- Hoge Raad
SALES CONTRACT - BETWEEN TWO DUTCH PARTIES - REFERENCE TO PRINCIPLES OF EUROPEAN CONTRACT LAW AND TO UNIDROIT PRINCIPLES TO INTERPRET APPLICABLE DOMESTIC LAW (DUTCH LAW)
STANDARD TERMS - EXEMPTION CLAUSE - WHETHER OR NOT BINDING ON ADHERING PARTY (ARTICLE 6:233(B) DUTCH CIVIL CODE; ARTICLE 2:204(2) OF THE PRINCIPLES OF EUROPEAN CONTRACT LAW AND ARTICLE 2.1.20(1) OF THE UNIDROIT PRINCIPLES)
A Dutch buyer acquired a plant nursery substrate unit (“the installation”) from a Dutch seller. Although the installation’s alarm went off upon being activated, the buyer repeatedly re-set the system and continued to use it. The defect was eventually repaired by the seller, but the nursery plants were found to have been damaged, prompting the buyer to claim damages. The seller did not dispute the facts, but relied on the exemption clause in the standard terms of the contract, restricting its liability to the amount covered by its insurance, and in addition, claimed that the buyer had by its faulty conduct contributed to the damage.
The issues to be decided, among other things, were whether the buyer had accepted the exemption clause contained in the standard terms of the contract, and whether the buyer was partly at fault in causing the damage.
The Court of first instance found that that the seller had not performed the contract in that it delivered a faulty installation and accordingly owed compensation to buyer. It also found however that the exemption clause contained in the seller’s standard terms was binding on the buyer. Indeed, the seller, in its correspondence with the buyer, had given timely, and repeated, notice of the applicability of its standard terms, and the buyer, though it had never explicitly agreed to them, had at no time objected to their application. Moreover, the Court deemed the buyer to have been partly at fault in having ignored the installation’s safety alarm, and accordingly ordered the seller to pay 25% of the damage.
The Court of second instance agreed with the lower court that the standard terms of the contract applied, but held that the seller had been grossly negligent in performing the contract, and that this was the primary cause of the damage. Although the buyer had also been at fault, the Court held the seller liable to an amount of no less than 50% of the damage.
The Supreme Court of the Netherlands set aside the decision of the Court of Appeal. In its reasoning, the Court not only referred to Article 2:204(2) of the Principles of European Contract Law, but also quoted Article 2.1.20(1) of the UNIDROIT Principles of International Contracts, which states that “no term contained in standard terms which is of such a character that the other party could not reasonably have expected it, is effective unless it has been expressly accepted by that party”. According to the Court, this provision in a manner placed emphasis on explicit acceptance of surprising terms, and was based on the assumption that a term was surprising if not in common usage in the relevant commercial sector. In the Court’s view, the Principles’ approach appeared preferable to the Dutch solution, which allows standard terms to be avoided on formal grounds, even if they are commonly used in a given sector and therefore should not be surprising to the other party. (Art. 6:233(b) BW)