Termination of a contract for work and its consequences
Client terminates villa renovation after months of negotiation
A married couple inherited a villa in Spain and approached a Dutch contractor (STB) for a major renovation. STB sent a quotation of €879,600 excluding VAT. Without the couple ever signing the order confirmation, the preparations continued for months — including site visits, cost calculations and enthusiastic text messages. When the couple pulled the plug through a representative, STB claimed payment on the basis of Section 7:764(2) DCC.
The Midden-Nederland District Court dismissed the greater part of the claim: in the court's view no agreement had come into being, and there had merely been broken-off negotiations. STB was awarded only €21,497 for costs incurred. On appeal, the Arnhem-Leeuwarden Court of Appeal reversed that ruling entirely.
Court of appeal: text messages and conduct constitute acceptance of the offer
The court of appeal holds that a signature is not a constitutive requirement for the formation of an agreement (Section 3:37 DCC). Whether an agreement has come into being depends on what the parties have declared and what they could reasonably infer from each other's declarations and conduct (Section 3:35 DCC). The wife's text messages — "Absolutely brilliant! We'll sign them this week and fax them to you!" and "Tomorrow I'll sign everything and send it on" — were, in the court's view, unequivocal. Combined with the months of preparations and the absence of any reservation, STB was entitled to rely on the contract having been awarded.
The pleas of nullity for conflict with the law (Section 3:40 DCC), fraud, mistake and abuse of circumstances all failed. The court characterised the termination by the representative as a termination within the meaning of Section 7:764 DCC. That means the client pays the full contract price, less the savings. This is a payment obligation under the agreement, not damages (cf. Supreme Court 14 October 1994, ECLI:NL:HR:1994:ZC1486).
The court assessed item by item whether the contractor had made savings. Presentation drawings and permit drawings: awarded. Calculation costs: half awarded. Work preparation: rejected for lack of substantiation. Lost profit (2% of the contract price) and general costs: fully awarded. The total: €89,589 including VAT, more than four times the amount awarded at first instance.
What does this mean for clients and contractors?
For clients: be careful with enthusiastic messages and with allowing preparations to continue without a clear reservation. A contract for work can come into being without a signature — conduct and declarations are sufficient. A party that then terminates pays, on the basis of Section 7:764(2) DCC, the contract price less the savings, including the profit the contractor would have made on the whole of the work.
For contractors: record contacts and undertakings carefully. Text messages and emails can make the difference. Specify the items in the estimate clearly — the court assesses item by item whether savings have been made. Items that are not concretely substantiated (such as the work preparation here) are rejected. For more information on real estate and construction disputes and the previously published analysis of rescission and additional work in undelivered contracts.
Frequently asked questions
Can a contract for work come into being without a signature?
Yes. On the basis of Section 3:37 DCC, an agreement can be formed in any manner, including through conduct. Text messages, emails and actual preparations may together be sufficient. What matters is what the parties could reasonably infer from each other's declarations and conduct.
What must a client pay on termination of a contract for work?
On the basis of Section 7:764(2) DCC, the client pays the full contract price, less the savings the contractor has enjoyed as a result of the termination. The contractor retains the right to the full profit. The burden of proving the savings rests on the client.
Is the compensation on termination damages or a contractual payment obligation?
It is a contractual payment obligation, not damages. The Supreme Court confirmed this as long ago as 1994 (ECLI:NL:HR:1994:ZC1486). This distinction is relevant to the chargeability of VAT and the applicability of the rules for calculating damages.
ECLI:NL:GHARL:2019:3788, Arnhem-Leeuwarden Court of Appeal, 30 April 2019
Cited case law
Supreme Court: ECLI:NL:HR:1994:ZC1486
Courts of Appeal: ECLI:NL:GHARL:2019:3788