What options are available if a party fails to meet its financial obligations or fails to do so on time? The right of retention is a powerful legal remedy that allows parties to retain certain items in the event of overdue financial obligations.
What does the right of retention entail?
The right of retention can provide protection in situations where financial obligations are not met. Pursuant to Article 3:290 of the Civil Code, the right of retention encompasses the authority—which, in certain cases, is granted to a creditor—to suspend the fulfillment of an obligation to deliver an item to the debtor until the claim is satisfied. The right of retention can be an effective means of ensuring fair transactions and financial agreements. Consider, for example, a business owner who delays the delivery of goods until the customer fulfills their payment obligation, or a garage owner who retains a repaired car until the overdue invoice is paid.
Due and Payable
To invoke the right of retention, the claim must be due and payable. In short, this means that the claim must be one for which the payment term has already expired. If no payment term has been agreed upon, this means the claim is immediately due and payable. In addition, there must be a sufficient connection between the creditor’s claim and the obligation to deliver the item. Furthermore, the party invoking the right of retention—also known as the retainer—must have actual control over the item. It is, however, required that the retainer have obtained the item lawfully. Invoking a right of retention over an item that was obtained unlawfully—for example, through theft—will therefore not be successful.
Exercising the right of retention is often seen as an effective way to increase pressure regarding an overdue payment obligation, but it also offers protection and legal certainty to the party that does fulfill its obligation.
Do you have questions about the right of retention, or would you like to contact our attorneys specializing in contract law? Feel free to send an email to info@sijbenpartners.nl or call us at +31 45 560 22 00.