EXCLUSION OF LIABILITY FOR INDIRECT DAMAGE IN THE NETHERLANDS
It is not uncommon in the Netherlands to exempt liability from indirect damages. The Netherlands has a long tradition of excluding liability for indirect damages. This practice is not without good reason. It is important to write standard terms and condition that apply to your specific situation. These general terms are designed to be used for multiple agreements. You can feel more secure if you know what risks are involved. A side note: It's just as important to declare correctly the conditions and terms applicable under Dutch law. You should do so at latest during or before the contract is signed and, if possible, by sending an official notification of (exclusive) application of your terms and conditions. It is rare in the Netherlands for a general set of terms and conditions to be sufficient.
Due to the lack a definition, and possible ambiguity of the term "indirect Damage" under Dutch Law, this concept is the focus of legal debates in The Netherlands. The essence of indirect damages is that they are damages that do not result directly from a breach in contract, but instead come as a secondary effect such as lost profit or reduced goodwill. In this way, dispute over indirect damages can be costly and complex for Dutch businesses. This article by our Dutch lawyer for contract law gives more details about the exclusion liability of indirect damages.
LIMITING LIABILITY IN STANDARD TERMS AND CONDITIONS IN THE NETHERLANDS
Limiting the liability of a party is done often in terms and conditional agreements. General rule, subject to certain exceptions on the basis of reasonableness or fairness in B2B scenarios is that liability may be restricted to an extent. Limiting liability can be done in the general conditions and terms in a liability clause. For instance, you could limit your responsibility per incident or per year. Or, your insurer may cover the entire amount. The latter, incidentally isn't very common in the insurance industry because it allows for more claims to be made against the insurer. It also leaves them less protected. There is considerable contractual flexibility and the ability to exclude liability from general conditions. You can, however, limit your liability to some extent and thus the severity of the damages you may suffer.
DIFFERENCES BETWEEN DIRECT OR INDIRECT LOSS UNDERS DUTCH LAW
Specialising in contract law I often find that indirect and direct damages are overlooked. This is especially true when it comes down to the'small print.' This difference is important because it can affect the risk you face as an entrepreneur. Dutch law doesn't define indirect or direct damages. You should be aware, however, that in the Netherlands you are not required to 'indemnify yourself'. This property damage could be covered by compensation if you do not exclude liability. As a business person, it is crucial to understand what you are not liable for and what the other side will.
Indirect damages are often completely excluded from the general conditions and terms of use, such as in sales and delivery conditions or service agreements. This means, in general, that losses such as lost profit, turnover and savings are not covered. In addition, other types of damages can be claimed, like loss of information, production loss, or corrupted data. Most often, indirect losses are also understood as being the cost to repair a loss that was caused by a defective product or service.
WHAT IS PROPERTY LOSS DEFINED IN THE NETHERLANDS
The best definition of property damage is loss suffered or lost profit. As far as is possible, the basic principle should be that the claimant's position must be the same as it was before the loss. You can recover any profit loss (and that is the main sticking point), if you were to be found at fault.
DUTCH RIGHTS EXCLUDING LIABILITY FOR DAMAGES INDIRECT
In general, it is considered commonplace to exclude the possibility of indirect loss in terms and conditions. The practice is common because the possible damages that may result from a defected product or service, for instance, can be immense. It is important to write standard terms and condition that apply to your specific situation. These general terms are designed to be used for multiple agreements. You can feel more secure if you know what risks are involved. A side note: It's just as important to declare correctly the terms and condition applicable to the agreement. You should do so at least prior to or during contract conclusion and, preferably, by sending an official notification of (exclusive) application of your terms and conditions. In most cases, a set of good general conditions will not be enough for you to invoke them.
A lack of clarity in the definition of indirect damage and its potential for ambiguity has led to a debate on the legal side of things. If you reduce it to the essence of indirect damages, they are damages that do not result directly from a breach in contract. Instead, these damages come as a secondary effect such as lost profits and diminished goodwill. As a result, business disputes over indirect damage can be complicated and expensive. This article by our contract lawyer provides more information about how general terms and condition exempt liability from indirect damages.
LIMITATIONS OF LIABILITY UNDER DUTCH COMMON LAW
If the B2B contract does not have a (reluctant or added) effect that is restrictive and/or fair, or when there are circumstances where recklessness, intent, or deliberate acts of negligence come into play, then liability may be greatly limited, if not excluded. You should always read general terms and condition carefully before accepting them. As a supplier, you should exclude the liability of indirect damages in your general terms and condition.
When a discussion of whether general terms and condition apply (and exclude indirect damage), turns out to have no value, for instance when you're dealing with an (much-larger) counterparty who won't deviate their own terms and conditions, ask for custom-made solutions to be included in a different addendum to the contract or in the purchase agreement. Sharing the benefits and risks with them is a great way to achieve greater success. Our experience has shown that some things can still be done even if general terms are used. You can negotiate a contract separately that will override a general term and condition which excludes liability for indirect damage.
EXCLUSION INDIRECT DAMAGES FROM THE NETHERLANDS
What should you remember most about the liability exclusions contained in terms and conditions general? The key points are:
You should know whether your general terms and condition apply or the terms of your counterpart, industry, or both. You should consult an experienced lawyer in contract law to determine the appropriateness of your general terms and condition.
Legal disputes can arise in Netherlands if indirect damages aren't clearly defined.
