In a recent ruling by the Amsterdam District Court, the legal question of default took centre stage in a dispute between two IT service providers who had entered into a collaboration: I&DT and NDC-IT. This ruling shows why, in certain cases, it is of great importance to properly place a defaulting counterparty in default — in particular, to attach the correct legal consequences to that default. Something that was not done correctly in this case, which ultimately proved costly for I&DT.
What was at issue?
Under the framework agreement, NDC-IT was to perform work for I&DT in connection with regular management, maintenance, changes and support relating to the managed services. In the course of the collaboration, I&DT began to have complaints about the quality of the services provided by NDC-IT. This ultimately led to termination of the collaboration as of 1 December 2022. But that was not the end of the matter. I&DT stated that NDC-IT had fallen short in various obligations under the agreement, including drawing up and delivering an exit plan upon termination of the collaboration. I&DT therefore claimed from NDC-IT repayment of invoices relating to this, plus damages as compensation.
I&DT’s request not qualified as a “notice of default”.
The court ruled that although NDC-IT had indeed fallen short in delivering an exit plan on time, it had not yet been placed in default. This was because no proper notice of default had been sent. In the email sent on the very last day by which NDC-IT was supposed to deliver the exit plan, I&DT merely asked NDC-IT by email to send the exit plan “immediately”, or “by Monday at 12:00 noon at the latest”. Even so, according to the court, the email could not be regarded as a formal notice of default.
One of the statutory requirements for a notice of default is that the counterparty must be given a reasonable period to still perform its obligations. That period was missing from the email, which meant the court could not qualify it as a notice of default.
Legal requirements for a notice of default.
For a debtor to be placed in default, a notice of default is, in principle, required (article 6:82 of the Dutch Civil Code). By law, this notice of default must meet three cumulative requirements in order to trigger default.
- First, the notice of default must be drawn up in writing and be sufficiently clear. The creditor must specifically describe which obligations the debtor has failed to meet.
- Furthermore, a reasonable period must be set within which the debtor can still perform the obligation. What is considered “reasonable” depends on the circumstances of the case.
- Finally, the creditor must make clear what consequences (legal consequences, sanctions) will be attached if the obligation is not performed.
A notice of default is not required under all circumstances in order to speak of default. For example, a notice of default can be dispensed with if a fatal deadline has been breached by the debtor, or when the creditor must infer from a statement by the debtor that the debtor will not perform the agreement in any case.
In addition, there are numerous legal remedies available that can be attached to a debtor’s default (the breach of contract). Which one is most suitable in a given situation, and also offers the greatest advantage, always depends on the circumstances of the case. The corporate lawyers at The Legal Company can support you very well as a business in this regard. If you are interested, you can email us at info@thelegalcompany.nl or call 020 345 0152.
