How to conclude a legally binding contract in The Netherlands?
People enter into agreements everyday, sometimes without even realising so. Whether it involves buying a house, renting a bike or ordering a cup of coffee, all these actions qualify as entering into a legal agreement. When can we speak of a legally binding agreement in the Netherlands? Is an oral agreement binding? Dutch contract lawyer Marco Guit briefly explains the key notions of Dutch Contract Law.
How is a contract effected under Dutch law?
A contract or agreement (including general terms and conditions) is effected by offer and acceptance. These actions can be very explicit, as in the case of buying a house, but in daily life they tend to coincide: paying for petrol with a credit card is basically the acceptance of the offer of petrol for a certain liter price. If parties agree, a contract is established. In principle all individuals and legal entities have the capacity to conclude contracts. There are a few exceptions such as minors (who need parental approval) and people who have been declared legally incompetent (e.g. due to mental illness).
Principle of contract law: reasonableness and fairness
An important and regularly used principle of Dutch contract law is the rule of reasonableness and fairness: an agreement not only has the legal effects which parties have agreed upon, but also those which, to the nature of the agreement, arise from law, common practice or the standards of reasonableness and fairness (article 6:248 Dutch Civil Code). As a consequence of this rule, a civil court can set aside a contractual provision if, given the circumstances, applying this rule would be unacceptable to standards of reasonableness and fairness. When this is the case exactly, is often subject to debate in litigation, hence, the abundance of case law on this matter.
Mandatory versus directory law in The Netherlands
While parties are free to a great extend to agree whatever they want to, some provisions on contract law are mandatory and cannot be superseded by contractual provisions (most of employment law and residential tenancy law is mandatory). When provisions are directory law, parties are allowed to derogate by contract from these provisions. Further more, standard terms regularly form a part of a contract and for these specific contract terms, the Dutch Civil Code provides some specific mandatory rules.
Dutch law: written or oral agreement?
For an agreement to be valid in the Netherlands it is not required that it is written down in a document. An orally concluded agreement is just as binding as a written one and can be enforced in court as well. The main difference is, though, that when the contract parties are in dispute, it can be difficult to provide evidence of the content or even the existence of an oral agreement. Hence, it is always better to put things in a contract and have both parties sign it. In some cases, the law requires that an agreement is laid down in a written document, a purchase contract regarding a house being one of them.
Dutch lawyer on special contracts and specific provisions
There are certain types of contracts that by nature require more specific rules, especially when parties with unequal social positions often conclude these contracts. Employment contracts, real estate purchase contracts and tenancy contracts are all agreements for which the Dutch Civil Code provides additional provisions, mainly aimed at protecting the socially weaker party (employee, tenant or consumer-buyer).