Effectiveness of exemption clauses in Commercial Contracts under Dutch law
Freedom of contract
Dutch commercial law is based on the freedom of contract principle. As a result parties are free to agree on the terms and conditions of their commercial relations to the extent that they do not violate mandatory rules, rules of public policy/order or competition law rules.
Exemption clauses in commercial contracts are commonly used and can in principle be relied upon by the party wthat has negotiated an exemption clause into the contract. Exemption clauses exclude or limit liability and are considered necessary in view of the often significant financial risks involved with commercial contracts.
Dutch law however provides that contracts not only have the effects expressly agreed upon, but also those which result from the law, usage or the standards of reasonableness and fairness. This is laid down in Article 248 of Book 6 of the Dutch Civil Code (Article 6:248 DCC).
Effectiveness of exemption clauses
In cases where the application of an exemption clause leads to results which, according to the principles of reasonableness and fairness, are unacceptable within the meaning of Article 6:248 DCC, such clauses cannot be relied upon.
However, the threshold to successfully invoke Article 6:248 DCC for the purpose of setting aside an exemption clause is high.
In general a party cannot rely on an exemption clause if the damages caused are the result of its own intentional conduct or gross negligence. Failing intentional conduct or gross negligence, the circumstances of the case will determine whether an exemption clause can be relied upon or not. Following from established case law of the Dutch Supreme Court the following aspects must be taken into consideration: the nature and the contents of the contract, the mutual relationship between the contracting parties, how the exemption clause was negotiated, the awareness of the aggrieved party with the extent of the exemption
Recent judgment of the Dutch Supreme Court
In a recent judgment the Dutch Supreme Court (re-) confirmed that Article 6:248 DCC must be applied with the required high level of restraint by the Courts when assessing exemption clauses in commercial contracts. Given the nature of a commercial contract which is concluded between professional parties, the high threshold set by the Dutch Supreme Court is appropriate with a view to the stability and predictability of international commercial trade.
Please feel free to contact Jaap van Till, Partner at Loyal for questions relating to Commercial Contracts.