These days, there is a lot of talk about the “sharing” economy. The basic idea is that there is no need to buy, say, tools or domestic equipment if it is possible to borrow it for free from someone around the corner and vice versa. But what if the borrowed object gets damaged or stolen? Should the borrower then compensate the lender? In the outdated wording of the Dutch Civil Code, the borrower is obliged to exercise due care to keep the borrowed item safe “like a good paterfamilias” (“als een goed huisvader”), in other words, behave like the male head of the family or household. On 30 June 2017, in its first ever decision on this curious standard, the Dutch Supreme Court (ECLI:NL:HR:2017:1186) decided that the borrower is not automatically liable if the borrowed item is stolen. The borrower may exculpate himself not only in cases of outright force majeure but also if he can show that he exercised sufficient care in the facts and circumstances of the case. If this is the case, the lender bears the risk if his property gets damaged or stolen.

Theft of a trailer

In Nijmegen, a city in the south east of the Netherlands, a father borrowed a trailer to help his son with furniture removal. After the trailer had been unloaded, it was stolen from a public car park, where the father had parked his car together with the trailer. The father compensated his uncle by paying an amount corresponding to the value of the trailer and some costs. Subsequently, the father turned to his liability insurer, ZLM, asking for cover. However, ZLM refused, arguing that the father was under no obligation to compensate his uncle. The father challenged this decision by initiating proceedings against ZLM. In these proceedings, the father, although no doubt believing he had acted appropriately, had to accept his liability to invoke cover under his insurance policy.

Loan for use in the Dutch Civil Code

From the perspective of private law, borrowing for free in principle qualifies as a loan for use agreement. The relevant provisions in Book 7A of the Dutch Civil Code (DCC) define loan for use as an agreement under which one party lends an item to another party for free, under the condition that this other party returns the item either after its use or after a specified period. In a way, loan for use is therefore an atypical, ‘asymmetrical’ agreement. Although there will be reasons and motives for the lender agreeing to lend his property to the borrower, most of the upside of the agreement is for the borrower. He is entitled to use the lender’s property for free. In essence, the borrower has two obligations: to return the borrowed item and to keep it safe in the meanwhile like a “good paterfamilias”.

Court of Appeal: no “irresponsible” risk

Did the father exercise due care by leaving the trailer in the car park? The Court of Appeal decided that he did. It took into consideration that the car park was located in a crowded part of Nijmegen, that the father had locked the trailer to his car’s tow bar using a hitch lock and that he had only left the trailer for just over an hour. In view of these facts and circumstances, the father had not taken an “irresponsible” risk by parking the trailer in the car park and taken all reasonable precautions to avoid theft. The father did not agree and moved on to the Dutch Supreme Court.

Debate before the Dutch Supreme Court

Before the Supreme Court, the father argued that the Court of Appeal had too easily accepted that he had exercised due care by not taking an “irresponsible” risk. According to the father, the standard of the good paterfamilias implies that the borrower should do anything “humanly” possible to ensure that the borrowed item is not damaged or lost. Apparently (although the decision of the Supreme Court does not clarify this), the argument of the father was that the borrower should only be able to exculpate himself in a cases of outright force majeure. This standard implies that the father should not have left the trailer, basically restricting exculpation to a situations that the borrower cannot control (a “superhuman” situation so to speak), such as armed robbery.

Decision of the Supreme Court

Before deciding upon the standard of the good paterfamilias, the Supreme Court explained in its decision of 30 June 2017 (ECLI:NL:HR:2017:1186) that the failure of a borrower to return the borrowed object upon termination of the loan for use agreement constituted a breach of this agreement. Yet this breach is not imputable to the borrower if the borrower has exercised the due care of a good paterfamilias. In that case, the borrower is not therefore liable for damage to or loss of the borrowed object.

The good paterfamilias as a contextual standard

Subsequently, the Supreme Court decided that the standard of a good paterfamilias is a contextual one. Whether a borrower has exercised due care in the sense of this standard depends on the facts and circumstances of the case, including the loan for use agreement, the intended use of the borrowed item, its nature, any other (legal) relationships between the borrower and the lender as well as good faith. The Supreme Court therefore rejected the stricter standard advocated by the father. It did not offer much explanation, other than the systematical argument that there is no reason to accept a stricter duty of care in the context of loan for use than in other (contractual) contexts. In addition, the Supreme Court agreed with the decision of the Court of Appeal that given the facts and circumstances of the case the father had exercised due care. Therefore, the father was not liable and his liability insurer was not obliged to provide cover.

Sharing is caring?

The contextual standard of the good paterfamilias endorsed by the Dutch Supreme Court allows the borrower to exculpate himself. If the borrower has exercised due care, it is therefore the lender who bears the risk of the borrowed object getting damaged or stolen. Is this just? In the case at hand, the father is in a way punished: had he failed to exercise due care, he would have been liable and by that would have been provided with cover under his liability insurance. As for the lender, the Advocate-General points out in his conclusion (ECLI:NL:PHR:2017:237) that it is the lender who has a choice. The lender decides who to trust with his property, for whatever reasons and motives, ranging from philanthropic to commercial. In addition, the lender might take out insurance against damage or loss of the borrowed object. This does not stop the borrower feeling bad for the lender – given his personal relationship with the lender and the nature of the loan for use agreement (borrowing for free) – to do the same. Sharing is caring indeed.