Dutch legal advice on broken-off negotiations, LOIs and pre-contractual liability

In Dutch transactions, parties are generally free to negotiate and to walk away from a deal. Freedom of contract is the starting point. However, this freedom is not unlimited.

If negotiations are broken off at an advanced stage, Dutch law may under certain circumstances impose legal consequences. This is particularly relevant in Dutch M&A transactions, investment processes, joint ventures and commercial contract negotiations where parties have already signed an NDA, term sheet or letter of intent.

I advise companies, entrepreneurs, investors, shareholders and international M&A professionals on Dutch law risks relating to discontinued negotiations. This includes both preventing liability before walking away and acting against a counterparty that has unexpectedly terminated advanced negotiations.

When can negotiations be broken off?

As a starting point, a party may break off negotiations. No one can normally be forced to enter into a contract merely because negotiations have started.

That position may change if the other party was justified in expecting that an agreement would be concluded, or that negotiations would at least continue. Dutch courts look at all circumstances of the case. Relevant factors include the stage of negotiations, the degree of agreement on essential terms, the wording of the LOI or term sheet, exclusivity arrangements, conditions precedent, due diligence status, draft transaction documents, approvals and the conduct of the parties.

For international parties, the key point is that a “non-binding” label does not automatically remove all Dutch law risk. The drafting and the behaviour of the parties both matter. For a broader explanation, see also this insight on pre-contractual liability in Dutch M&A transactions.

Typical situations

Disputes about discontinued negotiations often arise where parties have already invested significant time, money or confidential information in the deal process.

Examples include a buyer withdrawing after extensive due diligence, a seller terminating exclusivity to pursue another bidder, a party changing key deal terms late in the process, or negotiations being stopped after near-final SPA, APA, investment agreement or joint venture documentation has been exchanged.

These situations are especially sensitive where one party has incurred adviser costs, rejected alternative opportunities, made operational preparations, disclosed sensitive information or publicly anticipated the transaction.

Possible consequences under Dutch law

If breaking off negotiations is considered unacceptable under Dutch law, the consequences may differ depending on the circumstances.

In some cases, the other party may claim reimbursement of negotiation costs. In more exceptional cases, a claim may include loss of opportunity or even lost profit. In urgent situations, a party may seek interim relief, for example to prevent misuse of confidential information, enforce exclusivity or obtain a temporary measure.

Whether such claims are realistic depends heavily on the facts. The signed documents are important, but so are emails, board papers, process letters, drafts, meeting notes and the conduct of the parties during negotiations.

How I assist

I assist clients before and after negotiations are discontinued.

For parties considering whether to walk away, I assess the Dutch law risk, review the LOI, term sheet, NDA and correspondence, and advise on how to terminate negotiations in a controlled way.

For parties confronted with a counterparty walking away, I assess whether there is a basis for a claim, what evidence is available, whether urgent measures are appropriate and what commercial resolution may be achievable.

I also assist with drafting and negotiating NDAs, term sheets and LOIs in a way that makes clear which provisions are binding, which are non-binding and under what conditions a party may walk away. This is particularly important for international investors and buyers involved in private equity, venture capital or strategic acquisition processes in the Netherlands.

Preventing disputes in the pre-contractual phase

The best way to reduce risk is to be precise at the start of the process. A Dutch law LOI or term sheet should clearly state which provisions are binding, which provisions are non-binding and which approvals or conditions are still required.

Important safeguards may include financing conditions, investment committee or board approval, satisfactory due diligence, final transaction documentation, notarial implementation, shareholder approval and clear termination rights. Parties should also be careful with language suggesting that the deal is already final if material points remain open.

In cross-border transactions, these points are often underestimated. US and UK deal teams may assume that “subject to contract” or “non-binding” language is sufficient. Under Dutch law, the overall drafting, process and conduct remain relevant.

Need advice on discontinued negotiations?

If you are considering withdrawing from negotiations, or if a counterparty has walked away from an advanced transaction process, I can assist with Dutch law advice.

Dirk de Waard advises companies, entrepreneurs, investors and M&A advisers on discontinued negotiations, LOIs, term sheets, pre-contractual liability and transaction disputes.

Contact Dirk de Waard at dirk.dewaard@viottalaw.com to discuss your matter.