possible.

Ultimately, ignorance is no excuse under Dutch employment law – particularly when faced with steep financial penalties down the line. Therefore, both employers and employees alike must take responsibility for staying informed about current regulatory frameworks in order to avoid unnecessary disputes later on.

Dispute resolution procedures under Dutch law

In the event of any disputes or disagreements between employers and employees, it is important for both parties to be aware of their rights and responsibilities under Dutch employment law. As such, there are a number of options available in terms of dispute resolution procedures that aim to resolve issues quickly and effectively.

For instance, one avenue open to those seeking redress is mediation – where an impartial third-party will act as an intermediary between the two sides involved. This process typically involves working together to identify areas of disagreement before negotiating a mutually beneficial outcome; allowing matters to be resolved without having to resort to legal action further down the line. Alternatively, workers may also choose to file a complaint with the local court system if they feel that their employer has violated labor laws or neglected their contractual obligations in some way. Such grievances can include claims related to unpaid wages or wrongful dismissal, among other workplace infringements.

Overall then, navigating Dutch employment law requires both employers and employees alike take responsibility for staying informed about current legislation - particularly when faced with potential financial penalties or expensive litigation proceedings later on. With this knowledge firmly in hand, businesses can better avoid unnecessary conflict while ensuring compliance with all relevant regulatory frameworks at all times.

Tax obligations & employment law in the Netherlands

At the heart of any employment relationship lies a number of tax obligations; as such, it is essential for employers and employees to be aware of their respective responsibilities when operating within the Dutch system. To this end, various channels exist through which taxes can be paid in accordance with current legislation - each of which are designed to ensure both parties remain compliant at all times.

As such, adhering to these regulations not only safeguards against costly disputes further down the line but serves as an important reminder that social responsibility should always take precedence where finances are concerned - no matter how complex or convoluted the bureaucratic processes involved might seem at first glance. Ultimately then, being mindful of one's legal requirements provides invaluable peace-of-mind for businesses and individuals alike throughout every stage of the employment process.

FAQs - about employment law in the Netherlands

Labor law in the Netherlands

1. What are the main types of employment contracts in the Netherlands?

The main types of employment contracts in the Netherlands are:

  • fixed-term contracts
  • indefinite (permanent) contracts, and
  • temporary contracts (through employment agencies).

2. How is the minimum wage determined in the Netherlands?

Minimum wage determination in the Netherlands: The Dutch government sets the minimum wage, which is adjusted twice a year (January 1 and July 1). The minimum wage depends on the employee’s age and working hours.

3. What are the standard working hours and overtime regulations in the Netherlands?

Standard working hours and overtime regulations: Standard working hours are usually 36, 38, or 40 hours per week. Overtime pay is not regulated by law, but can be agreed upon in individual contracts or collective labor agreements.

4. How are vacation days and holiday pay calculated for employees in the Netherlands?

Vacation days and holiday pay calculation: Employees are entitled to a minimum of four times their weekly working hours as vacation days per year. Holiday pay is generally 8% of the gross annual salary and is typically paid in May.

5. What are the rules regarding maternity and paternity leave in the Netherlands?

Maternity and paternity leave rules: Maternity leave is 16 weeks (4-6 weeks before the due date and 10-12 weeks after). Paternity leave is up to 5 days fully paid leave after the birth, plus an additional 5 weeks at 70% of the employee’s salary.

6. How does the Dutch law regulate employee dismissal and termination procedures?

Employee dismissal and termination procedures: Employers must have a valid reason for dismissal and follow the correct procedures, which may include obtaining permission from the Employee Insurance Agency (UWV) or the court.

7. What is the role of trade unions and collective bargaining agreements in the Netherlands?

Trade unions and collective bargaining agreements: Trade unions negotiate collective bargaining agreements (CBAs) with employers, which set the terms and conditions for employment in various sectors. CBAs can cover matters such as wages, working hours, and dismissal procedures.

8. How does the Netherlands address workplace discrimination and equal treatment?

Workplace discrimination and equal treatment: Dutch law prohibits discrimination based on factors like race, sex, age, and disability. Employers must ensure equal treatment and provide a safe, inclusive work environment.

9. What are the rights and responsibilities of employers and employees in cases of illness and sick leave under Dutch law?

Rights and responsibilities during illness and sick leave: Employees are entitled to continued payment (usually 70% of their salary) during sick leave for up to two years. Employers must create a reintegration plan to help the employee return to work.

10. How do non-compete clauses work under Dutch employment law?

Non-compete clauses in Dutch employment law: Non-compete clauses restrict employees from working for competitors or starting a competing business for a certain period after leaving their job. These clauses must be reasonable and agreed upon in writing.

11. Under Dutch employment law, what is the maximum amount of overtime employees can work?

Working overtime is a common practice for many employers and employees in the Netherlands. The maximum amount of hours an employee can work overtime varies based on the type of job they are employed in, as well as their age.

According to Dutch legislation, full-time employees over 18 years of age may not be asked to work more than 12 hours per day or 60 hours per week. Overtime should also not exceed four hours per day or 24 hours per week. Employees under 18 years old must not be asked to work more than 8 hours per day or 40 hours a week, with no more than two hours’ overtime each day and a total of 10 extra hours weekly. These regulations apply only when working beyond normal contractual terms.

