What is a gag clause and when is it valid?

A gag clause is a contractual agreement whereby one party waives the right to take legal or administrative action against a specific subject, for example by not lodging an objection or appeal against a plan. Such a clause is not automatically valid in the Netherlands: the courts apply strict scrutiny. A gag clause only has a chance of success if it is concretely defined, limited in time, and does not unduly infringe upon the fundamental rights of those involved. If the clause is formulated too broadly or if it also silences legal successors through a chain clause, you run a real risk that the court will declare the clause void due to a conflict with public order.

Below, you can read a brief explanation of what a gag clause is, where you might encounter it, under what conditions it can hold up, and the risks you run with ill-considered wording. At the bottom, you will find answers to the most frequently asked questions.

What is a gag clause?

A gag clause is primarily encountered in purchase agreements and settlement agreements, for example in the context of area development. It is a special and far-reaching agreement: one party commits not to take legal or administrative action against a specific plan or project. In doing so, the clause affects the legal position of that party. Precisely for this reason, it is a sensitive subject on which the judiciary is critical.

Sometimes a gag clause goes a step further. The clause then obligates the party to impose the same restriction on others, such as future buyers or legal successors. This is done via a so-called chain clause, to which a penalty clause is often attached to enforce compliance. The consequence is that the legal position of third parties who are not themselves involved in the agreement may also be jeopardized. It is precisely this that makes the question of validity so important.

Where is a gag clause used?

• Area development and real estate: a seller wants to prevent a buyer from objecting to a construction or expansion plan at a later stage.
• Settlement agreements: parties definitively close a dispute and wish to rule out future proceedings.
• Purchase agreements: to avert future administrative law obstacles surrounding a project.

Are you considering including such an agreement in a purchase agreement or settlement agreement? If so, have the wording carefully drafted or reviewed, as a minor inaccuracy can undermine the entire clause.

Is a gag clause legally valid?

The short answer: a gag clause can be valid, but only under strict conditions. The core of the discussion is a balancing act between freedom of contract on the one hand and fundamental rights on the other.

In principle, parties are free to make agreements and record them in a contract. Nevertheless, this contractual freedom is limited. A legal act that, by its content or purport, is contrary to public order or good morals is void (Article 3:40 of the Dutch Civil Code). In the context of the gag clause, the right of access to the courts plays a particularly important role. In this regard, reference is made, inter alia, to Article 17 of the Constitution (no one can be deprived against their will of the court which the law grants them), Article 6 of the ECHR , and Article 14 of the ICCPR, which guarantee the right to a fair trial.

Judges generally attach great value to these fundamental rights. As recently as 2020, the 's-Hertogenbosch Court of Appeal ruled that a gag clause combined with a chain clause was void due to a conflict with public order, partly because the restriction was insufficiently concretely defined. A gag clause that restricts access to the courts too severely therefore often fails. For the clause to have a chance of success, it must not infringe upon those fundamental rights too severely. Below are the key guidelines considered by the courts.

Conditions for a valid gag clause

1. A concrete description is necessary

The agreement must specifically describe the matters to which the waiver of legal protection applies. A general, indefinite formulation is not accepted. Case law has emphasized that a gag clause must clearly indicate against which plans the counterparty (and any legal successors) may not take administrative measures. The clause may therefore not unlimited legal protection.

In practice, it is preferable to attach the specific construction or expansion plan as an annex to the agreement. This makes it immediately clear which specific legal claims are excluded and ensures better compliance with the requirement of specificity.

2. Time limitation

A gag clause may not be perpetual. A time limit is therefore almost indispensable, and that term must not be too long. In case law and literature, a very long term, in the order of several decades, is considered unreasonable. It is sometimes suggested to align with the planning period customary in spatial administrative law, which is generally shorter. A clearly defined, reasonable term increases the likelihood that the clause will hold up.

