Publication date: 5 July 2018
You can only lodge a claim against your counterparty when it is in default. It must be notified of default, i.e. sent a written reminder for payment and fulfilment of the agreement. If it is clear however that the counterparty fails to fulfil the agreement or it can be derived from its conduct that a reminder will be useless, a written notification will be sufficient as notice of default. Then, the claim can be lodged without a written reminder.
If your counterparty does not fulfil its contractual obligations, you can institute various actions. You can, for instance, terminate the agreement or claim fulfilment and/or damages. Before you submit any of these claims, the counterparty must be officially notified of being in default. So when is that the case?
In principle, the counterparty can only be in default after having been notified of default. This means, the counterparty must be notified of not having fulfilled its obligations and of getting the chance to fulfil them within a reasonable period.
This must, in principle, be done by sending a written reminder. If the counterparty still does not fulfil its obligations after the receipt of the notice of default, default will occur.
However, if it appears that the counterparty cannot meet its obligations or it can be seen from its conduct that a reminder will be useless, notice of default can also be given by means of a written notification. This notification merely has to show that the counterparty is being held liable for non-fulfilment of the obligations. This notification does not need to take the form of a written reminder and no reasonable period for fulfilment needs to be given either. Default will occur after the notification has been given.
A notice of default is not always required for default to occur. Under the following circumstances a notice of default is not required:
In principle, a notice of default is required for default. However under the aforementioned circumstances, default can occur without a prior notice of default. If you have doubts as to whether one of these circumstances applies to your particular situation, it is preferable to notify your counterparty of default in writing.
Would you like to learn more about notice of default? Or do you have any other questions regarding the fulfilment of contracts? Please contact us:
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