12. Are there specific laws in the Netherlands, protecting employees from discrimination based on gender?

Discrimination based on gender is a pervasive reality in many workplaces. In the Netherlands, there are specific laws that protect employees from this form of discrimination.

The Dutch Equal Treatment Act prohibits any forms of unequal treatment between men and women in work situations. It applies to recruitment, hiring, promotion, compensation, job assignment, training opportunities, termination of employment , or other terms and conditions of employment. The act also states that employers cannot use pre-employment tests or questions which could lead to discriminatory practices related to gender identity or sexual orientation.

Employers must ensure they comply with all applicable anti-discrimination laws when making decisions about employee rights and responsibilities within the workplace. Employers who violate such laws may be held liable for damages caused by their actions. Additionally, an organization's reputation may suffer if it is found guilty of engaging in unlawful discrimination against its employees or prospective hires. Employees have access to remedies through judicial proceedings and administrative enforcement authorities if they feel their rights under the law were violated due to gender-based discrimination.

13. Under Dutch law, are there any tax breaks available for employers?

Employers in the Netherlands may be eligible for tax incentives when they hire new employees. These breaks can help employers to reduce their financial burden and also benefit entrepreneurs who are just starting out.

Tax deductions are available on certain expenses incurred for hiring personnel, such as training costs and recruitment fees. Furthermore, there are certain contributions made by employers which qualify for tax relief including pension premiums, social security payments and accident insurance premiums. Employers should familiarize themselves with these laws before making any decisions regarding taxation and benefits provided to their employees so as to ensure compliance with Dutch employment law regulations.

In addition, various grants and subsidies may be accessible depending on particular industry type or number of hired employees; thus it would be beneficial for employers to research further into what types of allowances could potentially be claimed from governmental bodies in order to optimize cost savings over time.

14. What are the penalties for non-compliance with Dutch labor laws?

Non-compliance with labor laws can have serious consequences in the Netherlands. Employers must ensure they are aware of the various regulations and understand the penalties for failing to comply. The Dutch authorities take a strong stance on non-compliance, providing both criminal and civil sanctions depending on the severity of any violations.

The most common penalty is an administrative fine imposed by the Inspectorate SZW (Inspectorate Social Affairs & Employment). These fines can range from €500 up to a maximum of €82,000 per violation or incident and may be increased if there are numerous violations present. In addition to these fines, employers may also face additional financial liabilities such as back pay due to failure to adhere to minimum wage requirements. Furthermore, companies may suffer reputational damage that could result in lost business opportunities or lawsuits from employees whose rights were violated.

Any individuals found guilty of violating labor laws within their organization may also face individual charges related to their actions. It is therefore essential all employers familiarize themselves with applicable law and remain compliant with it at all times. Failure to do so could result in significant repercussions both financially and legally.

15. Are there any restrictions on the types of employment contracts that can be used?

  • Are there any restrictions on the types of employment contracts that can be used?
  • What are the penalties for non-compliance with labor laws?

Ad 1. When considering a type of contract, there are several factors to take into account such as:

  • education level
  • length of agreement
  • level or nature of work allowed
  • obligations which could include contributions to social security funds, taxes, benefits etc.

In addition, some forms of temporary contracts may have limitations regarding how long they can remain active before renewal or termination.

It is also worth noting that certain sectors might have specific regulations governing the terms of their employment contracts due to collective agreements negotiated by trade unions. Similarly, many industries require jobseekers to complete vocational training courses prior to being employed in a particular position so make sure you are aware of any additional qualifications needed when recruiting staff.

Ad 2. Any organizations failing to comply with relevant legislation risk substantial fines or other sanctions imposed by regulatory authorities including criminal prosecution in more serious cases. Therefore it is essential that employers ensure all new hires meet legal obligations and contractual provisions, while offering support and guidance where necessary to help protect all parties involved during their period of engagement.

My conclusion with regard to employment law in the Netherlands

Employment attorney in the Netherlands

In conclusion, the Netherlands’ intricate employment law framework plays a crucial role in safeguarding the rights and interests of both employers and employees. A thorough understanding of these regulations helps to foster a harmonious and productive work environment, ensuring that all parties comply with their respective obligations.

By adhering to Dutch employment law, employers can create a supportive workplace that values equal treatment and respects the rights of each individual. In turn, employees can contribute to a thriving economy with increased job satisfaction, knowing that they are protected by a robust legal system.

As a result, a comprehensive grasp of the Netherlands’ employment law not only contributes to the well-being of those directly involved in the workplace but also promotes economic stability and growth across the nation. This underscores the importance of staying informed about the latest developments in Dutch employment law and working diligently to uphold its principles in everyday business practices in the Netherlands.

As an experienced employment lawyer in the Netherlands , I am able to advise clients on all aspects of labor law in the Netherlands. I would be happy to discuss further details regarding this.

About the author

Employment lawyer in the Netherlands - Eva Jongepier

Eva Jongepier is an acclaimed employment lawyer in the Netherlands with more than 22 years of experience.

With specializations in employment termination and litigation under Dutch employment law, Eva stands out as employment attorney for her keen analytical abilities and sound legal advice she provides to clients. Eva's clients range from individuals and small/medium-sized enterprises to large corporations.

As Dutch employment attorney , she is highly regarded for her professionalism and efficiency when resolving complex employment disputes. With an in-depth knowledge of Dutch employment law, Eva stays current on legal developments and changes within this field.

