Deferring your obligation: suspension explained

When you enter into a contract with another party and that party fails to fulfil its obligation, there are a number of measures you can take. One of these is suspension. With this, you pause your obligation, as it were, until the other party fulfils its part of the agreement. With the aim of encouraging the other party to fulfil its obligation. In this article, lawyer Floris Krijt explains what the points of attention are.

Example use of suspension right

Suppose you regularly do business with another company. Your company sells electric bicycles to a distributor. The distributor orders 50 electric bicycles and you charge €100,000 for them. On a previous order some months ago, the distributor failed to pay an invoice of considerable amount. To induce the distributor to pay, you can postpone the delivery of the bikes until the time of payment.

Points of attention

To use suspension to your advantage, it is important to pay attention to a number of things. With suspension, you pause your own obligation, but this does not cause your obligation to lapse. If the other party has fulfilled its obligations, your own – paused – obligation must also be fulfilled.

Suspension powers may also be contractually excluded (but also extended) between two professional parties. Between a professional party and a consumer, it is not permissible to exclude it or grant the professional party a more far-reaching power of suspension than the law already provides.

Note that if it is established afterwards that suspension was not allowed, the party that suspended is in default by operation of law. This may mean that – suppose you have suspended your payment obligation in the reverse situation of the example – you will owe statutory interest on that amount. You may choose to suspend not the whole but part of your obligation to reduce this risk.

You do not have to give the other party notice of default before you proceed to suspend. However, the other party should know that there is reason to suspend, and if it may not be aware of this, it should be informed. In some circumstances, this may mean that you have to inform the other party that you are going to suspend including the reason why you are going to do so.

Any questions? Feel free to contact us

A number of other formal requirements apply to suspension, but they are too far-reaching to discuss in this article. We will be happy to advise you on what steps to follow in your specific situation. You can contact one of our lawyers by mail, telephone or fill in the contact form for a free initial consultation. We will be happy to think along with you.