On March 15th, the Dutch government announced new measures pertaining the corona pandemic. These measures aim to contain the virus and therefore have taken effect immediately. The new measures have a major impact on the Dutch economy, especially as neighbouring countries have also issued similar restrictions to curb the corona virus. The current situation can rightly be called extreme. As far as we know, measures and consequences on this scale have never been experienced.
We can fairly say that almost every entrepreneur in the Netherlands will experience the effect of the new measures to a greater or lesser degree and will have to make major decisions about current contracts, but possible also about future contracts. Some examples of questions an entrepreneur may have:
- Do I have to fulfil current supplier contracts or may I terminate these?
- Do I have to continue to pay or charge rent?
- Can I, as a contractor, invoke extension of construction time?
- I am negotiating a takeover or commercial collaboration. Can I cease the negotiations without consequences or not?
- I am a seller of real estate. Can I force a buyer to effectuate a previously closed real estate deal?
- Can I temporarily suspend my contractual obligations?
- As a landlord, do I have to take measures, such as closing a building, if tenants are diagnosed with Covid-19? Especially if there are multiple tenants (multi-tenant building)?
We will respond to these and similar questions in future articles and blogs, so stay tuned.
In the meantime it is important to realize that each situation is different and therefore a tailor-made assessment of your position might be required. There is no one-size fits all solution, that much is clear. But where to start?
The fact is that, in principle, contractual obligations must be observed at all time and you are liable for damages if you do not fulfil your contractual obligations. This may be different if the contract itself makes an exception to this by, for example, a so-called force majeure clause (which is not unusual) or a warranty provision.
Our suggestion is therefore to first grab your contract and assess whether or not the contract contains provisions that apply on a force majeure situation!
If the contract does not contain such provisions, it is good to know that, Dutch civil law offers various potential solutions. For instance, pursuant to article 6:75 of the Dutch Civil Code (DCC), in some force majeure cases the failure to fulfil your contract does not lead to liability for damages. Also article 6:248 DCC (reasonableness and fairness) and 6:58 DCC (unforeseen circumstances) provide a possible solution, especially if it is objectively “unacceptable” that you are held to the obligations contained in the contract. If that is the case, the contract might be amended or even dissolved.
In our view (we will omit the many nuances for now), the current extreme situation may indeed be regarded as force majeure or an unforeseen circumstance. So it is worth investigating whether you are entitled to change or terminate an ongoing contract or break off ongoing negotiations in case of severe adverse effects of the current situation.
Please, however, bear in mind that in particular article 6:258 DCC will be applied with restraint by judges. Especially if and when the current measures are only effective for a short period of time.
We understand that you may have ample questions on the legal consequences of the current corona pandemic. To help you with those we have set up a Corona HELPDESK.
We kindle invite you to call us – without obligation – and share with us your legal questions on contracts, real estate and corporate law, so we can provide you with possible solutions, fit for your situation.
PHAROS lawyers
+31 (0)35 7110844