Contact Eva

Please feel free to contact Eva if you have any question regarding employment law in Holland .

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Terminating an agreement under Dutch law

  • 15 March 2023 22 January 2024
  • by Contract Lawyer In The Netherlands

Table of Contents

Termination of an agreement under Dutch law

Are you facing the daunting task of terminating an agreement under Dutch law? Terminating a contract can be a complex and delicate process, but understanding the legal requirements and your rights and obligations is crucial. In this article, we’ll provide you with a comprehensive guide on how to terminate an agreement following Dutch law.

As a starting point, it should be noted that both parties must either agree on the termination of the contract for it to be valid, or a notice period must be taken into account. Next to that, it might be the case that damages should be compensated. Furthermore, depending on the type of agreement and its terms, different laws may apply, such as those relating to purchase agreements, commercial agency contracts, or distribution agreements. We’ll discuss these considerations in more detail later in this article.

Finally, all contractual terminations must comply with relevant statutory regulations, so if you are unsure about how best to proceed then seeking professional advice is essential. In summary, by following the guidelines outlined here, readers will have all they need to know about terminating an agreement under Dutch law.

Termination Of Contract under Dutch law: Overview

Terminating an agreement is like slamming the door shut on a relationship. It marks the end of a business partnership, and requires careful consideration as to ensure that all legal obligations are fulfilled. Termination of contract is used in cases where one or both parties have breached the terms of their agreement, parties do not longer want to collaborate, when payment has not been received due to insolvency, or for other reasons such as incompatibility between the two parties. In any scenario, the termination of contract should be done with care and attention to detail; this article will discuss what must be taken into account when terminating an agreement under Dutch law.

When terminating an agreement, either party may seek compensation for damages caused by breach of contract if applicable. They may also look at notice periods – these refer to how far in advance notification needs to be given before termination takes effect. And there may also be prohibitions on terminations which can only take place upon certain conditions being met. All of these factors need to be taken into account while considering whether it is appropriate to terminate an agreement under Dutch Law.

It’s essential that sufficient evidence is gathered prior to taking action – the burden of proof rests upon those initiating termination proceedings and they must demonstrate why it would be necessary under specific circumstances. With this knowledge in mind, we now move onto discussing termination agreements and Dutch Law specifically.

Termination Agreement And Dutch Law

Under Dutch law, the termination of a contract is regulated by Book 6 or 7 of the Civil Code and/or in case law. Termination can be undertaken in several ways and may depend on the cause for terminating the agreement. A termination notice must generally be sent to terminate an agreement legally. This notice should contain details about when, how and why the agreement is being terminated. It should also specify any necessary steps that need to be taken following its issuance.

When it comes to non- or poor performance or abuse of circumstances, the commercial contract might allow for immediate termination (in Dutch: “opzegging”) without requiring a prior notice period. When such cases are present, a party wishing to terminate an agreement does not need to send out a termination notice before doing so as long as there is clear evidence for their claims. In other words, no prior warning needs to be given if one party has been proven guilty of either non-performance or abuse of circumstances within the terms of the contract.

For contracts with longer durations, however, sending out a valid termination notice and/or paying for the damages is required according to some landmark cases (for example: SMQ / Goglio ). The length of time needed before this kind of legal action can take effect depends on both parties’ individual business relation. Once these criteria have been met, only then will a proper request for ending such contractual arrangement via legal means become available under Dutch Law.

The legal requirements for ending any type of contract in the Netherlands vary depending upon many factors but ultimately require some form preparation and consideration beforehand; regardless if immediate termination due to circumstance applies or more prolonged process from standard expectations proves necessary instead

Legally Ending A Contract In The Netherlands

Terminating a contract in the Netherlands is like navigating a minefield: it requires careful consideration of all options, their associated risks and potential consequences. As such, it’s critical to know the various termination options available under Dutch law and any prohibitions on termination that may apply to your situation.

In general, contracts in the Netherlands are terminated either through mutual agreement or unilateral notice given by one party. If there is no fixed duration specified in the contract then either party can terminate with a proper notice period. However, if a contract has been made for a specific term than there will be restrictions as to when termination can take place before its expiration date. All parties must comply with these terms until the end of the agreed upon contract duration unless they receive written permission from another party beforehand.

When considering unilateral termination without consent from other parties, it’s important to note that the burden of proof lies with those who initiated the termination request. This means that you have to provide substantial evidence supporting your decision in order for it to be considered valid within legal proceedings. Therefore understanding both your rights and obligations throughout this process is key when terminating an agreement under Dutch law.

Understanding The Termination Notice Process

In Dutch law, there are a few ways to terminate an agreement. Termination notices must be provided in writing and include relevant details that outline the reasons for termination. The notice must also specify when the termination will take effect. It is important to note that certain agreements may require additional steps for termination or renewal of the contract.

Force Majeure clauses allow parties involved to suspend their obligations if unforeseen circumstances arise, such as natural disasters, prices increases, pandamics, or economic crises. If a Force Majeure clause is included in the agreement, it should be consulted prior to terminating any contractual relationship. Alternatively, Unlawful Acts by either party can lead to immediate termination without further action from either side. Additionally, Third Party Clauses enable one of the parties to terminate an agreement due to non-performance by a third party. Finally, there may be Lapse Clauses which provide predetermined time frames within which contracts should be renewed; otherwise they become invalid after expiry.

