Creditor’s default and right to damage compensation. AMS explains!

In a dispute between an oysterman and a customer, the parties claim large sums from each other. The core issue is whether the fisherman was justified to suspend deliveries to the customer because of arrears in payment or that, in doing so, he was liable for compensation to the customer. Dutch contract lawyer Thomas van Vugt explains.

Dispute between customer and supplier

The cause of the dispute was the following. The fisherman and the customer had worked together for years, based on a type of supply contract. The fisherman supplied oysters to the customer against a monthly payment. At some time there was a substantial arrears in payment. In spite of being summoned, the customer refused to pay the outstanding balance. The fisherman subsequently suspended delivery.

Payment of claim in Dutch collection proceedings

The fisherman claimed in collection proceedings among others payment of the overdue invoices. The court finds that the customer did owe a large sum of money and a large part of the fisherman’s claim is granted.

Damage compensation for cessation deliveries?

In counterclaim proceedings the customer claims over €350,000 in damage compensation for loss caused by the suspension of deliveries. However, the customer is unsuccessful. The court finds that it has not been argued or shown that the fisherman was served with a notice of default for this. Therefore there is no negligence. To the extent that the customer argues that the fisherman suspended deliveries for no valid reason, the court rejects this argument. The customer was substantially in arrears of payment, so he himself was in default and could not invoke default by the fisherman. The customer’s claims are rejected.

Creditor’s default: creditor himself fails!

In this case the customer invoked breach of contract by the fisherman: the fisherman was in noncompliance with his contractual duty to supply oysters. This caused a loss by the customer that, according to the customer, had to be compensated by the fisherman. This claim was dismissed. This was a case of creditor’s default. The customer himself was in default by not paying the invoices in time. The subsequent suspension by the fisherman was justified. Therefore the fisherman was not in default.

AMS: default required to claim damage compensation!

Another aspect was that the fisherman had not been served with a notice of default by the customer. If a debtor is in default in complying with the agreement, in principle he has to compensate the damage. If noncompliance is not permanently impossible, this obligation only occurs after the debtor is in default. There is default if there is a continued noncompliance by the debtor even after he has been served with a notice of default (been informed of a default) and has been given a term for compliance as yet. In this case the customer never served the fisherman with a notice of default and the default did not occur. Compliance by the fisherman (delivery of the oysters) was, after all, not permanently impossible.