Right to compensation

Right to compensation

If there is a failure to perform (also known as non-performance), the injured party is entitled to compensation. Compensation can only be claimed if the injured party has actually suffered damage. If the creditor no longer requires the debtor to fulfill their obligation, the creditor may demand compensation.

It is also possible to recover damages on the basis of an unlawful act. An unlawful act involves an infringement of a right. The provision is described in the law. The provision reads as follows: 'Whoever commits an unlawful act against another is obliged to compensate the injured party for damages'. In the case of an unlawful act, the 5 requirements must be met. The requirements are:

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

The legislator has established a main rule for this. The main rule reads as follows: 'Damage can only be compensated by the payment of a sum of money.'

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 contract law. Please contact us to discuss the possibilities.

When does the right to compensation arise?

The right to compensation for damages in the event of a breach of contract follows from Article 6:74 of the Dutch Civil Code. Every breach obliges the debtor to compensate the damage suffered by the creditor as a result, unless the breach cannot be attributed to him. This force majeure exception is set out in Article 6:75 of the Dutch Civil Code. In practice, therefore, the law of obligations concerns three core questions: is there an attributable breach, has actual damage occurred, and is there a sufficient connection between the two?

An important starting point is that the right to compensation only becomes enforceable when performance is permanently impossible, or when the debtor is in default. As long as performance is still possible, the creditor has a choice: to demand performance retroactively, or to claim substitute damages instead. This order applies to both the international enterprise with a disrupted supply chain and the baker on the corner whose new oven is not working.

Default and notice of default

In the case of a temporary breach, the right to (substitute or supplementary) damages usually arises only after the debtor has defaulted. In principle, default only occurs after a written notice of default in which the counterparty is given a reasonable period to still perform (Article 6:82 of the Dutch Civil Code). A proper notice of default is therefore often the key to a successful claim for damages.

In a number of cases, default occurs by operation of law, without notice of default (Article 6:83 of the Dutch Civil Code). This is the case, among others, with a fixed time limit, with an obligation arising from a tort, and when the creditor must infer from a communication that the debtor will default. A proper prior assessment prevents a claim from failing due to a formal error; our lawyers and in-house counsel provide sharp and practical advice on this matter.

What damage is eligible for compensation?

Article 6:95 of the Dutch Civil Code stipulates that compensable damage consists of pecuniary loss and other disadvantage, the latter only to the extent that the law grants a right thereto. According to Article 6:96 of the Dutch Civil Code, pecuniary loss comprises both suffered loss and lost profits. This also includes reasonable costs for preventing or limiting damage, reasonable costs for establishing the damage and liability, and reasonable extrajudicial collection costs.

• Loss incurred: direct costs, repair, depreciation and replacement.
• Lost profit: lost revenue or income as a result of the shortcoming.
• Consequential damage: indirect damage resulting from the breach.
• Non-pecuniary damage (“other disadvantage”), determined equitably (Article 6:106 of the Civil Code).

For entrepreneurs, the estimation of lost profits is often the most sensitive aspect. The judge may estimate the damages when the extent cannot be accurately determined (Article 6:97 of the Dutch Civil Code). A well-substantiated damage file, possibly including an expert report, is of decisive importance in this regard.

Causal link, contributory negligence and mitigation of damages

Not all damage occurring after a breach of contract qualifies for compensation. A causal link must exist, and the damage must be reasonably attributable to the liable party (Article 6:98 of the Dutch Civil Code). If the injured party contributed to the occurrence of the damage, the compensation may be reduced on the grounds of contributory negligence (Article 6:101 of the Dutch Civil Code).

In addition, the injured party is subject to a duty to mitigate damages: anyone who can reasonably take measures to limit the damage must do so. Moreover, benefits arising from the same event may be deducted from the damages (attribution of benefits, Article 6:100 of the Dutch Civil Code). In exceptional cases, the court may reduce an obligation to pay damages (Article 6:109 of the Dutch Civil Code). Our legal experts map out these legal principles early on, both when building a claim and when defending against it.

Statutory interest and contractual penalties

If the damage consists of a delay in the payment of a sum of money, the creditor is entitled to statutory interest for the period of default. For non-commercial transactions, Article 6:119 of the Dutch Civil Code applies; for commercial agreements between enterprises, the (higher) statutory commercial interest under Article 6:119a of the Dutch Civil Code applies. Many contracts also contain a penalty clause in the event of a breach. Such a contractual penalty may take the place of or be in addition to compensation for damages; the court may reduce an unreasonably high penalty pursuant to Article 6:94 of the Dutch Civil Code.

Compensation for damages through tort

A right to compensation can also arise outside of a contract, namely on the basis of unlawful act (Article 6:162 of the Dutch Civil Code). Requirements include unlawful conduct attributable to the perpetrator, damage, a causal link, and that the violated norm is intended to protect against the damage suffered (the relativity requirement of Article 6:163 of the Dutch Civil Code). Sometimes a contractual and a non-contractual basis run parallel; we assess which route yields the strongest position in your situation. For the contractual aspect, we work closely with our contract law.

Statute of limitations: file your claim on time

A claim for compensation is subject to a statute of limitations. The general time limit is five years after the injured party has become aware of both the damage and the liable party, with an absolute maximum period of twenty years (Article 3:310 of the Dutch Civil Code). Anyone who waits too long may lose their right to compensation. Acting promptly and, where necessary, interrupting the statute of limitations is therefore essential. We monitor these time limits for clients ranging from international corporations to independent entrepreneurs.

Our approach: from advice to proceedings

MKB Juristen works with mixed teams of lawyers and in-house counsel. This combination means you receive both a sharp legal analysis and a realistic assessment of commercial interests. We have extensive experience in contractual and non-contractual dispute resolution: providing advice, drafting notices of default, conducting negotiations, and, where necessary, conducting legal proceedings. Whether it concerns a multi-million dollar claim from a listed company or a dispute between the local baker and a supplier, we determine the most effective strategy together with you. Please feel free to contact us to discuss the possibilities without obligation.

Frequently asked questions about the right to compensation

Am I always entitled to compensation for breach of contract?
No. There must be an attributable failure, actual damage, and a causal link. Furthermore, the debtor must usually first be put in default via a notice of default.

What damages can I claim?
Pecsatory damage (suffered loss and lost profits), reasonable costs, and, to the extent permitted by law, non-pecuniary damage. The extent must be substantiated as concretely as possible and may be estimated by the judge.

How long do I have to file a claim?
In principle, five years from the date of knowledge of the damage and the liable party, with a maximum period of twenty years. Do not wait too long and have the deadlines monitored in a timely manner.