Almost every entrepreneur has to deal with it at some point; a counterparty who does not fulfill his/her agreements. In this article Gentia Niesert, attorney at contract law, explains how you can act towards your counterparty in such a situation and what the importance of a notice of default can be.
The notice of default
Suppose you own a contracting company and have engaged a subcontractor to do work for you. The subcontractor gets to work, but does not perform his work in accordance with the agreements made. For example, the subcontractor does not deliver the desired quality and furthermore does not perform some of the work at all.
In such a case, it may be advisable to send your counterparty a “notice of default. This is a written reminder in which you give your counterparty one last reasonable period to fulfill its obligations under the agreement.
Default
If your counterparty does not comply with the formal notice, your counterparty is legally ‘in default’. Default is necessary to be able to dissolve an agreement and/or claim damages.
There are also cases, where a party is already legally in default and a notice of default can be omitted. This is the case, for example, if your counterparty has failed to meet a deadline and performance is permanently impossible.
In cases where your counterparty is not yet in default by operation of law (we can assess this for you), sending a notice of default may be essential to be able to take further steps, such as dissolving the agreement.
Important issues in a notice of default
It is important that the notice of default complies with a number of formalities. For example, the following are important:
- Describe clearly in the notice of default which obligations your other party has not fulfilled and which obligations he/she still has to fulfill (e.g. the proper painting of a window frame);
- In your notice of default, state a reasonable period within which your counterparty must comply (what constitutes a reasonable period depends on the circumstances of the case, on which we can advise you further);
- Send the notice of default in writing (preferably in a way that you can later demonstrate that your counterparty has actually received your notice of default).
Advice
Do you need help in drafting a notice of default or would you like advice on the notice of default you have received? Then you have come to the right place. Gentia Niesert, attorney at law in contract law, will be happy to assist you.
