Obligation of respect in contract law

A third party has to a certain degree of respect for the interests of others resulting from an existing agreement. A breach of this obligation could result in liability. Important considerations for the assessment of careless conduct of a third party are: the degree in which the breach of contract can be attributed to the third party and the scope of the interests of the contracting parties and others that are affected by the breach of contract.

Third parties have to pay a degree of respect regarding the interests of others in an existing agreement. If you, as a third party, induce one of the parties to a contract to non-performance or if you benefit thereof, breach of the obligation of respect may mean that you are liable. What is the obligation of respect exactly and when will there be a breach of this obligation?

Trust

One important principle of Dutch contract law is that parties must be able to rely on the fact that agreements will be met. The interest to maintain agreements results in the obligation of respect of third parties. A third party may be expected to show a certain degree of care with regard to respecting someone else’s agreements, This obligation of respect is not so extensive, however, that third parties can be limited in their competitive position and freedom to conduct their trade and business.

Breach of obligation of respect

If A sells and delivers a car to C, while A had concluded a sales agreement with B regarding the same car at an earlier stage, this does not necessarily mean a breach of C’s obligation of respect. Simply concluding a conflicting contract does not mean a breach of the obligation of respect. This social duty of care is breached however if C knew of the sales agreement between A and B and C also encourages non-performance of A towards B by indemnifying A against future claims of B.

Negligent conduct regarding someone else’s agreements may lead to liability in tort. However, in the assessment whether there is negligent conduct, the court will take into account the following:

• The degree in which the third party has had an impact on the breach of contract or non-performance. That the third party knew or could have known that he or she was involved in breach of contract or non-performance is not sufficient for assuming liability. The same applies to taking only advantage of non-performance. That is not the case if the third party has induced breach of contract or non-performance. Especially, if he or she influenced the terminating party by deception or coercion.
• The interests involved in the agreement. The presence of a particular general or individual interest, such as the economic progress of the consumer, may lead to an increased duty of care of the third party. If it regards only the interest of the parties to the contract, such as in terminable continuing performance agreements, a breach of the obligation of respect by a third party will not quickly be assumed.

As a general rule: if the interests of other parties than the contracting parties are larger, it will sooner be assumed that the third party has committed a breach of the obligation of respect. On the other hand, the more the breach of contract or non-performance can be attributed to the conduct of a third party, the smaller the interest affected will have to be. Thus, the third party may also breach the obligation of respect by encouraging termination of a terminable continuing performance agreement, if coercion or deception is involved.

The circumstances always have to be considered together. It is in principle allowed to contact someone else’s customers to terminate their existing contracts but it could result in a breach of the obligation of respect if one of the contracting parties has made a major investment of time and money which is protected by the contracts. This can include, for instance, a contractor who has bought special equipment for a project or a franchisee who invested a lot of money to adapt a building.

Our advice

As a third party, make sure to take into account the existing contracts of someone else and the interests involved. In the event of one of the aforementioned circumstances, you are well advised to pay extra care to prevent a breach of your obligation of respect. If you fail to do so you might be liable.

More information

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