The exclusion of indirect damages must be specific and unambiguous, while taking into account commercial context as well as reasonableness.
To create effective exclusion clauses, it is important to carefully consider the criteria for exclusion, contract obligations, risks assessment, and commercial impacts.
In order to prevent excessive liability exclusions, clauses which violate Dutch law will be voidable and not enforced.
If you want to discuss liability limits, then it's best to create an additional contract that divides the risk more in terms of liability.
Ensure you are aware of the applicable terms and circumstances, such as your own or those that your counterparty has agreed to. It is important to seek legal advice on the application of terms and conditions.
IS THERE A LIMITATION OF LIABILITY IN RESPECT TO DAMAGES DIRECT?
When we discuss contractual liability we usually refer to an agreement which hasn't been performed properly, on time or in full. Liability can be excluded from contracts or terms and conditions in certain situations. A clause of this type is known as a exculpatory provision.
It depends on the circumstances in the particular case that it was invoked. The Dutch Civil Code has a list of clauses that limit liability. The grey list is a collection of terms that the Dutch Civil Code considers to be excessively burdensome. A consumer may invoke the nullity of such clauses. However, in B2B transactions, the rules are different.
EXONERATION CLAIMS OR PROVISIONS FOR EXONERATION IN GENERAL CONDITIONS AND TERMS
One of the main pillars in Dutch contract law is freedom of contract. In other words, the freedom to contract includes exclusions of indirect damage liability in terms and conditions. You can also decide who you want to deal with and what agreements you make. Agreements must, however, not contradict mandatory law, order of public or morality. In addition, there are limits to contract freedom and the extent of liability that can or cannot be excluded. For example, indirect damage. The Supreme Court, which ruled in Saladin V HBU in 1967, formulated criteria to judge whether a liability exclusion is acceptable, or, in other terms, whether an exculpatory provision is admissible. The principles of liability limitation are set out in this case. Such a clause can be rejected if its reasonableness or fairness is not acceptable.
This assessment, according to the Supreme Court of Canada, must include:
Seriousness is also measured by the type and importance of interests at stake.
This clause should be accompanied by a description of the contract, including its nature and content.
Social position and reciprocal relations between the parties
How the clause has been concluded
How well the other party understood the terms of the clause.
Standard terms and Conditions: Legal Framework for Exclusion of Indirect Damage
It is necessary to carefully consider the contract implications and the Dutch legal implications when defining exclusions for liability. When developing strategies to limit the liability of general terms, there are several important things you should consider:
Is an exclusion from liability reasonable? Dutch law has focused on the particular circumstances in the case, and to what extent an exclusion would be unreasonable or unfair under Dutch standards.
Contract context: Judges will consider the business context, such as any previous negotiations, or the subsequent behavior of the parties, when interpreting clauses.
Disclaimers: General or specific? A general "indirect" disclaimer may not suffice if you do not specify which types of indirect losses it excludes (think, for instance, of the loss of data).
In light of these factors, it's important to ensure that the clauses exculpatory are written accurately and in a clear manner.
IMPORTANT CONSIDERATIONS TO BE REMINDED WHEN FORMULATING A DISCLAIMER UNDER DUTCH LOCAL LAW
Dutch law calls for careful consideration when drafting effective exculpatory clauses. This includes the inclusion criteria, contract obligation, limitations clauses, assessment of risk and impact on business. For exclusion clauses to be reasonable and enforceable, they should be clearly drafted and accurate. Exclusion clauses should be drafted with the following key considerations: Identifying the risks to exclude, defining its scope, making sure that it does not contradict legal or mandatory requirements, or policy and/or ethics, and informing everyone of its existence.
Indirect Damages Excluded in General Terms and Conditions Under Dutch Law
In order to ensure that exclusion clauses are compliant with the law, you must understand both the applicable legal requirements as well as the public policy concerns. Compliance with the contract is essential, because exclusion clauses in violation of Dutch law may be unenforceable. It is important to assess the risks associated with exclusion of indirect damage. Limits of Liability should be clearly defined in order to prevent excessive exclusions.
The contract negotiations are also important in creating exclusions clauses, which ensure the compliance of law. The contract terms, as well as the clauses that exclude, should be agreed upon by both parties before the document is signed. If there is a problem with the interpretation of or the enforcement of the clause, then dispute resolution procedures should be available. For a Dutch exclusion clause to be effective, all the aspects should be carefully considered.
Companies can benefit from case studies or examples where courts have rejected poorly written exclusion clauses, as well clauses which are in conflict with public policy. Companies can learn from these past cases how to best protect their interests, without breaking the laws or risking reputational harm as a result unfair contract terms.
DUTCH DISCLAIMER LAW LIMITS LIABILITY
Amsterdam-based Dutch lawyers advise organizations about the use of exculpatory and general terms and condition clauses in commercial contracts. In the Netherlands, our team of contract lawyers is focused on the exclusion of damages and indirect liability in general terms. Our attorneys have all the experience and expertise needed to help you navigate complex IT contracts and sale-and-purchase agreements. You can also have us draft general terms and agreements for you, so that the risks and benefits are made clear and your best interests served.
DUTCH SPECIALIZED IN EXCLUSION INDIRECT LOSS FROM STANDARD CONDITIONS AND TERMS
Our Dutch contract lawyers are available to provide assistance if you require one. Remko Roussejen is a Dutch Contract Lawyer who has worked in the area of contract law since many years. He advises, litigates and deals with national and international commercial contracts.