These various scenarios offer insight into how contracts can be terminated under Dutch law depending on individual circumstances and specific contractual needs. Carefully considering all applicable laws and provisions ensures compliance with local regulations while providing adequate protection against potential legal liabilities resulting from ineffective terminations of agreements.

Cancellation Under Dutch Law

According to the Netherlands Bar Association, over 55% of legal disputes in Dutch courts are related to contract termination. Terminating an agreement under Dutch law involves a complex process that requires knowledge and expertise of applicable statutes. This section will discuss the various grounds for legally terminating an agreement as well as dispute resolution procedures when necessary.

When evaluating whether or not an agreement can be terminated under Dutch law, there are several key elements which must be taken into consideration:

  • Law in the Netherlands: It is important to understand how laws governing contractual agreements work within the Netherlands so that any potential risk associated with termination can be managed effectively.
  • Legal Grounds for Termination: There are certain criteria such as breach by one party or expiration of time limits which may provide valid grounds for cancellation of contracts.
  • Statute of Limitations: Depending on the type of contract, different limitations may apply when it comes to initiating proceedings against another party involved in the transaction.
  • Dispute Resolution Procedures: If a dispute arises between two parties regarding termination of their contract, they should consider resolving it through alternative methods such as arbitration before resorting to litigation.
  • Cancellation Under Dutch Law: When cancelling a contract due to non-performance or other issues identified above, both parties should take steps to ensure compliance with all requirements set forth by relevant legislation.

These key considerations form the basis for understanding how best to terminate an agreement under Dutch law. As each situation is unique, it is important to seek professional advice from qualified experts who can provide guidance on how best proceed based upon individual circumstances. With this information in hand, parties will be better informed about their rights and obligations when negotiating and executing their contracts – thus helping them avoid costly disputes down the line.

Grounds For Legal Termination in Holland

Under Dutch law, several grounds exist to legally terminate an agreement. The first is when the agreement has been fulfilled and all obligations have been completed by both parties. This type of termination does not require notification or special provisions; either party can simply end the agreement once it has been satisfied.

The second ground for legal termination in Holland law is if a court declares that one side has violated its contractual obligations. In such cases, the other party may seek to immediately terminate the contract without notice. Additionally, a breach of contract clause contained within an agreement gives either side the right to terminate in case of violation by the other party.

Finally, legal termination also occurs if one party fails to meet their required performance under the terms of the contract. In this situation, neither prior nor subsequent notification is necessary and any damages resulting from this failure must be compensated according to applicable Netherlands law.

In certain circumstances, default, breach of contract and compensation are relevant considerations when terminating an agreement under Dutch law. In the event of a non- or poor performance the agreement can in most of the cases only be terminated (in Dutch: “ontbinden”) after a letter of demand and when there’s a status of default (in Dutch: “verzuim”).

Default, Breach Of Contract And Compensation

Under Dutch law, parties to a contract may terminate an agreement in Holland under certain circumstances. In order for the termination of a contract to be valid and enforceable, it must be done in accordance with the terms of the agreement or applicable law. This section will discuss how default, breach of contract, and compensation can lead to termination of an agreement.

Firstly, when one party fails to fulfill their contractual obligations as outlined in the agreement, they are said to have committed a ‘default’. If this occurs, both parties may agree on a resolution that causes the other party to cease any further performance related to the agreement. Alternatively, either party may elect to seek damages resulting from such breach by way of legal action.

Secondly, if either party breaches any term or condition contained within the written contract without providing sufficient justification or excuse then they are deemed to have breached the contract. In such cases, affected parties may initiate proceedings against each other seeking various remedies including specific performance and/or monetary damages depending upon the severity and nature of such breach.

Finally, should a dispute regarding liability arise between two contracting parties due to alleged wrongful conduct then those affected may claim compensation for any losses incurred as a result thereof. Such claims could include requests for restitutionary payments made from one party to another which were not justified by prior contractual obligations or agreements between them.

This allows for disputes relating matters such as non-payment of fees or services rendered etc., to be resolved fairly and equitably according to what is legally prescribed under Dutch law concerning contracts and agreements entered into by all involved parties

How To Make A Formal Request For Termination

Having discussed the circumstances in which an agreement in Holland may be terminated, it is necessary to determine how a formal request for termination should be made. In Dutch law, there are two primary ways of terminating an agreement: by mutual consent or unilaterally.

When seeking to terminate by mutual consent both parties must agree on termination and sign a statement confirming their agreement. The statement should include details about when the contract was signed, why it is being terminated and what rights remain with each party once the contract has been terminated. It should also state that both parties have read and understood all terms of the termination.

To terminate unilaterally one must provide written notice to the other party detailing their intention to end the agreement. This notice should outline reasons for termination as well as any relevant legal provisions authorizing its use. Once this notification has been provided, either party can choose to accept or reject the proposed termination without further negotiation or consultation between them.

In either case, it is important that those requesting termination act in good faith and provide clear evidence of their intentions so as not to create any unnecessary confusion or dispute over whether or not they intend to fulfill their obligations under the agreement. By doing so, parties can ensure a smooth transition from contractual relations into non-contractual ones while avoiding potential disputes down the line due to unclear communication regarding intent. With these steps taken, parties can then move forward with nofifying the other party of their intenions for terminating an agreement according to Dutch Law.

