The importance of default and notice of default in B2B relationships
If your contractual partner fails to fulfil the agreements or fulfils them incorrectly, you want to be able to take action. For example, by urging the other party to still fulfil the agreements (correctly), terminating the contract and/or claiming compensation. In that case, you must follow the correct legal route. It is therefore important that you take the following into account.
Default and notice of default
In business contracts between companies (B2B), the moment at which a party is “in default” because something is not going according to the agreements plays a key role. Only when the debtor is in default does a right to compensation arise in principle, and often also grounds for termination. In practice, this often goes wrong because a notice of default is missing or has been incorrectly drafted. A recent ruling by the Rotterdam District Court on 31 July 2025 shows the consequences of a notice of default being missing or not meeting the legal requirements: without default, there is no compensation.
According to the Civil Code (‘BW’), a debtor is, in short, in default if he fails to deliver the performance due. In many cases, a notice of default is also required for default. This is a written reminder in which the creditor clearly states which specific obligation must be fulfilled, within what reasonable period of time this must be done and that any damage will be borne by the debtor if performance is not fulfilled within that period. What constitutes a reasonable period depends on the circumstances: the nature of the performance, the duration and complexity of the work and the preparations necessary to be able to perform. In addition, it must be clear exactly what performance is still required; a general complaint is not sufficient.
If performance by the debtor is temporarily impossible or if the debtor’s attitude indicates that a reminder is futile, no reasonable period of time needs to be given and it is sufficient for the creditor to send a written notice stating that he will be held liable for the failure to perform.
Furthermore, case law and legal literature allow room for special cases, partly from the point of view of reasonableness and fairness, to assume that a notice of default may be omitted or that invoking the absence thereof is unacceptable. However, the main rule remains that a business party must carefully consider whether a notice of default is required and how it should be formulated.
Furthermore, the law (Section 6:83 of the Dutch Civil Code) describes situations in which default occurs without notice of default, such as:
a) the expiry of a specified period for performance without the obligation having been fulfilled (also known as a deadline)
b) when the creditor must infer from a communication from the debtor that the latter will fail to fulfil the obligation.
The “deadline” is important in B2B relationships. In principle, agreed deadlines for performance – in particular explicitly agreed payment terms – must be regarded as deadlines. This means that if the deadline expires without proper performance, the debtor is automatically in default, i.e. without a notice of default being required. However, the nature of the agreement, the nature of the obligation or other circumstances may mean that a deadline is not final. It is therefore wise to explicitly state in commercial contracts that a certain deadline is a final deadline, so that there can be no discussion about this and you, as an entrepreneur, know where you stand.
Why is default so important? When the other party is in default, the creditor is in principle entitled to claim damages and, in many cases, to terminate the agreement in whole or in part. In other words, without default, there is often no legal basis for claiming damages or terminating the contract. A correct notice of default is therefore often the key to further steps in the event of problems in the performance of the contract you have with the other company.
Rotterdam District Court ruling of 31 July 2025
The ruling of the Rotterdam District Court of 31 July 2025 illustrates this in a dispute about the installation of solar panels. A company (A) had installed solar panels at GSW’s customers on behalf of GSW. A had carried out the agreed work and sent invoices for this. The parties had agreed on a payment term of 14 days. When GSW failed to pay, A initiated debt collection proceedings. In the proceedings, GSW argued that it was entitled to suspend its payment obligation and recover damages from A for poor workmanship, so that it could set off its counterclaim.
The court ruled that the 14-day payment term was a strict deadline. Because GSW did not pay on time, it was automatically in default, without the need for a prior notice of default. A party that is itself in default cannot, in principle, successfully invoke suspension. If GSW wishes to recover damages from A, A must be in default with regard to its obligation to properly install and repair defects. In this situation, a legally valid notice of default was required: a clear, written reminder with a concrete description of the complaints and a reasonable period for repair.
GSW referred to an email dated 3 February 2023 as a notice of default, but the court ruled that it did not include a reasonable repair period and that, moreover, A did not have the customer data to carry out the repairs. The argument that a notice of default would have been pointless because A indicated in a later email that it wanted to receive payment first was also unsuccessful: A was exercising its right of suspension and indicated that it was willing to resolve the issues after payment. The conclusion is that GSW is in default and A is not. GSW must pay the outstanding invoices and cannot recover any damages from A. This ruling emphasises the importance of strict (payment) deadlines and correct notices of default in B2B relationships.
Conclusion
There are a number of clear lessons to be learned from this in practice. Firstly, specify as clearly as possible in B2B contracts which deadlines apply, whether these deadlines are strict and what the consequences are in the event of non-compliance. This strengthens your position as a creditor and provides clarity for both parties. Secondly, for every failure on the part of your contractual partner, assess whether a notice of default is necessary to establish default. If so, ensure that the notice of default meets the legal requirements: it must be in writing, specific, with a reasonable period for compliance and with a clear statement of liability for damages in the event of non-compliance. Thirdly, realise that your options for compensation and termination depend to a large extent on whether the other party is in default and whether you yourself are already in default, for example by not paying or otherwise failing to perform.
For entrepreneurs, contract managers and management, it is therefore wise to seek legal advice in good time in the event of problems in a B2B relationship. Furthermore, a well-drafted contract, clear general terms and conditions and a correct notice of default can make the difference in the success of subsequent steps.
Advice
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