Compensation

Compensation

If the injured party suffers damage due to a failure to perform, the injured party is entitled to compensation. However, the injured party must have suffered damage; otherwise, you cannot claim compensation! If the injured party no longer requires the debtor to fulfill their obligations, the injured party can also claim compensation.

The legislator has established an important main rule regarding the claiming of damages. The main rule reads as follows: 'Damage can only be compensated by the payment of a sum of money'.

It is also possible to recover damages on the basis of a tort. A tort involves an infringement of a right. If damages are claimed on the basis of a tort, the 5 requirements must be met. The requirements are:

1. Unlawful act;
2. Attributable;
3. Injury;
4. Causality requirement and;
5. Relativity requirement

It is important to know that in the event of a tort, there is not always liability or compensation!

Compensation for damages within contract law

Within contract law, the statutory basis for damages is Article 6:74 of the Dutch Civil Code (BW). This article stipulates that any failure to perform an obligation obliges the debtor to compensate the damage suffered by the creditor as a result, unless the failure cannot be attributed to him. Compensation for damages due to non-performance exists alongside other options available to the creditor, such as demanding performance, suspending performance, or dissolving the agreement.

Unlike in the case of tort, liability for breach of contract arises from the agreement itself: the parties have entered into an obligation, and one of them fails to fulfill it (fully or in a timely manner). At MKB Juristen, lawyers and in-house counsel collaborate on these disputes for clients ranging from international corporations to the baker on the corner. We assess which legal basis is strongest and which route offers the best chance of full compensation.

Notice of default and failure to act

In most cases, a claim for damages due to a breach of contract only arises after the debtor is in default. Pursuant to Article 6:82 of the Dutch Civil Code, default generally occurs following a written notice of default, in which the debtor is given a reasonable period to still perform. If performance fails to occur within that period, the debtor is in default.

In a number of cases, a notice of default is not required and default occurs automatically (Article 6:83 of the Dutch Civil Code), for example when a term stipulated for performance expires (a fixed deadline), when the obligation arises from a tort, or when the creditor must infer from a communication by the debtor that the latter will not perform. In practice, a correct notice of default is often decisive for the success of a damages claim; we ensure that this is done in a legally watertight manner from the outset.

What damage is eligible for compensation?

The extent and types of damage are regulated in the general provisions on compensation (Articles 6:95 to 6:110 of the Dutch Civil Code). Pursuant to Article 6:95 of the Dutch Civil Code, both pecuniary damage and other disadvantage are eligible for compensation, insofar as the law grants a right thereto. Article 6:96 of the Dutch Civil Code stipulates that pecuniary damage includes, among other things, suffered loss and lost profits, in addition to reasonable costs for preventing or limiting damage, costs for determining damage and liability, and reasonable costs for obtaining satisfaction out of court.

For non-material damage (other disadvantage), Article 6:106 of the Dutch Civil Code applies; this qualifies for compensation only in limited cases. Not all damage is ultimately recoverable: pursuant to Article 6:98 of the Dutch Civil Code, only damage that is so connected to the event that it can be attributed as a consequence thereof, also taking into account the nature of the liability and the damage, qualifies for compensation.

Assessment of damages, causal link and contributory negligence

The judge assesses the damages in the manner most consistent with their nature (Article 6:97 of the Dutch Civil Code). If the extent of the damage cannot be accurately determined, it is estimated. In doing so, a comparison is made between the situation of the injured party and the hypothetical situation in which the failure would not have occurred.

If the injured party has personally contributed to the damage, the obligation to pay may be reduced on the grounds of contributory negligence (Article 6:101 of the Dutch Civil Code). Furthermore, the injured party has a duty to mitigate damages: reasonable measures to limit the damage must not be omitted. Careful substantiation of the causal link and the extent of the damage – supported by evidence, quotations, and, if necessary, expert reports – is often decisive for the amount of compensation awarded.

Exoneration and the penalty clause

In many contracts and general terms and conditions, liability for damages is limited or excluded by means of an exemption clause. Such a clause is valid in principle, but may be set aside if invoking it is unacceptable according to standards of reasonableness and fairness (Article 6:248 paragraph 2 of the Dutch Civil Code), for example in cases of intent or conscious recklessness. Moreover, for consumers and smaller businesses, an exemption clause may be unreasonably burdensome.

Parties can also determine the compensation in advance by means of a penalty clause (Articles 6:91 to 6:94 of the Dutch Civil Code). In principle, the fixed penalty then takes the place of the statutory compensation, although the court may mitigate an excessive penalty. Whether you wish to enforce an exoneration clause or break through it: we assess the contractual agreements and determine the sharpest legal line.

Statute of limitations for the claim for damages

A legal claim for compensation for damages is subject to a statute of limitations pursuant to Article 3:310 of the Dutch Civil Code. Two time limits apply: a short period of five years after the injured party has become aware of both the damage and the liable person, and a long, objective period of twenty years after the damage-causing event. Anyone who waits too long may lose their claim. The limitation period can be interrupted in a timely manner by means of a written demand or notification in which the right to performance is unequivocally reserved. We monitor these time limits and take timely actions to interrupt the limitation period.

Frequently asked questions about compensation

What is the difference between damages for breach of contract and unlawful act?

In the case of breach of contract (Article 6:74 of the Dutch Civil Code), liability arises from an agreement between the parties. In the case of unlawful act (Article 6:162 of the Dutch Civil Code), there is no contractual relationship and five requirements apply: unlawful act, imputability, damage, causal link, and relativity. In practice, both grounds can coincide; we choose the strongest route.

Do I always have to send a notice of default first?

Often so: default usually only occurs after a notice of default with a reasonable period (Article 6:82 of the Dutch Civil Code). In certain cases, default occurs by operation of law (Article 6:83 of the Dutch Civil Code), for example in the case of a fixed deadline. An incorrectly drafted notice of default is a common and costly mistake.

How is the amount of my compensation determined?

Damages are assessed pursuant to Article 6:97 of the Dutch Civil Code by comparing the actual situation with the situation without the breach. Pecuniary damage comprises incurred loss and lost profits (Article 6:96 of the Dutch Civil Code). Contributory negligence (Article 6:101 of the Dutch Civil Code) and the duty to mitigate damages may reduce the compensation.

Within what timeframe must I file my claim?

In principle, within five years after you become aware of the damage and the liable party, and in any event within twenty years after the event (Article 3:310 of the Dutch Civil Code). Interrupting the limitation period in the meantime prevents the statute of limitations from expiring.

MKB Juristen helps you with your damage claim

Whether you wish to claim damages or need to defend yourself against a claim, our lawyers and in-house counsel are at your service. We guide enterprises ranging from international corporations to the local baker, from the initial notice of default to court proceedings. Do you want to know if you are entitled to damages under contract law? Contact us without obligation for a thorough assessment of your case.