Unjustified Suspension of Obligations

Under Dutch Caribbean law, a debtor has a right to suspend the performance of his obligation if he has a due claim against his creditor; there is sufficient connection between the claim and the obligation, which may be assumed when the obligations result from the same legal relationship or from regular business activities between the parties; and the suspension is proportionate.

The question is what the legal consequences are if, in retrospect, a suspension was fully or partially unjustified. In the past the Supreme Court has ruled that the party who unjustifiably invoked the right of suspension was immediately in default. Therefore, the legal consequences could be severe, such as in the case of contractual provisions regarding (immediately due and payable) penalties in the event of default.

However, in more recent case law the Supreme Court found that the mere fact that there was no reason, again: in retrospect, for a party to invoke the right of suspension does not mean that such party was automatically in default. Whether or not a party was in default, from the moment of the suspension, depends on the given circumstances. According to the Supreme Court, being in default implies that a party was failing to meet its obligations required under the contract. What was required under the contract can only be determined based on an interpretation thereof considering all relevant circumstances at that time.

This approach by the Supreme Court allows scope for arguing in a specific case that although a party in retrospect unjustifiably suspended performance of its obligation, the legal consequences of such suspension should not mechanically be equated to that of a (regular) default situation.