Almost every business owner is confronted with liability law at some point. For example, when ordered goods do not meet the requirements set for them. In such a case, the supplier can be held liable under Article 6:74 of the Dutch Civil Code. This article of law regulates liability in the event of failure to fulfill an obligation. That is, if the shortcoming is based on an agreement, the party that has failed can be held liable under this article.
If the shortcoming is not based on an agreement, the party that has failed may be held liable under Article 6:162 of the Dutch Civil Code. Liability under this article of law requires that the other party has committed an “unlawful act”. This includes: an infringement of a right, an act or omission in violation of a legal obligation and an act or omission in violation of what is customary in society according to unwritten law.
The distinction between the two grounds for liability seems clear. If the failure arises from an obligation, Article 6:74 of the Dutch Civil Code is relevant. If not, Article 6:162 of the Dutch Civil Code is relevant. But what if a party fails to fulfill an obligation and a third party (i.e., not the party with whom the obligation was entered into) suffers damage? Can the third party hold the defaulting party liable? And if so, on what basis? Read this blog for the answer.
HZPC/Veritas
The facts
A Dutch exporter (HZPC) sells a batch of potatoes to an Angolan buyer. The Angolan government requires that, prior to importing the potatoes, an inspection of the potatoes be carried out by an approved inspection agency. The usual practice is for the buyer to request inspection from the inspection agency. The agency then fills out an application form for inspection to the extent possible. The application form is sent to the exporter, who fills in the remaining details and returns the form. Upon receipt, the inspection commences.
In the HZPC/Veritas case, the procedure described above was followed. The buyer ordered an inspection, after which the inspection agency (Veritas B.V.) partially completed an application form and sent it to HZPC. HZPC further filled out the form and returned it by fax. The form, according to Veritas B.V., never arrived. Veritas B.V. therefore did not proceed with inspection. At least, not before the potatoes left the Dutch port. The inspection only took place much later, resulting in negative financial consequences for HZPC.
HZPC argues that Veritas B.V. committed unlawful acts within the meaning of Article 6:162 of the Dutch Civil Code by deviating from the normal course of business. In this regard, it points out that Veritas B.V. received the form sent by fax. If the form was lost after receipt, this is at Veritas B.V.'s risk.
Vleesmeesters/Alog
HZPC substantiates its argument with a reference to the Vleesmeesters/Alog judgment. In that judgment the following was considered:
"When a person has bound himself contractually, as a result of which the contractual relationship to which he is a party is connected to the interests of third parties, he is not under all circumstances free to neglect the interests which third parties may have in the proper performance of the contract (cf. HR 3 May 1946, NJ 1946, 323). If the interests of a third party are so closely involved in the proper performance of the contract that he may suffer damage or other disadvantage if a contracting party fails in such performance, the standards of what is customary in society according to unwritten law may imply that that contracting party must spare those interests by having his conduct partly determined by those interests. When answering the question whether these standards imply this, the court will have to take into account the relevant circumstances of the case, such as the capacity of all parties involved, the nature and purpose of the agreement concerned, the way in which the interests of the third party were involved, the question whether this involvement was known to the contracting party, whether the third party could rely on the fact that his interests would be safeguarded, the extent to which it was difficult for the contractor to take the third party's interests into account, the nature and extent of the disadvantage threatening the third party and whether he could be expected to have covered himself against it, as well as the reasonableness of any compensation offered to the third party. "
Thus, the starting point for liability to a third party is that the interests of the third party must be very closely related to the proper performance of the contract. And even then, liability is assumed only "under certain circumstances." The circumstance which, according to the attorney general, is particularly important is the knowledge of the third party's interests. After all, it is difficult to be guided by the interests of the third party if these interests are not known.
The Supreme Court agrees with this reasoning and considers that because Veritas B.V. did not take notice of the fax, the interests of HZPC were not known to Veritas B.V. and it was not obliged to let its conduct be partly determined by the interests of HZPC.
Conclusion
If a party fails in the performance of an obligation and a third party (i.e., not the party with whom the obligation was entered into) suffers damage, the third party can hold that party liable under Article 6:162 of the Dutch Civil Code. But: the threshold for liability is very high. The interests of the third party must be very closely involved in the proper performance of the contract. And even then, liability is assumed only "under certain circumstances".
Need advice?
Have you suffered damages and are you considering holding someone liable? Do you have other liability law or civil law questions? Feel free to contact one of our lawyers.