Pursuant to Article 7:2 paragraph 2 of the Dutch Civil Code, a buyer of a house has the right to dissolve the contract without giving reasons during three days after signing the sales contract. Can the seller also rely on this statutory cooling-off period?
The law requires that the purchase of a home must be concluded in writing if the buyer is a natural person who is not acting in the exercise of his profession or business. A verbal contract of sale is therefore not binding and not enforceable. Once the sales contract has been signed, the buyer then has a statutory cooling-off period of three days.
This statutory cooling-off period was introduced into the law in 2003 to protect (private) buyers of residential property. During the cooling-off period, a hasty decision to buy can be reversed without the buyer needing to have a reason for this.
However, this statutory cooling-off period does not apply to a seller, but a contractual cooling-off period for the benefit of the seller may be included in the purchase agreement if the buyer and seller mutually agree to this.
Whether the seller can always rely on this, however, remains to be seen. The Supreme Court recently ruled on this issue.
The District Court of Overijssel was seized of a case in which the sellers had stipulated in the purchase contract that, after signing the purchase contract, they were also entitled to a three-day cooling-off period. Buyers agreed to this. On the second day of the cooling-off period, the sellers invoked the cooling-off period and the contract was dissolved. It turned out that the sellers had done this because they had received a higher offer.
The buyers argued that the sellers should not have relied on this clause at all and claimed in court that they had to pay the 10% penalty included in the sales contract. According to the buyers, the cooling-off period was included for the benefit of the sellers in order to protect them from an ill-considered sales decision. The sellers could not use the cooling-off period to sell the house to someone else for a higher purchase price. This would constitute a "misuse of power" by the vendors.
Judgement of the court
The sales contract stipulated that the sellers could invoke the cooling-off period under the same conditions as the buyers, so that the sales contract could be dissolved on that basis. Because the buyers did not have to give a reason for invoking the cooling-off period, the District Court of Overijssel was of the opinion that the sellers had that option as well. The buyers had agreed to the contractual cooling-off period in the purchase agreement and therefore knew that there was a risk that the sellers would invoke the cooling-off period and could dissolve the purchase agreement. Although the court questioned whether negotiating with a third party after the conclusion of a purchase agreement was appropriate, it saw insufficient reason in this case to hold the sellers to the purchase agreement. The court also considered that the sellers had not used the possibility of invoking the cooling-off period to strengthen their negotiating position vis-à-vis the buyers by threatening to rescind the purchase agreement if the buyers did not offer a higher purchase price.
Judgment of the court of appeal
According to the District Court there was no abuse of power, but the Court of Appeal came to a different conclusion and found in favour of the buyers. According to the Court of Appeal the sellers had abused the cooling-off period they had stipulated. It had been agreed that this cooling-off period would be included in the sales contract so that the sellers could also make use of the same statutory cooling-off period to which only buyers are entitled pursuant to Article 7:2 (2) of the Civil Code. The sellers did not want the buyers to be in a better position than they were.
It therefore had to be assessed whether this cooling-off period could be invoked by the buyers in a similar situation. The purpose of including this statutory cooling-off period was to protect against ill-considered, impulsive decisions. Based on the legislative history of Article 7:2 paragraph 2 of the Civil Code, the buyer is not allowed to use the statutory cooling-off period to make a final choice from the various houses he has purchased. According to the legislator, the interests of the sellers would be harmed disproportionately as a result. The Court of Appeal then drew a parallel with the sellers. As buyers are not allowed to use the cooling-off period to choose between different houses, and it was agreed that the sellers would use the same cooling-off period, the sellers were not allowed to use the cooling-off period to choose between different buyers. The court therefore found that the sellers had abused their authority to invoke the cooling-off period in this case. The sellers were ordered to pay the fine to the buyers.
The sellers disagreed with the judgment of the Court of Appeal and appealed to the Supreme Court.
Supreme Court ruling
In his advice to the Supreme Court, the Attorney-General stated that he agreed with the Court of Appeal's judgment:
The cooling-off period for the benefit of the sellers was included with the idea that the buyers would not be in a better position than the sellers. Therefore it had to be examined in which position the buyers were. The legislative history of Article 7:2 of the Civil Code shows that the legislature, by granting the statutory cooling-off period, wants to protect the buyer against ill-considered, impulsive decisions. The legislator wants to give the buyer the opportunity to investigate the property concerned further (or have it investigated) and to rectify a hasty decision to buy. However, the seller will usually think carefully before putting a property up for sale and knows it like no other. Therefore, he will not be likely to make ill-considered, impulsive decisions. The fact that a higher offer was made for the property at a later date is irrelevant. The statutory cooling-off period is not intended for such a situation.
The Supreme Court followed this advice. In this case the sellers could not invoke the cooling-off period. The appeal to the Supreme Court was rejected and the Court of Appeal's ruling upheld.
Do you have any questions about the cooling-off period or do you need advice about a sales contract? Please contact one of our lawyers without obligation. We will be happy to assist you.