Cancelling a purchase may seem straightforward, but it can be an expensive affair for consumers. Many companies implement a cancellation clause that requires payment of 30% of the purchase price. But is this reasonable? A recent ruling by the subdistrict court in Tilburg sheds new light on the legal validity of such clauses, particularly in the housing sector, where cancellation fees are commonly applied. How has case law evolved in recent years, and what does this mean for the future?

The cancellation clause according to the CBW terms and conditions

The conditions set by the Central Home Sector Association (CBW), used by many home furnishing retailers, include a cancellation clause. This clause applies when cancelling purchase agreements for furniture, kitchens, and other home furnishings. Article 12 of the CBW conditions states that a buyer who cancels the agreement must pay compensation amounting to 30% of the purchase price. This percentage is based on the seller's gross profit margin, which consists of fixed and variable costs, minus unearned variable costs.

Courts are increasingly being asked whether this fixed compensation is reasonable or ‘unreasonably onerous’ as referred to in Article 6:237(i) of the Civil Code.

From general justification to specific calculation of damages

Until around 2021, case law regarding the cancellation clause was relatively favourable to home improvement retailers. If a retailer could demonstrate that the cancellation compensation was reasonably proportional to the damage suffered, reliance on the clause often succeeded. This was typically supported by general industry figures, such as the percentage of fixed costs that needed to be covered. In other words, if a seller could show that in their industry, the gross profit margin usually exceeded 30% of the selling price, that was deemed sufficient evidence.

Starting in 2021, judges began to scrutinize the practice of cancellation clauses more rigorously. This was notably reflected in rulings by the ‘s-Hertogenbosch court of appeal. In these cases, it was determined that sellers could no longer rely solely on general industry figures; they were required to concretely prove the actual damage incurred in the specific situation.

The ruling of the Tilburg Subdistrict Court

On 2 June 2024 the subdistrict court in Tilburg further clarified previous case law in its ruling. In this case, a buyer had cancelled a furniture order, prompting the seller to invoke the cancellation clause from the CBW terms and conditions. However, the buyer contended that the compensation of 30% of the purchase price was unreasonable, as this amount was disproportionate to the actual damage suffered by the seller.

The court ruled that the seller could not rely on general industry figures but had to specifically demonstrate the damages incurred in this case. This meant that the seller had to provide evidence of the fixed and variable costs at the time of purchase and cancellation, focusing on the specific industry and the timeframe during which the purchase occurred.

In its final judgement, the subdistrict court concluded that the seller had sufficiently demonstrated the nature of the damages in this particular situation and ruled that the cancellation clause could not be considered unreasonably onerous in this case.

What does this ruling mean for entrepreneurs and consumers?

For entrepreneurs using CBW terms and conditions, this ruling is significant. They can no longer rely on general figures or industry reports to justify the cancellation clause. Instead, they must provide specific justification in each case as to why a compensation amount (for example, 30%) is reasonable, given the specific circumstances surrounding the cancellation. This often requires additional administrative efforts and may even involve hiring an accountant.

Consumers are better protected by this ruling against potentially unreasonable cancellation fees. Previously, the 30% fee was often taken for granted; however, the updated case law now provides them with greater leverage to challenge a cancellation clause. If a retailer cannot prove that the actual damages equal or exceed the 30%, the court may rule that the compensation is unreasonably high and reduce it.

This development necessitates greater diligence and administrative justification from business owners. If you have questions about how these developments may impact your situation or would like to know more about the cancellation clause in your agreement, please feel free to contact the lawyers at SPEE advocaten & mediation.