Beware of simple undermining of the prohibition on right of retention

A prohibition on the right of retention stipulates that a contractor may not withhold items in the event of non-payment, but in principle, such a prohibition is only If your contractor engages a subcontractor or affiliated company that has not signed the prohibition, that party can, in principle, still exercise its own right of retention and withhold your items. As a result, a prohibition on the right of retention is easier to circumvent than many entrepreneurs realize. Below, you can read what the right of retention is, how a prohibition can be circumvented within a chain, what a high-profile court case reveals regarding this, and how to secure your interests watertight.

What is the right of retention?

The right of retention is the right of a creditor not to surrender an item belonging to his debtor until the outstanding debt has been settled. It is regulated in the Dutch Civil Code, starting from Article 3:290 BW. A classic example is the garage owner who only returns your car after the repair bill has been paid.

The right of retention can be exercised on movable property (such as a car, machine, or inventory) and, in certain cases, also on immovable property, for example, a project under construction. It is a powerful means of pressure: under certain conditions, it must also be respected by specific third parties, even if such a third party claims ownership of the property.

When may you exercise the right of retention?

For a valid claim to the right of retention, three conditions must generally be met simultaneously:

• An due and payable claim. The payment term must have expired. If no term has been agreed upon, the claim is usually immediately due and payable.
• Sufficient connection. There must be a sufficient link between the claim and the item being withheld. A bicycle repairer may withhold a bicycle for unpaid repair costs; an energy supplier cannot simply apply that same right to that bicycle.
• Actual control over the item. The creditor must actually have possession of the item in a manner that is also discernible to third parties. If you surrender the item, you in principle lose your right of retention.

Right of retention or right of suspension: what is the difference?

The right of retention is a specific form of the broader right of suspension. With a general right of suspension, you withhold your own performance until the counterparty pays or performs. The right of retention specifically concerns the withholding of an object and has the peculiarity that, under certain conditions, it also works against specific third parties. In practice, this makes it a more powerful means of pressure than an ordinary right of suspension.

Contractually establishing a prohibition on the right of retention

Parties may contractually agree that the contractor will not invoke its right of retention. Such a prohibition on the right of retention is valid in principle. Clients often impose this when strict deadlines apply and delays could lead to high (penalty) costs. A simple payment dispute must not, in such cases, block delivery.

The consequence is that the contractor must surrender the item even in the event of non-payment and collect his claim through another channel. To the client, this appears to be a watertight agreement. In practice, however, the prohibition is more limited than it seems, because in principle it only applies between the parties who agreed to it.

This is how a prohibition on the right of retention is undermined

The weak point lies in the chain. A prohibition on the right of retention binds only the party that signed it. If your contractor engages a subcontractor or an affiliated company to actually carry out the work, that subcontractor has usually not waived their right of retention themselves.

A striking example is a case concerning the production of rocket parts for the Ariane 6 space program, which was heard by the District Court of Overijssel in 2019. Aircraft and aerospace group Airbus had outsourced production to a Dutch contractor, who had contractually waived its right of retention. That contractor, in turn, had the work carried out by an affiliated company. When a dispute arose regarding (additional work) invoices and that performing party remained unpaid, the contractor itself could not exercise a right of retention, but the performing party could: it had actual control over the parts and had never waived its right.

In that relationship, Airbus was a third party confronted with the subcontractor's right of retention, even though Airbus itself claimed delivery. To obtain the parts nonetheless, Airbus had to go to court.

Does the ban extend to the subcontractor?

The core question was whether a prohibition on the right of retention in the construction contract also extends to the underlying subcontracting agreements. The starting point is that this is not the case: in principle, the subcontractor can simply invoke the right of retention independently.

This does not mean that the outcome always turns out to the detriment of the client. In this case, the subcontractor's appeal was ultimately rejected because exercising it unacceptable under the given circumstances according to standards of reasonableness and fairness . A contributing factor was, among other things, that the party concerned was aware of the prohibition on rights of retention higher up in the chain. Important: this is an outcome that depends heavily on the specific facts and is not a fixed rule on which you can rely blindly. Therefore, do not count on a judge setting aside a subcontractor's right of retention in advance.

What does this mean for you as an entrepreneur?

The lesson is twofold. If you are the client and are counting on a non-retention order, realize that this order does not automatically bind the entire chain. A subcontractor or affiliated party can still withhold your work, and it is impossible to say with certainty beforehand whether a judge would deem that unacceptable. If such a conflict ends up in court, it will cost time, money, and potentially cause delays to your project—precisely what you wanted to prevent with the order.

If you are a contractor or subcontractor, this issue demonstrates that the precise wording of agreements regarding the right of retention and payment can have significant financial consequences. Consequently, a prohibition on the right of retention is rarely the only lever you can pull.

Concrete next steps to strengthen your position:

• If desired, allow a prohibition on right of retention to extend throughout the entire chain, for example by requiring subcontractors to impose the same condition on them and to have that agreement confirmed in writing.
• Combine the prohibition with other securities, such as clear payment agreements, a right of suspension, a retention of title, or a bank guarantee.
• Ensure that your contracts and general terms and conditions align with how you work with subcontractors in practice.
• In the event of non-payment, keep a close eye on the installments so that you can switch to debt collection or another solution in a timely manner.
• Are you unsure about your position in an ongoing conflict? Then seek legal advice , before taking a stance.

Frequently asked questions about the right of retention and prohibition of the right of retention

What is a prohibition on the right of retention?

A prohibition on the right of retention is a contractual agreement in which a party undertakes not to exercise its right of retention. Consequently, the contractor may not withhold items in the event of non-payment, but must collect the claim in another way. Such a prohibition is valid in principle.

Does a prohibition on the right of retention also apply to subcontractors?

In principle, no. A prohibition on the right of retention binds only the parties who agreed to it. A subcontractor who has not signed the prohibition can generally exercise a right of retention themselves. If you want to prevent this, you must explicitly ensure that the prohibition is incorporated into the underlying agreements.

What conditions must the right of retention meet?

As a general rule, there must be an enforceable claim, a sufficient connection between the claim and the withheld item, and actual control over that item. Only when these three conditions are met simultaneously can a creditor invoke the right of retention.

What is the difference between a right of retention and a right of suspension?

The right of suspension is the general right to suspend one's own performance as long as the counterparty does not pay or perform. The right of retention is a specific form thereof: it specifically concerns the withholding of an object and can, under certain conditions, also be invoked against specific third parties. As a result, it is often a more powerful means of pressure.

Can a judge nevertheless set aside a valid right of retention?

That can happen. Even with a right of retention that is valid in principle, a judge may rule that exercising it in the given circumstances is unacceptable according to standards of reasonableness and fairness. Whether this is the case depends heavily on the specific facts and is therefore difficult to predict in advance.

How do I prevent my prohibition on retention from being undermined?

By looking beyond the prohibition itself. Let it carry over the chain, combine it with other securities such as a retention of title or bank guarantee, and align your contracts and general terms and conditions with the way you work with subcontractors. A specialized lawyer can close these loopholes in advance.

Have your contracts drafted to be watertight

A non-retention order is just one way to safeguard your interests in a contract or construction chain, and as this case shows, it is easier to circumvent than expected. Do you want to prevent the counterparty from finding loopholes? Our legal experts assist you with contract law and drafting watertight agreements. If an invoice is already getting out of hand, take a look at our debt collection options .

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