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The capacity of contracting parties and (commercial) contracts

The capacity of contracting parties and (commercial) contracts

The capacity of contracting parties and (commercial) contracts

15.06.2021 NL law

Under Dutch law, a general principle is that contracting parties conclude agreements in their own name, i.e. they conclude agreements for themselves. However, in Dutch commercial legal practice, contracting parties frequently act as representatives of a company.

In the latter situation, confusion often arises as to whether a party has acted in his/her own name, or alternatively in his/her capacity as a representative of a company. For instance, take the case of a company director who places a private order with a corporate client by means of a business email; the question may arise as to who the contracting party actually is; the director (in a private capacity), or the company?

The subject of this blogpost concerns the question as to how and according to what elements this question must be answered. Further, it concerns the question whether it is possible after concluding the contract for a new party to be regarded as the contracting party (in place of the original contracting party), and if so, under what circumstances this is possible.

Acting in whose name?

In Dutch commercial legal practice, contracting parties frequently act as representatives of a company instead of acting in their own name.  In that case, confusion regularly arises as to who the contracting party is – i.e. the representative of the company in his private capacity or the company itself.

In the Kribbebijter judgment, SC 11 March 1977 ECLI:NL:HR:1977:AC1877, the Dutch Supreme Court ruled that the answer to this question depends on what the parties declared to each other, and what they derived and could have derived from one another’s statements and conduct (known as the Kribbebijter standard).

Who should be considered as the contracting party depends therefore on a subjective consideration of the parties intentions. However, the aforementioned (Kribbebijter) standard is not very clear and gives rise to disputes; see for instance the Hezemans Air judgment SC 5 September 2014 ECLI:NL:HR:2014:2628, NJ 2015/21. The subject of this judgment concerned the question as to whether an authorized representative acted in his own name or as a representative of a company when the agreement was concluded. The Dutch Supreme Court applied the aforementioned Kribbebijter standard.

For further relevance see also the Baby Joost judgment SC 8 September 2000 ECLI:NL:HR:2000:AA7041, NJ 2000/734. In this judgment, parents had concluded an agreement with the hospital for the medical treatment of their child. However, at the time the contract was concluded, the parties did not discuss whether the parents concluded the medical agreement in their own name, or as legal representatives of their child, or both. The Dutch Supreme Court ruled that the other party (the hospital) could have assumed that the parents concluded the medical agreement as legal representatives of their child exclusively.

Based on settled case law and literature, performance of the contract – and therefore the conduct of the parties after concluding the contract – also plays a role for the identification of the identity of the contracting parties. Some writers refer to the order confirmation or the written confirmation of the assignment, as contracting parties usually send these confirmations after concluding the contract. Clearly, the name details of these documents are relevant for the identification of the contracting parties.

Furthermore, at any time after concluding the contract it is possible that a new party may be regarded as the contracting party in place of the original contracting party. Whether or not there is a shift in the identity of contracting parties will depend on what the parties declared to each other, and what they derived (or could have derived) from each other’s statements and conduct. See the Inscharing judgment SC 20 December 2019 ECLI:NL:HR:2019:2034, NJ 2020/43 (no. 3.1.2).

The Supreme Court adopted AG Valk’s opinion in SC 20 December 2019 ECLI:NL:HR:2019:2034 NJ 2020/43. AG Valk had ruled that a tacit change of contracting parties is possible at any time after concluding the contract, drawing a parallel with “dynamic interpretation” of contracts; under Dutch law, the manner in which the agreement is executed can result in changes to the contents of the contract (no. 3.5). The court, however, does not approve such changes lightly. See for instance SC 2 September 2011 ECLI:NL:HR:2011:BQ3876 (VDE/Fuchs).

Some writers question the aforementioned Inscharing judgment as, in case of a contract takeover, a “deed of contract takeover” is required by law; see article 6:159 DCC. The question is how this judgment relates to article 6:159 DCC.

Conclusion

The answer to the question of who the contracting party actually is depends on what the parties declared to one another, and what they derived (or could have derived) from one another’s statements and conduct (the Kribbebijter standard). Furthermore, it is possible that, at any time after concluding the contract, a new party may be regarded as the contracting party. Whether or not there is a shift in the identity of contracting parties also depends on a subjective consideration of the parties’ intentions (ECLI:NL:HR:2019:2034).

In Dutch legal practice, disputes about the Kribbebijter standard arise frequently. To avoid potentially unpleasant surprises, it is well worth specify precisely who the contracting parties are at the moment that parties conclude the agreement.

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