Obligation to disclose vs. due diligence in sale contracts

According to the District Court of Amsterdam, the disclosure obligation of a seller (to disclose information) prevails to the due diligence obligation of a buyer (to investigate the object of a sale). The failure of a buyer to carry out an inspection cannot be held against the buyer if the seller has withheld information which he should have disclosed. Dutch contract lawyer Thomas van Vugt explains.



The obligation of a seller to disclose

This case concerned the acquisition of a day nursery. The lawyer of the buyer sued the seller for damages (€ 150.000,- for income loss and € 33.284,30 for costs relating to work carried out to get the required business permits). The buyer argued that the nursery does not comply with his expectations based on the acquisition contract. According to buyer, seller has violated his obligation to disclose information about the correct measurements of the outside space and about the fact that due to these (smaller) measurements the nursery was only suitable for 12 children.

Due diligence by buyer

Following the submitted evidence of both parties it can be concluded that buyer was aware of the fact that the size of the outside space was determent for the maximum number of children that would be allowed on the premises. Besides, buyer was aware that the applicable regulations (like the Dutch Law on Childcare) would be strictly enforced after the takeover. It is therefore even more remarkable that buyer, who visited the nursery twice, has not taken the effort to investigate the exact measurements of the outside space. The Court of Amsterdam considered that buyer has violated his obligation to carry out due diligence and that he therefore cannot rely on the alleged failure to perform of seller.

Sale & non-conformity under Dutch law

The basis for any ruling about whether or not non-conformity can be established, is article 7:17 of the Dutch Civil Code, in which it is stated that goods lack conformity when they do not conform to the contract, taken into consideration the nature of the goods, the description given by the seller and the expectations of the buyer.

Unlawful act (tort) in The Netherlands

The lawyer of the buyer based his claim also on the rule of unlawful act. Article 6:162 of the Dutch Civil Code states that he who commits an unlawful act towards another must repair the damages which the other person suffers as a consequence thereof. The Court finds, however, that the buyer has not substantiated this alleged unlawful act and the claim is rejected.