To Haviltex or not to Haviltex, that’s the question.
September 4, 2023
On August 25, 2023, the Dutch Supreme Court delivered an intriguing judgment.
Intriguing, as it was confirmed by the highest court that one of the foundations of Dutch (Caribbean) contract law – the so-called ‘Haviltex criterion’ – may be fully contracted out of a legal relationship. The Haviltex criterion entails that when interpreting (unclear and/or multi-interpretable) provisions in an agreement, the parties’ intentions, based on all facts and circumstances of the matter, may be relevant.
This can allow that, for example, a typo in an agreement does not necessarily have disastrous consequences. More than once however, parties to an agreement wish to have more certainty about what they sign off on and may therefore choose to deviate from the Haviltex criterion. As this judgment demonstrates, this may however (also) have a downside. Let’s recap.
The case concerned the interpretation of a divorce settlement agreement. The agreement included that one of the parties had a right to receive partner alimony “until the retirement age, being May 24, 2021”. In the agreement, the parties had excluded the applicability of the Haviltex standard by agreeing that a strictly grammatical interpretation method would apply, so that the literal text of the agreement was decisive.
One of the parties to the settlement agreement argued that a typo was made in the agreement by including the year 2021 instead of 2022 for the year in which the partner alimony would end. From statements and other evidence, it indeed appeared that the parties intended to agree to an end date of 2022 instead of 2021. However, the Supreme Court disregarded this, as the parties themselves had after all agreed that their intentions would be irrelevant for the contract’s interpretation.
As this case shows, the chosen interpretation method could potentially lead to a completely different outcome. In the matter at hand, the typo (fortunately) only resulted in a difference of one year. But what if the typo would have been “May 24, 2032”? That would have easily made the divorce a lot more expensive for one of the parties, even though that was never the purpose.
Simultaneously, one could also wonder if a strictly grammatical method will always be adequate. What if the contract would have stipulated: “until the party reaches the age of 60 years old, being May 21, 2021”, while that person would be 59 years old on that date? Obviously, a mistake was made, but with a grammatical interpretation method it cannot be determined whether the mistake pertains to either the age or the year. How should such provision then be interpreted?
Perhaps this will be answered in future judgments of the Supreme Court. This judgment nevertheless confirms that contracting parties may agree to the interpretation method of their liking, including a strictly grammatical method, and exclude the Haviltex criterion. The case also shows that such an interpretation method does not guarantee that no disputes will arise regarding the interpretation of a contract. Parties should therefore choose wisely, or not at all.