Notifying The Other Party Of Termination Intentions

Have you been thinking about terminating an agreement under Dutch law? If so, it’s important to understand the legal requirements for notifying the other party of your intentions. The first step is to ensure that both parties are legally allowed to end their contract as outlined in the agreement. It must be determined if termination requires written notice and what timeframe this notice should follow. Once these steps have been taken, the next step is to provide clear notification to the other party of your intention to terminate the agreement. This can be done via letter or email; however, it must include all relevant details such as a final date when the contract will no longer be valid. Finally, if applicable, confirm any payment obligations due at the time of termination and remind them of any restrictions on how long they may take before replying with acceptance or rejection of your intent to terminate. In doing so, you’ll help avoid any potential disputes down the line regarding either party’s understanding of what was agreed upon prior to ending the arrangement. Understanding notice period restrictions is essential for successful termination under Dutch law.

Understanding Notice Period Restrictions

Under Dutch law, agreements may be terminated upon giving notice. This requires the stipulated period of notice to be respected and adhered to by both parties. The amount of time required can vary depending on the type of agreement and its duration. Generally speaking, a longer-term contract may require more advanced notification than a short-term one. It is important for all parties involved in an agreement to be aware of the terms and conditions surrounding termination so they can plan ahead accordingly.

The notice period is often set out explicitly in the text of the agreement itself or referenced in any relevant legislation that applies to it. If there are no specific provisions regarding termination within the agreement, then legal regulations will apply instead. In certain cases, contractual restrictions may also limit when either party can terminate without penalty, such as requiring payments towards compensation if done prematurely or before expiration date of the contract has been reached. Therefore, understanding these prohibitions on prematurely ending an agreement is key in order to ensure proper compliance with Dutch law.

Prohibitions On Prematurely Ending An Agreement

Under Dutch law, an agreement may not be terminated prematurely unless the parties have agreed otherwise. In many cases, a party wishing to end an agreement must provide reasonable notice in order to do so. This is particularly true of longer-term agreements such as leases or employment contracts. As with other areas of contract law, there are certain circumstances where termination without prior warning is permissible – for example if one of the parties has committed a material breach of the contract.

In addition to this, there are several legal prohibitions on terminating an agreement too soon that stem from centuries-old case law and should be taken into consideration when reviewing any potential contractual disputes. Firstly, it would constitute unlawful discrimination if a party were to terminate an agreement on account of race, religion or gender; secondly, termination must not contravene public policy nor cause financial harm to either party; and thirdly, termination cannot take place solely for the purpose of avoiding payment obligations due under the contract.

The court will also consider whether non performance, mistake, deception or abuse of circumstances played a role in determining why one party sought to end the agreement early. It is therefore important that both sides retain all relevant evidence pertaining to these issues which can later help prove their respective positions before a judge.

Reasons For Non Performance, Mistake, Deception Or Abuse Of Circumstances

Under Dutch law, an agreement may be terminated due to non-performance, mistake, deception or abuse of circumstances. When a party fails to fulfill its obligations under the contract, this is considered a breach of contract and can result in termination of the agreement by either party. If one party makes a mistake regarding essential elements of the agreement such as price or quantity, then the other party has grounds for termination. Additionally, if one party has misled or deceived another with regards to any matter related to performance of the agreement then again it could be seen as sufficient reason for terminating the contract. Lastly, when one side takes advantage of another’s position through coercion or pressure into entering an agreement that would not have been entered absent such tactics then similarly there are grounds for nullifying the arrangement. In all these cases effective legal counsel should be sought in order to protect both parties’ interests and ensure compliance with relevant laws and regulations.

Force Majeure And Unforeseen Circumstances

Just as a ship can be tossed around by the waves before it reaches its destination, agreements between parties in Dutch law can sometimes be derailed or changed due to unforeseen events. Force Majeure and Unforeseen Circumstances are two such occurrences that may have an effect on termination of an agreement.

Force Majeure is defined under Article 6:75 of the Dutch Civil Code (DCC)as any event beyond the reasonable control of either party which makes performance impossible, temporarily or permanently. This could include natural disasters such as floods or earthquakes, war or terrorism, strikes or lock-outs, governmental acts, or changes in legislation. If one of these events renders performance impossible for either party then they shall not be held liable to perform their contractual obligations until such time that they become able to do so again.

Unforeseen circumstances are similar to force majeure but differ slightly in how they affect the conclusion of an agreement. Whereas force majeure typically affects both parties equally, unforeseen circumstance tend to only hinder one side’s ability to fulfill their obligation without fault from either side. In this case article 6:258 DCC allows for a renegotiation of terms and conditions which must take into account any losses incurred by either party during the period where performance was impossible. It also gives permission for either party to terminate the contract if mutually agreed upon following negotiations over new terms and conditions.

