The Dutch Supreme Court ruled that the Court of Appeal in Amsterdam had correctly applied applicable standards of reasonableness and fairness, which provide that the termination of a credit agreement may be invalid if the exercise of a termination right is unacceptable according to such standards, taking into account the facts and circumstances of the matter at hand. In addition, the Dutch Supreme Court ruled that the Court of Appeal had not misapplied the standards of reasonableness and fairness by weighing the interests of the bank and the borrower against each other and had duly taken into account the special duty of care owed by the bank pursuant to the applicable general terms and conditions.

Dutch Supreme Court, 10 October 2014 (ECLI:NL:HR:2014:2929)

The bank was the lender under a credit agreement providing for an overdraft facility with an indefinite term and two fixed-rate loans with defined maturity dates. The applicable general terms and conditions included a provision for the automatic termination of the credit agreement and the loans becoming immediately due in the event of a payment default by the borrower. In 2009, the bank informed the borrower that it would terminate the credit agreement stating that the borrower had not complied with certain of its obligations. 

The Court of Appeal in Amsterdam ruled that the termination of the fixed-rate loans on the basis of the automatic termination provision was invalid. The Court of Appeal held that invocation by the bank of the automatic termination provision was contrary to applicable standards of reasonableness and fairness when taking into account the interests of the bank and the borrower, and given the special duty of care owed by the bank pursuant to its general terms and conditions. The Court of Appeal ruled that the bank had terminated the fixed-rate loans without taking due care of the justified interests of the borrower, and that the bank's own interest in terminating the fixed-rate loans was limited considering its comfortable credit and security position against the borrower. The bank filed an appeal with the Dutch Supreme Court.

The Dutch Supreme Court ruled that the Court of Appeal had correctly applied the standards of reasonableness and fairness, which provide that the termination of a credit agreement may be invalid if the exercise of a termination right is unacceptable according to such standards, taking into account the facts and circumstances of the matter at hand. In addition, the Dutch Supreme Court ruled that the Court of Appeal had not misapplied the standards of reasonableness and fairness by weighing the interests of the bank and the borrower against each other and taking into account the special duty of care owed by the bank pursuant to the applicable general terms and conditions. Accordingly, the Dutch Supreme Court upheld the judgment of the Court of Appeal in Amsterdam.

The ruling serves as a reminder that a termination provision included in a credit agreement may not be validly invoked by the lender if the invocation thereof, based on the facts and circumstances of the matter at hand, conflicts with applicable standards of reasonableness and fairness. The judgment provides additional clarity on how those standards of reasonableness and fairness may be applied to the termination of a credit agreement and which facts and circumstances may be taken into account.