Dissolution of an agreement

Dissolution

A claim for damages and dissolution of an agreement are possible if default occurs. A notice of default not only sets a time limit for performance but also holds the debtor liable. The moment the debtor is in default, the notice of default is established. From that moment on, there is a failure to perform, and this leads to a claim for damages.

It is stipulated by law that in the event of any failure to perform an obligation, the injured party has the right to dissolve (terminate) an agreement (in whole or in part). If the agreement has been partially performed, the creditor may choose to maintain part of the agreement.

The law of obligations is a broad, dynamic area of ​​law that consistently concerns a duty to perform or refrain from performing an act.
We have extensive experience in contractual and non-contractual dispute resolution through providing advice, conducting negotiations, or litigation. We have an experienced team of lawyers and legal experts in the field of the law of obligations. Please contact us to discuss the possibilities.

When may you terminate an agreement? The legal conditions

Dissolution is a drastic remedy within the law of obligations : you undo the agreement instead of enforcing performance. Article 6:265 of the Dutch Civil Code forms the starting point: any failure to perform gives the other party the power to dissolve the agreement in whole or in part. In practice, three conditions apply that you must meet.

First, there must be a failure to perform: the agreements are not performed, not performed on time, or not performed properly. Second, the failure must be serious enough; the 'unless' clause of Article 6:265 paragraph 1 of the Dutch Civil Code stipulates that a failure which, due to its particular nature or minor significance, does not justify dissolution, does not constitute grounds for dissolution. Third, default is usually required (Article 6:265 paragraph 2 of the Dutch Civil Code): as long as performance is still possible, the right to dissolve arises only when the debtor is in default.

Default and notice of default: the threshold before dissolution

Default is the pivotal point in many cases. If default does not occur by operation of law, you must first put the debtor in default: a written demand in which you give a reasonable period for performance (Article 6:82 of the Dutch Civil Code). If performance occurs within that period, there is no default and, in principle, you cannot dissolve the contract.

Default occurs without notice of default (Article 6:83 of the Dutch Civil Code) when a fixed time limit is exceeded, when the obligation arises from a tortious act, or when the debtor indicates that they will not perform. If performance is permanently or temporarily impossible, default is not required at all and you may dissolve the contract immediately. Dissolution too early or incorrectly can backfire; therefore, our lawyers and in-house counsel first carefully assess whether all conditions have been met.

Extrajudicial and judicial dissolution

Dissolution can be done in two ways. In most cases, extrajudicial dissolution suffices: a written statement to the other party in which you inform them that you are dissolving the agreement and the reasons for it (Article 6:267 of the Dutch Civil Code). An email or registered letter may already be sufficient, provided the content is clear and verifiable.

If the other party disputes the dissolution, or if you desire greater legal certainty, you can ask the court for judicial dissolution. The judge will then assess whether the statutory conditions have been met. Whether you are an international group or the baker on the corner: a well-substantiated declaration of dissolution prevents the dispute from ending up in court later on.

Consequences of dissolution: reversal and partial dissolution

Dissolution does not have retroactive effect, but releases the parties from the obligations that have not yet been fulfilled. Obligations to undo what has already been performed arise (Article 6:271 of the Dutch Civil Code): delivered goods are returned and amounts paid are refunded. If a performance cannot be undone by its nature, compensation for value takes its place (Article 6:272 of the Dutch Civil Code).

If the agreement has been partially performed correctly, you can opt for partial dissolution and leave the good part intact. Which route yields the best results depends on your interests, the services rendered, and the evidentiary position.

Combining dissolution and compensation

Dissolution and compensation are not mutually exclusive. In addition to dissolution, you may claim additional compensation for the damage you suffer as a result of the breach, provided that the breach is attributable to the other party (Article 6:277 of the Dutch Civil Code). Examples include replacement costs, damages for delay, or lost revenue. We map out in advance which items of damage are feasible and provable, ensuring that dissolution not only terminates the agreement but also restores your financial position.

Dissolution, termination, or annulment: what is the difference?

Dissolution is often confused with other ways of ending an agreement. Dissolution requires a breach of contract and reverses performances already rendered. Termination ends a (often long-term) agreement for the future, without the need for a breach of contract. Annulment challenges the agreement due to a defect at the time of its conclusion, such as error or fraud. Choosing the right route is crucial: an incorrect basis can cause your claim to fail. For the broader context, see also agreements.

Assistance with the dissolution of your agreement

The law of obligations is a broad, dynamic area of ​​law that always revolves around a duty to perform or refrain from performing an act. At MKB Juristen, lawyers and in-house counsel work together in mixed teams for clients ranging from international corporations to independent entrepreneurs. We advise on dissolution declarations, conduct negotiations, and assist you in legal proceedings if necessary. This page falls under our main area of ​​expertise: the Law of Obligations. Please contact us to discuss the possibilities.