The implication of Force Majeure and Unforeseen Circumstance clauses vary depending on whether you’re dealing with a fixed term agreement or a continuous service provision contract; though overall they allow flexibility when unexpected events occur outside of each party’s control and prevent them from being held liable should something change drastically enough that continued performance becomes unrealistic:

  • Fixed Term Contracts: Termination rights will remain unchanged unless otherwise stated in the original agreement
  • Continuous Service Provision Contracts: Allows for renegotiations taking into consideration economic losses suffered by each side

By allowing some leeway when extreme external factors alter the course of an agreement, Force Majeure and Unforeseen Circumstances provide much needed stability against legal action should something happen unexpectedly outwith each parties control making successful completion difficult or impossible without fault from either side moving forward. With this knowledge we now turn our attention towards unlawful acts, damages and third party clauses

Unlawful Acts, Damages And Third Party Clauses

Under Dutch law, an agreement may be terminated if it is found to contain unlawful acts. This could include a breach of contract or any other illegal activity that has occurred during the course of the agreement. In such cases, affected parties are entitled to seek damages from each other in order to compensate for losses incurred due to the unlawful act(s). Additionally, third party clauses can also be used to terminate agreements where one party is liable for a debt owed by another party who is not directly involved in the agreement. The clause allows the non-liable party to take action against the liable party and thereby terminate the agreement without legal repercussions.

In this context, assessing contract duration and determining whether it has been voided or subject to statute of limitations must also be considered when terminating an agreement under Dutch law.

Assessing Contract Duration, Voidability And Statute Of Limitations

It is like a chessboard game. A contract between two parties can be terminated by either party for any reason, or even no reason at all, provided the respective statutory rights of each party are respected. For example, under Dutch law, both parties must abide by the duration stated in the agreement and any voidability requirements such as consent from both sides before termination. In addition, there is also a Statute of Limitations that applies to contracts made under Dutch law which limits how long one has to take action on breach of agreement before it becomes barred by statute. All these factors need to be taken into consideration when assessing whether an agreement can be ended according to the laws governing them. Furthermore, if there have been changes to the contract’s terms during its existence then those changes must also be taken into account when deciding whether it can be successfully terminated. It is important to remember that proper assessment of duration, voidability and Statute of Limitations will help ensure that any termination of an agreement under Dutch Law is legally sound and valid.

Frequently Asked Questions

What is the difference between termination and cancellation in holland.

Termination and cancellation are two terms that have similar meanings but different implications in the legal context. Termination typically involves ending a contract by mutual agreement between both parties, while cancellation is usually unilateral in nature and signifies an immediate termination of rights or obligations under a contract.

The distinction between these two concepts lies mainly in their respective processes for execution and effect on contractual relationships. In the case of termination, it requires the consent of all parties involved to be legally valid, as opposed to cancellation which does not require any input from other entities. Termination also generally provides more flexibility with regards to how long it takes to come into effect and may allow for certain clauses within the contract to remain intact even after its conclusion; whereas, cancellation terminates all rights and obligations without exception immediately upon operationalization.

In contrast, when terminating an agreement under Dutch law there are specific conditions that must be met regardless of whether or not either party has given prior notice or expressed intent to terminate the contract. Firstly, in order for such a termination to be effective, at least one party must have failed to fulfill its obligations according to the agreed-upon terms outlined in the contract; secondly, if either side wishes to cancel the agreement unilaterally this will likely result in damages being awarded against them due to breach of contract laws; finally, depending on the type of agreement being terminated there may be additional requirements required before dissolution can take place (e.g., payment of outstanding fees). All said, it is important for those entering into agreements governed by Dutch law understand what constitutes a lawful termination so as to avoid potential repercussions related thereto.

What Is The Effect Of Force Majeure On A Contract under Dutch law?

Force majeure is a legal concept that applies to contractual agreements, enabling parties to be released from their obligations when certain unforeseeable events occur. Such events may include natural disasters, war, civil unrest or pandemics. In the Netherlands, force majeure provisions are typically found in article 6:75 DCC and following of the Dutch Civil Code.

When it comes to contracts affected by force majeure, there are three primary effects which should be considered:

1) Suspension – One party’s obligation to perform under the contract will be temporarily suspended until the event causing force majeure has been resolved. 2) Cancellation – If an event causing force majeure lasts for an extended period of time, either party can cancel the agreement without further liability. 3) Modification – Parties could also agree to modify their contractual obligations due to changes caused by force majeure; however, if one party does not agree on any proposed modifications then the other cannot enforce them unilaterally.

In view of these considerations, it is clear that understanding how force majeure affects a contract is essential in order to protect oneself should unforeseeable circumstances arise during its duration. It is therefore important for all parties involved in such agreements to read through and clearly understand every provision relating to this concept before signing off on any document.

How Do I Know If My Contract Is Voidable Or Not?

When negotiating a contract, it’s important to understand when and how you may be able to terminate the agreement. This is especially true in Dutch law, which can be complex and confusing for those who are not familiar with it. In order to know if your contract is voidable or not, there are certain criteria that must be met.

To start off, contracts can become voidable due to misrepresentation of facts or wrong information from one party. It could also be due to an error on the part of both parties or a mistake concerning the terms of the contract. Additionally, any element of duress present during negotiations can render a contract invalid as well.

There are other factors that play into making a contact voidable under Dutch law; here is a list:

  • Misrepresentation of facts
  • Errors made by either side
  • Any presence of duress
  • Lack of consent from one party
  • Unconscionability (when one party has much more bargaining power than another)
  • Mental incapacity at time of signing

It’s important to remember that these conditions vary depending on each individual case, so always consult with legal counsel before entering into any agreement with another party. Overall, determining whether or not your contract is valid in accordance with Dutch law depends largely on the unique circumstances surrounding its formation.

