Default, also known as ‘breach of contract’: a strong term that means your counterparty is not fulfilling their obligations under the agreement. This can mean your counterparty delivers too late, performs incorrectly, or doesn’t do what was agreed at all. You can of course start by kindly asking them to still comply with the agreement. If there’s no response, fortunately you have some other options available. Sometimes, you can even use multiple options in the same situation.

Compensation: a balm for the wound

The first option you have in the case of default is to claim compensation for the damage you have suffered because someone has not (properly) fulfilled the agreement ?. To claim compensation, it is first required that the failure to perform the agreement can be attributed to your counterparty. This means your counterparty can be blamed ?. This can range from simple negligence, such as forgetting to put a ‘fragile’ sticker on a package causing the contents to arrive in a thousand pieces, to flat-out refusal to perform. Secondly, there must be a ‘default’ (verzuim) by your counterparty ?. Your counterparty is in default if you have sent a written notice of default giving a reasonable period to still fulfill the agreement, but no action is taken ?.

Suspension: pressing the pause button

A less drastic option is the right of suspension. This means that you, as it were, wait with fulfilling your own obligations until your counterparty has complied with theirs as agreed ?. There are, however, a few conditions. The obligation of your counterparty must already be due and payable. If it was agreed that payment is made only after delivery, then delivery cannot be suspended if payment has not yet been made ?. If the non-performance is very minor, you may also not exercise the right of suspension ?. Moreover, suspension is only possible in the case of reciprocal obligations. For example, if you agreed to deliver a textbook and provide tutoring, you cannot suspend delivery of the book if only the tutoring has not been paid for ?.

Termination: when it really doesn’t work anymore

Sometimes, you may prefer to end the agreement altogether. You can then choose to terminate it, either by sending a letter to your counterparty or through the court. Termination is also possible even if the breach cannot be attributed, unless the seriousness of the breach does not justify termination ?. If performance is temporarily or permanently impossible, the agreement may be terminated immediately. Think of a situation where a necklace was to be made from the ashes of your deceased pet, but the ashes were lost. If performance is still possible, your counterparty must be in default. Default works in the same way as described above ?. Termination means that both parties are released from their obligations under the agreement. If certain obligations have already been performed, ‘restitution obligations’ arise. For example, goods or payments must be returned. If this is not possible, such as in the case of services rendered, a ‘reasonable compensation’ must be paid for those services.

Special powers: you might be even stronger

In some specific cases, there are additional possibilities. One example is the ‘right of retention’, under which, for instance, a car dealer may keep a car in their possession as long as payment for the repair has not been made. We’ll be happy to tell you more about special rights in your specific situation.

Mind the fine print

What is described above applies if the parties have not made other arrangements, such as in the general terms and conditions. The general terms may, for example, state that termination is not possible or that compensation is limited to a certain amount. Feel free to let us check whether this applies in your case. We can also adjust your general terms and conditions to work in your favor.

Are you unsure whether your counterparty is in default? Or are you being accused of a breach of contract yourself? Submit your case to our lawyers without obligation — we’re happy to help.