Over the past year and a half, there has been a great deal of movement in both legislation and case law in the field of contract law. Are you, as an entrepreneur, ready for a clear summary of the most important legal changes for SMEs in the field of contract law? We have listed these changes for you below.

New legislation that now requires your attention and/or action.

Updating your consumer contracts and general terms and conditions
Firstly, two European directives have been adopted that will bring about a shift in Dutch consumer sales law. So if you do business with consumers, this is very important! These directives aim to provide (even) more protection for the consumer, among other things in the area of conformity (goods and services sold must be as expected) and the warranties and the actions you must take if the product or service is non-conforming (remedies). This means you must revise your consumer contracts and general terms and conditions so that they continue to comply with the mandatory rules. For example, we recommend including in your general terms and conditions that minor defects are not grounds for dissolution (just to be clear about it). Fortunately, there is still enough time for this, as the provisions transposed from the directive will only apply to contracts concluded after 1 January 2022.

ACTION POINT #1: Update your customer contracts and general terms and conditions.

Should you need help with this, we can of course assist you. Request here your quote.

Attention franchisors and franchisees!
On 12 July 2019, the bill for ‘the Franchise Act’ was sent to the Council of State and will probably take effect on 1 January 2021. This new Franchise Act is meant to make the unequal relationships in franchise relationships more balanced. It does so, among other things, by;

• a pre-contractual duty of disclosure for the franchisor towards the candidate franchisee;
• a mandatory organised consultation between the franchisor and franchisee;
• and a mandatory prior approval by the franchisees for a significant change to the franchise formula.

ACTION POINT #2: For franchisors: Keep an eye on this legislation and seek advice on whether you need to restructure your franchise formula and/or contracts.

ACTION POINT #3: For (prospective) franchisees: Keep an eye on this legislation and seek advice on whether your position is sufficiently protected under this act and whether the franchise formula and/or contracts are in order.

Should you need help with this, we can of course assist you. Request here your quote.

For more general provisions from 2019 that may play a role for SMEs, you can look here , and for provisions that came into effect on 1 January 2020, you can look here .

Case law

The highest court has not been idle over the past year and a half in the field of contract law, and there have been many cases from which important lessons can be drawn when concluding contracts with suppliers and customers. On the following contract law topics, the Supreme Court has given guidance.

When may you dissolve a contract?
If your counterparty fails to fulfil the agreements in its contract and you want to dissolve the contract for that reason, you may in principle do so. Every failure in the performance of an obligation gives rise to a statutory right to dissolution, unless the failure does not justify the dissolution. A nice legal formula, but when exactly does the failure justify dissolution? In the Supreme Court ruling Eigen Haard/x, a ruling from the last month of 2018, the Supreme Court confirms that every failure is in principle sufficient grounds for an appeal to dissolution, but the circumstances of the case may nevertheless mean that dissolution is not, after all, justified. Think, for example, of the severity, duration and consequences of the failure. If these circumstances favour the debtor, the failure may not justify dissolution.

ACTION POINT #4: As the dissolving party, you can obtain extra certainty by explicitly naming the possibility of dissolution in the contract or your purchase or sales terms and conditions in relation to the obligations that are most important to you.

What exactly must I do legally in the event of a failure by my counterparty?
Before being able to claim damages for a failure by your counterparty, that counterparty must, according to the law, first be in default. A debtor is only in default once he has received written notice from you giving a period to still remedy the failure. Such a notice is called a notice of default. A notice of default without (or with too short) a period to remedy does not automatically lead to default. In a ruling from October 2019, the Supreme Court answered how a reasonable period should be determined. In any event, the court makes clear that a debtor who has been given too short a period to remedy may not simply disregard the notice of default, because under certain circumstances it can still lead to default. The creditor is also supported as regards the period to remedy that must be given with the notice of default. This is less formal than initially thought and depends on the contact between the parties. In certain circumstances, a relatively short period to remedy would suffice.

Recommendation: Deviate contractually from the statutory rules surrounding notices of default by specifying exactly, in your contracts or general terms and conditions, what must be done in the event of a failure or breach of contract. Also specify concretely the agreed duration of the period to remedy.

ACTION POINT #5: Update your general terms and conditions on this point.

Should you need help/advice with updating your general terms and conditions (action points 4 and 5), we can of course help you. Request here your quote.

So how do digital signatures actually work?
A signature turns a piece of paper into solid evidence. This document, also called a private deed, provides conclusive evidence between the parties of the content of the deed. How does this work with a digital signature? Or with a scanned or photographed image of the signature pasted into a document (a stamped signature)? The Supreme Court emphasises, in a ruling from April 2019 and in a ruling from June 2019, the importance of the original signature and clarifies that, in some circumstances, an advanced or qualified digital signature is needed. Those are digital signatures with a qualified certificate. The certificate is issued by companies that are on the trust list of the Radiocommunications Agency (Agentschap Telecom). The Supreme Court does not state precisely in which situations a qualified digital signature is required, but does say that a ‘stamped signature’ often does not suffice.

ACTION POINT #6: Still sign important contracts offline, i.e. physically, and keep the original contracts. Another option is to use a qualified digital signature. Anything in between can create evidentiary problems.

How should one act in the case of an abstract bank guarantee?
It happens that, as a contracting party, you want certainty of payment of your invoices. One way to do this is a bank guarantee. The third party providing the guarantee, usually a bank, has an independent obligation to pay, provided the conditions in the contract are met, if the counterparty cannot or will not pay. This is also called “the abstract bank guarantee”, the most common form of guarantee. According to the Supreme Court, the conditions of the abstract bank guarantee must be applied strictly, given the nature and function of the abstract bank guarantee. This is emphasised in the Rabobank/Rollecate ruling. In this ruling, the Supreme Court even says that, when interpreting the provisions, the exact wording must be followed, i.e. a strict grammatical interpretation.

ACTION POINT #7 and Recommendation: When drafting an abstract bank guarantee, write everything as clearly and concretely as possible. Once that has been done, follow all provisions precisely. Missing a deadline, for example, may already release the bank from its payment obligation.

By reading about the above contractual ‘pitfalls’, you may be able to avoid a potential misstep in the future. Of course, there were many more rulings in this period in the field of contract law from the Supreme Court and other authoritative bodies. We are, of course, aware of these and all other developments surrounding contract law.

Help and advice
Do you need help and/or advice drafting or amending a contract, drafting or updating your general terms and conditions, or advice on your contractual legal position? We are happy to help. Contact us via this contact form or call us directly on 020-3450152.

The corporate legal advisers at The Legal Company specialise in employment law, contract law, company law and privacy law for SMEs.

Nothing changes as often as laws and regulations. We would like to point out that our blogs may no longer be in line with current laws and regulations and may therefore be outdated. If you have questions or a problem relating to this blog, or if you require legal assistance, please contact us.