Agreements and contracts: all you need to know

What is a contract or agreement?

A contract is a spoken or written agreement between 2 or more parties. A contract obliges you to perform a certain duty, or it entitles you to the performance of a duty by someone else. You can use both the words contract and agreement.

Who can enter into a contract?

Both natural and the board of a legal person (for instance a private limited company or bv) can enter into a contract. You must have legal capacity for the contract to be valid. In other words, you cannot be in receivership (curatele), and you must be over 18. You can look up whether someone is under guardianship in the Central Guardianship and Administration Register (in Dutch).

If you are a minor, you have to get permission from your legal representative (usually your parents or guardians). There are exceptions for contracts that minors can reasonably be expected to enter into. If you are 16 or over, you can apply to the district court for limited legal capacity (handlichting). With this capacity, you will be able to conclude contracts.

How do you conclude a contract?

You can conclude a contract in several ways. A spoken (or oral) agreement is just as valid as a written one. If a deal is proposed by one party, and the other party accepts, you have a contract. There are exceptions, such as when buying or selling a house. A non-competition clause in an employment contract must also be laid down on paper. Nevertheless, it is wise to lay down your agreement in writing. That way you have proof of the agreement. There are some situations where only a written contract is valid. For instance, when you deliver shares for a private limited company, you must get a deed from an actuary or notary.

Contents of a contract

The main thing to include in the contract is the description of the product or service, the price and the acceptance by the customer. It also often contains agreements on:

• the duration of the contract
• the notice period
• delivery
• consequences of failure to fulfil obligations
• terms of payment and collection
• warranty
• service and maintenance obligations
• the handling of disputes

The agreements in the contract have to be reasonable for both you and your client or supplier, and you have to observe legal boundaries. For instance, you have to observe the rules for consumer sales contracts.

What invalidates a contract?

A contract can be ruled invalid or reversed if:

• one of the parties is a minor, or in ward;
• the person signing the agreement is not authorised to represent the organisation or company;
• the contents of the agreement violate the law, the rules of common decency, public safety, or are unreasonable or unfair;
• the information given about the contract was misleading (for instance, if one of the parties entered into the agreement because they had the wrong impression of a product);
• the agreement was entered into under threat, abuse of circumstances or deceit.

General terms and conditions

General terms and conditions are a special type of contract. They complement the specific agreements you make with a customer or supplier. If you draw up your general terms and conditions once, you can use them for all future contracts. You won’t have to draw up new general terms and conditions for each delivery you make; your delivery terms are in your general terms and conditions. This saves time and effort. Your client must be able to find these terms and conditions easily, for example on your website.

Types of agreements

There are many types of agreements:

• You conclude a sales contract or purchase agreement when you supply products or services.
• If you are a self-employed professional, you use model agreements to prove to the Tax Administration that you’re not in your client’s employ.
• If a public authority awards you a project in a tender, you conclude a procurement contract.
• You lay down agreements with the owner of a franchise in a franchise agreement.
• An employment contract is the agreement between employer and employee that contains work arrangements.
• A non-disclosure agreement (NDA) is used to protect confidential information.
• You lay down arrangements on the financing of company equipment and vehicles in a lease contract.
• A rental agreement serves to record arrangements for renting or hiring company accommodation.
• If you want to start a company with others, you can conclude a partnership agreement for your legal business structure.

Things to take into account

Check if the person you are dealing with is legally capable and authorised

People who are authorised to sign may sign contracts or perform certain actions on behalf of the company. It is important that the person with whom you conclude a contract is allowed to do this. Otherwise the contract may be invalid. Someone can be fully authorised to sign, or may only sign for certain matters. For example, someone may only sign contracts up to a certain amount. You can find out who is authorised to sign on behalf of a company by checking the Business Register. You can search for information in the Business Register by trade name, address or KVK number (in Dutch only). You can find out who is authorised to sign on behalf of a company by checking the Business Register

Do not simply withdraw during negotiations

During negotiations, there is no contract. However, negotiations may be partially binding. The further along the process you are, and the more promises are made, the more you may rely on reaching an agreement. When you have come that far, you cannot simply withdraw from negotiations. If you do, you may have to pay compensation.

Failure to fulfil a contract

If your contract partner withdraws or stops responding, there are several organisations you can turn to for legal assistance.