Yes, article 6:75 of the Dutch Civil Code (DCC) provides that FM can be invoked if a party cannot perform because of a factor that is:
- Not their fault
- Not something that they have assumed the risk for (under statute, contract, or other generally accepted principles of Dutch law)
Dutch law does not require that performance is impossible. However, only in exceptional cases will reliance on FM be honored if performance would technically still be possible. In the end, whether a party will be able to rely on FM is highly dependent on the particular circumstances of the case.
When examining whether FM can be relied upon, an analysis should be made of the consequences of the FM event that has allegedly lead to the non-performance and whether that non-performance is caused by that FM event.
In general, the threshold for successful reliance on FM is high. This is in part due to the fact that many contracts contain separate FM clauses that simply attribute the risk of the occurrence of an FM event to a particular party, and exclude reliance on statutory remedies
No, although many contracts contain specific provisions on FM. The effects of applying FM provisions in contractual relationships may differ. Certain contracts specify that if FM can be relied upon, performance is suspended, or the contract may be terminated. Contracts can also specify that FM is simply a risk that is attributed to a specific party.
Furthermore, contracts may also specify that relief under Dutch statutory FM law is excluded. The enforceability of such provisions, however, is not beyond dispute.
Under Dutch law, the concept of statutory FM is treated as a defense from the non-performing party against a claim for performance or damages. The burden of proof for demonstrating FM is on the non-performing party.
Contracts that contain FM clauses, typically also specify formalities which must be observed for invoking such clause. This is typically a notification requirement to the other party within a certain timeframe after the FM event has occurred.
Under Dutch statutory law, all parties to a contract have a duty to take reasonable steps to mitigate damages. The requirement to mitigate damages applies with respect to damages claims but not with respect to claims for specific performance.
If parties do not observe their obligation to mitigate, the damages that could have been mitigated are deducted from the damages claim.
Contracts may also provide an obligation to mitigate damages. If so, these obligations should be carefully reviewed.
When FM is successfully invoked, performance of a contract cannot be enforced and the non-performing party cannot be held liable for the damages.
If performance is impossible but the non-performing party cannot successfully rely on FM, non-performance will be considered a breach of contract and that party will be liable for damages.
The counterparty to the non-performing party can also suspends its obligations under the contract in the event of FM.
Furthermore, under Dutch FM law, the principle applies that the non-performing party that successfully relies on FM, should not be in a better position than when the contract would have been ordinarily performed. Should a non-performing party rely on FM, and attain a better position than when the contract would have been ordinarily performed, the counterparty generally has a claim on the non-performing party on the basis of unjust enrichment.
- Unforeseen circumstances (article 6:258 DCC)
This article applies where unforeseen circumstances are of such a nature that a party cannot reasonably expect the other party to continue to perform the agreement under its current conditions.
When this is the case, a party may ask the court to modify or set aside the agreement in whole or in part, with retrospective effect.
Whether a circumstance is unforeseen depends on whether the parties have made an (explicit or implicit) allowance for the occurrence of the circumstance in the contract.
This Article is applied restrictively.
- Reasonableness and fairness (article 6:248 DCC)
General principles of reasonableness and fairness (redelijkheid en billijkheid) apply to all Dutch law governed contracts and may impact reliance on contractual provisions. These principles must be applied irrespective of whether a contract contains specific provisions on FM. For contracts which do not contain such provisions, and where parties fall back on Dutch statutory law, these principles must also be applied. Even if an event does not qualify as an FM event or as an unforeseen circumstance under Dutch statutory law, a party may still not be permitted to demand performance from the non-performing party if such a demand would be unacceptable in light of the standards of reasonableness and fairness.