Interpretation of contracts under Dutch law: beware of the interpretation clause!

NL Law

Under Dutch law, the interpretation of contracts is governed by the 'Haviltex' standard. Parties who favour legal certainty sometimes opt for their own standard instead by including an 'interpretation clause'. The Supreme Court judgment of 25 August 2023 (ECLI:NL:HR:2023:1131), illustrates that interpretation clauses should be treated with caution, as they do not necessarily prevent interpretation issues.  

Under Dutch law, the interpretation of contracts is governed by the 'Haviltex' standard. According to this standard, contracts should be interpreted by considering all the specific circumstances of the case, subject to the principles of reasonableness and fairness. When applying the Haviltex standard, Dutch courts interpret the contract not only by reviewing its wording, but also by assessing among other things the parties’ intentions in entering into the contract and the expectations that the parties could reasonably have of each other.

That being said, Dutch case law shows that courts tend to attach considerable weight to the wording of provisions when applying the Haviltex standard. This is especially so if parties carefully chose the wording of the contract, for instance when a business-to-business contract has been extensively negotiated with the assistance of legal experts. Even in those cases, however, the Dutch Supreme Court has been known to rule that the Haviltex standard remains decisive.

While there is much to be said for the Haviltex standard going beyond the "four corners of the contract" from the perspective of reasonableness and fairness, commercial parties tend to favour legal certainty. This is reason for some parties to opt for an 'interpretation clause', using their freedom of contract to stipulate how the agreement should be interpreted. Such an interpretation clause was the subject of the Dutch Supreme Court judgment of 25 August 2023 (ECLI:NL:HR:2023:1131):

A former husband and wife entered into a divorce settlement agreement in 2009. They included the following interpretation clause in the preamble (original text in Dutch):

"Notwithstanding the Haviltex standard, the verbatim text of this agreement will prevail over any party's intentions in the performance of this agreement. If any dispute arises from this agreement, also if only one of the parties believes a dispute to be present, the competent court should interpret and apply the provisions set out in this agreement solely grammatically."

The agreement also contained a provision specifying until when the wife would be entitled to spousal support (again original text in Dutch):

"Spousal support will end on the day on which the wife reaches retirement age, i.e. 24 May 2021."

After the contract had been entered into, the wife noted that it accidentally contained a 'typo'; under the Dutch General Old Age Pensions Act, the wife’s retirement age was not until 24 May 2022. The former spouses debated the interpretation of their contract before the courts in various instances: until what date was the wife entitled to her spousal support?

The Court of Appeal considered itself bound by the interpretation clause and held that the clause did not allow the court to consider the parties’ intentions at the time they entered into the contract. As the term 'retirement age' could have multiple meanings – and thus requires additional interpretation – while the date '24 May 2021' has only a single meaning, the Court of Appeal ruled that the right to spousal support had ceased on 24 May 2021.

The wife disagreed and appealed to the Dutch Supreme Court. She argued that despite the agreed interpretation clause (that excluded the Haviltex standard), the Court of Appeal should still have taken the Haviltex standard (or elements of that standard) into account when interpreting the end date of her spousal support. The Supreme Court did not subscribe to the wife’s opinion and ruled that the Court of Appeal was right to consider itself bound by the contractual standard of interpretation agreed on by the former spouses. Given the importance of the principle of freedom of contract in Dutch contract law, that in itself is not surprising. As the Court of Appeal had held that this interpretation clause excluded the Haviltex standard, the Supreme Court ruled that the court was not obligated to take the other elements of the Haviltex standard into account when deciding the end date of the right to spousal support.

It is interesting to note that the Supreme Court did not go into the Court of Appeal's interpretation of the interpretation clause itself, and why only words with a 'single meaning' could be included in the grammatical interpretation of the contract. When looking at the text of the contract, it is not immediately clear why the Court of Appeal attached more weight to a date than to the concept of 'retirement age'. Especially since the wife expressly argued that she could not have been of retirement age (whatever the meaning of that term) on 24 May 2021. The Court of Appeal's judgment has therefore been criticised. However, the wife did not challenge this before the Supreme Court, which therefore could not rule on it.

This case demonstrates that, although it may seem helpful to include an interpretation clause in a contract, caution is required. Interpretation clauses also need to be interpreted themselves as well. It greatly depends on the circumstances of the case whether the desired method of interpretation will actually increase legal certainty. An interpretation clause might prove even more troublesome if the text of the contract contains an internal contradiction or ‘drafting error’. This case therefore also highlights the importance of careful drafting.