Assumption of debt and contract: this is what you need to know!

Assumption of debt (Art. 6:155 BW): transfer of debt from debtor to third party — requires creditor's consent. Assumption of contract (Art. 6:159 BW): transfer of the complete contractual position (rights and obligations) — requires counterparty consent. Common in acquisitions, restructurings, or termination of activity. Important: no transfer without counterparty consent. Below are the differences, applications, and how Tessa assumes contracts during an acquisition.

The short answer

• Assumption of debt: debt transferred to new debtor — creditor's consent required.
• Assignment of contract: transfer of the entire contract (rights + obligations) — consent of the counterparty required.
• Form: in writing, but no specific formal requirements.
• Applications: acquisition, restructuring, termination of activity, resale.
• Without consent: invalid — debt or contract remains with the previous party.

Difference between assignment, debt assumption, and contract assumption

• Assignment: only claim (right) over — creditor becomes new.
• Assumption of debt: only the debt (obligation) remains — the debtor becomes the new one.
• Assignment of contract: complete position transferred — party becomes new.

In the case of the takeover of customer contracts: often a contract assignment (all rights and obligations are transferred).

Assumption of debt (Art. 6:155 BW)

Debt transfers from the original debtor (transferor) to a third party (assignee). Requirements:

• Agreement between transferor and transferee.
• Creditor's consent.
• The creditor can give consent in advance, at the time of transfer, or afterwards.

Consequence: the original debtor is discharged. The creditor only has a claim against the assignee.

Example: in a company acquisition, buyers take over the bank loan — the bank must agree.

Contract takeover (Article 6:159 of the Dutch Civil Code)

The entire contractual position is transferred. Example: in the acquisition of customer agreements, the buyer assumes all delivery obligations AND payment rights.

Requirements:

• Agreement between transferor and transferee.
• Consent of the counterparty in the contract.
• Deed with parties and contract specification.

Distinction from transfer of undertaking (Art. 7:662 BW): in the case of a transfer of undertaking, employment contracts are automatically transferred without separate consent. Non-employment contracts, however, do require takeover.

Obtain permission

Main obstacle: the other party must agree. Possible routes:

• Included in the contract beforehand: “preliminary consent” — built-in flexibility.
• At the time of transfer: signing of the deed.
• Subsequent ratification: acknowledgment after acquisition.

In case of refusal: assignment of the contract invalid — the contract remains with the previous party. Sometimes the purchase price must be reduced or the structure adjusted.

Tessa's takeover

Tessa acquires small electronics company — including 25 ongoing customer contracts and 5 supplier agreements:

• For customer contracts: letter to each customer requesting permission for takeover. 23 of 25 agree.
• 2 customers refused: contracts remain with previous owner — must be settled separately.
• For supplier contracts: 4 out of 5 consent. 1 refuses: new contract drawn up with acquirer under different conditions.
• Bank loan: debt takeover with bank permission after due diligence.

Lead time for consent process: 6 weeks. Important to factor this into the purchase price/timing.

Strategies to avoid consent

• Share transfer: BV remains owner of contracts — no takeover necessary.
• Pre-emptive consent: include in standard contracts.
• Subcontracting: the assignee executes under the name of the transferor.
• New contract: in case of refusal, renegotiate with the new party.

Honest recommendation

When acquiring a company involving contracts: contract assignment is required and counterparty consent is essential. Allow time (4-8 weeks for consents). For flexibility: include a “preliminary consent” clause in your own contracts. Alternative: share transfer instead of asset acquisition — avoids numerous consents. For complex acquisitions: engage a lawyer with M&A experience.

For other topics: deed of assignment, share transfer and business merger.

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