What Are The Consequences Of Terminating A Contract Prematurely?

Terminating a contract prematurely can have serious legal consequences. Both parties may be liable for damages, and the court may award punitive or exemplary damages to either party if they are found guilty of breach of contract. In addition, any costs associated with terminating the agreement early could be charged against one or both parties in certain cases.

The first step in determining these potential liabilities is to understand what type of contractual arrangement exists between the two parties. If it is an ongoing relationship such as a lease or service contract, then there may be more onerous obligations that need to be taken into account during termination proceedings. The terms of the agreement will generally dictate how much notice needs to be given by each party before moving forward with dissolution proceedings.

Furthermore, depending on the nature of the terminated agreement, there may also be restrictions placed upon other forms of dispute resolution such as arbitration or mediation which must also take place prior to commencing litigation. It is important for all involved parties to consult an attorney who specializes in Dutch law when considering premature termination so that they fully understand their rights and responsibilities under applicable laws and regulations.

What Are The Damages I May Be Liable For If I Breach A Contract?

When it comes to breach of contract, damages may be incurred. These refer to a monetary amount awarded for losses sustained due to the other party’s failure to fulfill their contractual obligations. Generally speaking, in order for someone to be held liable for breaching a contract, they must have acted intentionally and without good reason.

The types of damages which might be sought depend on the nature of the agreement. For instance, if there has been a breach of an employment contract then any unpaid wages or benefits may form part of the claim along with compensation for emotional distress or financial loss suffered as a result of being dismissed unfairly. In some cases punitive damages – i.e., those designed to punish rather than compensate – may also be applicable.

In addition, there are certain circumstances where one party is entitled to specific performance; that is, when an action is required from another person in order for them to fulfil their contractual obligation. If this is not forthcoming then legal redress can be sought by way of injunction against further non-compliance or even forfeiture of any security given as part of the agreement. It should however be noted that all claims related to breach of contract need to be brought within time limits set out by law and these vary depending upon jurisdiction and type of dispute involved so advice should always be taken before taking any steps.

Contact a Dutch contract lawyer

For any legal inquiries or support in the Netherlands, please feel free to contact our adept team at MAAK Advocaten . Committed to excellence, our Dutch lawyers provide superior legal services tailored to your distinct needs. You can reach our law firm in the Netherlands through our website, by email, or phone.

Our approachable and skilled staff at MAAK Attorneys will be delighted to assist you, arranging a meeting with one of our specialized attorneys in the Netherlands . Whether you need a Dutch litigation attorney or a Dutch contract lawyer in Amsterdam , we are eager to guide you through the legal intricacies and secure the most favorable results for your situation.

Contact details Remko Roosjen | attorney-at-law (‘advocaat’) +31 (0)20 – 210 31 38 [email protected]

The information on this legal blog serves purely for educational purposes and should not be taken as specific legal guidance. While we endeavor to maintain accurate and current information, we do not assert its absolute completeness or relevance to your particular situation. For advice tailored to your legal concerns, we urge you to engage with a licensed attorney. Please note that the blog’s content may change without notice, and we are not liable for any inaccuracies or missing information.

Remko Roosjen

Remko Roosjen

Remko Roosjen is a Dutch contract attorney in the Netherlands and creates close working relationships with clients, providing pragmatic solutions across on all legal matters in the Netherlands. Remko is a partner of our Commercial law firm in Amsterdam, the Netherlands . His specialist areas include Dutch Contract Law , including Dutch Commercial Contracting and Legal Disputes , including civil litigation, arbitration and mediation. Remko is a sharp, creative Dutch attorney with extensive cross-border experience representing both foreign plaintiffs and defendants. Visit Remko's profile via the website or via his LinkedIn Profile .

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  1. Assignment of a claim under Dutch law

    Under Dutch law, the general rule is that a chose in action (such as a claim) unless assignment is precluded by law or the nature of the right (art 3:83(1) of the Dutch Civil Code). Contracting parties are free to exclude assignment in their agreement (art 3:83(2) of the Dutch Civil Code).

  2. Assignment of a claim under Dutch law

    Under Dutch law, the general rule is that a claim can always be assigned, unless assignment is excluded by law or contract. This is governed by article 3:83 paragraph 1 of the Dutch Civil Code ( burgerlijk wetboek - BW). The parties may stipulate in the contract that an assignment of claims is excluded (Article 3:83 (2) of the Civil Code).

  3. PDF Overview Contract Formation and Enforcement in the Netherlands

    The legal requirements to create a contract under Dutch law are: • Offer. • Acceptance. • Intention to create legal consequences. Both the offer and acceptance are deemed to be "legal acts." Legal acts are not defined under Dutch statutory law, but require the will, expressed in a statement, to create legal consequences (Article 3:33, DCC).

  4. Interpretation of contracts under Dutch law

    Decisive for the interpretation of a contractual provision to which Dutch law applies, is the meaning that the parties were could reasonably expect of the contract provision, and of each other, in the given circumstances. In the Netherlands, the courts have firmly rejected the so-called parol evidence rule, even in commercial settings.

  5. The Netherlands

    Under Dutch law, the relationship between parties in negotiations is governed by the principles of good faith, reasonableness and fairness. Generally, parties are free to break off negotiations unless they have led the counter-party to have justified expectations. If such expectations exist, ending the negotiations may be regarded as ...