3. Be careful with a chain clause

Adding a chain clause, which also binds legal successors, significantly increases the risk of nullity. After all, a clause that deprives third parties of their legal protection affects the fundamental rights of people who have not signed anything themselves. Opinions on this differ in legal literature: some consider a chain clause too risky, while others believe it is permissible, provided the clause is sufficiently concrete and limited in time. Case law on this point has not yet fully settled. Caution is therefore advised.

Step-by-step plan: how to carefully draft a gag clause

Do you want to increase the chances that a gag clause will stand up to scrutiny by the court? Then follow these steps:

1. Name the concrete plan. Describe precisely against which plan or project no action may be taken and, if possible, attach the plan as an appendix.
2. Limit it in time. Link the clause to a clear, reasonable term rather than an indefinite or very long period.
3. Weigh the chain clause. Determine whether it is truly necessary to bind legal successors as well; if not, omit the chain clause to limit the risk.
4. Align the penalty clause. Ensure that any penalty is proportionate and legally separate, so that not everything is lost if the clause fails.
5. Have the wording legally reviewed. A lawyer assesses whether the clause is sufficiently concrete and balanced before you sign.

What are the risks of an incorrect gag clause?

An ill-considered gag clause can backfire. The main risks:

• Nullity: an overly broad or undefined clause may be declared entirely void, meaning you have absolutely no protection left.
• No enforceable penalty clause: if the gag clause lapses, the associated penalty often lapses as well.
• Infringement of third parties: through a chain clause, the clause can affect the position of legal successors, which increases the likelihood of nullity.
• Litigation risk and costs: validity is frequently contested in court retrospectively, resulting in uncertainty and costs.

Drafting a gag clause or having it reviewed

When drafting a purchase or settlement agreement, we assess whether a gag clause is advisable in your situation. We aim for a concrete, time-limited wording that withstands the rigorous scrutiny of case law as well as possible, whether or not in combination with a chain clause. Do you have doubts about the validity of a clause you drafted yourself? Then we will have it critically reviewed before things go wrong. Read more about our assistance with contract law or see what we do for settlement agreements.

Frequently asked questions about the gag clause

What exactly does a gag clause mean?

It is a contractual agreement whereby a party waives the right to take legal or administrative action against a specific subject, for example by not lodging an objection or appeal against a plan.

Is a gag clause always void?

No. A gag clause is not void by definition, but is strictly assessed against Article 3:40 of the Dutch Civil Code. If the clause is too broad, unlimited in time, or deprives third parties of their legal protection, the likelihood of it being void is high.

Which fundamental rights play a role in a gag clause?

In particular the right of access to the courts and a fair trial. In this regard, reference is made to Article 17 of the Constitution, Article 6 of the ECHR, and Article 14 of the ICCPR.

May a gag clause bind legal successors?

One can attempt this through a chain clause, but this significantly increases the risk of nullity, as it affects the fundamental rights of persons who are not themselves parties to the agreement. Caution is advised.

How long may a gag clause remain in effect?

There is no fixed statutory term, but the clause must be limited in time. A very long, indefinite period has been deemed unreasonable in case law. A shorter, reasonable term is more sensible.

There is a gag clause in my purchase contract. What now?

Do not sign unseen. First, have the clause assessed for specificity, duration, and any potential chain clause. Often, the agreement can be repaired with more precise wording to ensure it remains valid and you do not unintentionally give away too many rights.

What is the difference between a gag clause and a restrictive covenant?

A gag clause imposes restrictions on a party taking legal action. A chain clause is a technique by which that same obligation is passed on to subsequent parties, such as later buyers. Both are often combined, but this makes the agreement legally more vulnerable.

Need help with a gag clause?

Would you like to have a gag clause drafted or have an existing clause checked for validity? Our legal experts provide practical and thorough assistance. View our legal support or schedule a no-obligation consultation immediately. This way, you prevent an ill-considered clause from causing you problems later on.