The Dutch Supreme Court recently delivered an important ruling
on the interpretation of contracts.
Under Dutch law, there is a certain distinction between the two
general standards used to interpret contracts. According to the
basic "Haviltex standard", it is not the text of the
contract that is decisive, but the meaning that the parties could
have reasonably attached to the provisions of the contract in the
particular circumstances at hand and what they could reasonably
have expected. In the "CAO standard" (CAO meaning:
collective bargaining agreement standard), the specific wording of
the contractual provision is, in principle, decisive for
interpretation. This does not mean that the parties' intentions
are irrelevant to the interpretation of contracts governed by the
CAO standard, but that these intentions are relevant only to the
extent that third parties could objectively have known about them.
The CAO standard has been applied to specific contracts, including
not only collective bargaining agreements but also collective
The Dutch Supreme Court recently ruled that particular circumstances can arise
which make it necessary, in interpreting the contract, to consider
the intentions of the contracting parties, even if these intentions
are not known to third parties. This can also apply where the
justification for using the CAO standard is not a factor; that is,
when the protection of third parties and the uniform interpretation
of the contract are not at issue.
Clients should therefore pay attention to the fact that all the
circumstances of the particular case may be relevant when it comes
to the interpretation of contracts, even if those contracts are
interpreted according to the CAO standard. Aside from collective
bargaining agreements and collective redundancy plans, the CAO
standard has also been applied to deeds of transfer of real
property, deeds of trust on which bonds were based, and pension
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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