  6. Non-assignment clauses in Dutch law: the end of the road?

    If a contract prohibits the transfer of receivables, then they can neither be transferred nor pledged. A transfer contrary to such clause will, depending on the exact wording of the clause and its interpretation, result in a default (under contract law) or the non-transferability of the receivable, and thus the invalidity of any attempted ...

  7. Contract law in the Netherlands

    Contracts Under Dutch Law: The Power of Binding Agreements. Dutch law recognizes contracts as binding once the process of offer and acceptance is complete. This fundamental principle ensures security and predictability in business dealings, solidifying Dutch contract law's reputation as a robust and dependable system.

  8. Contract Law in the Netherlands

    The principles of the Dutch contract law. The contract law in the Netherlands is based on a few key principles and each contract must observe them in order to have binding force. Each party may enter into a contractual agreement out of his or her own will: this is the freedom of contract.This is important as neither party can force the other to agree upon certain terms that do not suit them.

  9. The top 5 things to be aware of in commercial contracts ...

    The top 5 things to be aware of in commercial contracts governed by Dutch law. Category: International law. 1. The subjective meaning behind agreements - the Haviltex Principle. As opposed to common law, Dutch law places a great deal of importance on the subjective meaning behind agreements. Under the Haviltex Principle, a written agreement ...

  10. Q&A: contract termination in Netherlands

    Yes, force majeure is recognised under Dutch law and referred to as 'overmacht'. The general rule is that a contracting party is liable for all damages resulting from their breach of contract ...

  11. Contract formation under Dutch law

    Dutch contract law requires an offer, acceptance, and consideration to form a valid contract. The offer must be clear and unambiguous, and the acceptance must be unequivocal. Consideration can be anything of value, such as money, goods, or services. If all three elements are present, a valid contract has been formed.

  12. Dutch law

    Welcome to our comprehensive guide on civil law in the Netherlands. As an authority in legal expertise in the Netherlands, the Dutch Law Institute aims to provide accurate and up-to-date information to help you navigate the intricacies of civil law within the Dutch jurisdiction. Whether you are a resident, an expatriate, doing businnes in the Netherlands, or simply interested in understanding ...

  13. Termination of contracts or agreements under Dutch law

    In most cases, contracts under Dutch law contain a provision that provides for the termination of the agreement for convenience. Therefore, a first step would be to verify the contract (including the general terms and conditions that may apply) and inspect the termination provisions. In many contracts, the termination notice must be provided in ...

  14. New Interpretation of Non-Assignment Clauses Relevant for

    Rights governed by Dutch law subject to a non-assignment clause were traditionally considered unsuitable for these types of financing. This judgement challenges that traditional thinking. ... Under Dutch law, if there is a dispute about the meaning of a contract provision, a Dutch court will ascertain this meaning by applying the following ...

  15. Assignments: The Basic Law

    Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court, 35 Cal. 2d 109, 113-114 (Cal. 1950). An assignment will generally be permitted under the law unless there is an express prohibition against assignment ...

  16. Assessing Assignability: Transferring Contractual ...

    An assignment involves the transfer by an obligee (assignor) of some or all of its rights to receive performance under the contract to a non-party (assignee). The assignor no longer receives any benefits of the assigned rights, which are all transferred to the assignee. However, even though the assignor divests its contract rights, the ...

  17. Employment contract under Dutch law

    An employment contract, often referred to as a labour contract or job contract, is an agreement between two parties: the employer and the employee. It establishes their rights and duties with regards to their employment relationship. An employment contract in the Netherlands contract must comply with the Dutch Civil Code and other codifications ...

  18. Dismissal under Dutch law

    The employer must immediately inform the employee and communicate the reason for the dismissal to the employee. The employee must also have been heard. The employee must have been given the opportunity to tell his or her side of the story. The requirements for a valid urgent dismissal are strict under Dutch law, so it is wise to seek legal ...

  19. Contractual Penalty under Dutch Law

    Dutch law is known for its complexity and for the wide range of contractual penalties that can be imposed. In this article, our Dutch lawyers will discuss in detail the various types of contractual penalties under Dutch law and how they are applied. The use of contractual penalties is an important tool when it comes to enforcing terms within a contract in the Netherlands.

  20. Distribution contracts in the Netherlands

    Dutch law does not have a specific legal regime applying to distribution agreements. This means that the general law of contracts applies to distribution agreements. The Dutch Civil Code is based on the principle of contractual freedom: suppliers and distributors are only bound by the rules they agreed to between themselves.

  21. Federal Register :: Privacy Act of 1974; System of Records

    Contractors: To contractors, grantees, experts, consultants, students, and others performing or working on a contract, service, grant, cooperative agreement, or other assignment for VA, when reasonably necessary to accomplish an agency function related to the records. 7.

  22. Employment law

    Employment contracts under Dutch law. Employment contracts are a vital part of the employment relationship between employers and employees in the Netherlands. The Dutch Civil Code requires that all permanent or fixed-term contracts must be written down, with details such as job title, duties and salary specified in order to ensure legal compliance.

  23. Terminating an agreement under Dutch law

    Under Dutch law, the termination of a contract is regulated by Book 6 or 7 of the Civil Code and/or in case law. Termination can be undertaken in several ways and may depend on the cause for terminating the agreement. A termination notice must generally be sent to terminate an agreement legally. This notice should contain details about when ...