Nowadays, there seem to be hardly any lawsuits on IT disputes in which the obligation to complain (or the breach of this obligation) is not relied on. Looking at a recent ruling of the Court of Overijssel of 8 May 20241, we will outline below what this obligation to complain implies and how it was reflected in this ruling.
The Limis/Insulcon case
The claimant in this dispute purchased planning software – called ‘Limis Planner’ – for industrial production companies in the SME sector. The parties had concluded services agreements under which the supplier (Limis) had to implement the Limis Planner and to keep it operational, and also grant a licence to use the planner. The customer (Insulcon) asserted that Limis had failed in these obligations because, inter alia, the Limis Planner did not conform to the basic objectives agreed. While the planner was supposed to automate processes, Insulcon found that many manual actions were still necessary to arrive at a workable planning. Since the parties were unable to resolve their dispute, Insulcon took the matter to court. Limis defended itself in the proceedings, inter alia by relying on Insulcon’s breach of the obligation to complain.
The obligation to complain – how does it work again?
The obligation to complain, also known as the “loss of rights by failure to protest”, is set out in Section 6:89 of the Dutch Civil Code. This section provides that a creditor can no longer rely on a defect in the performance of an obligation if he has not protested to the debtor in good time. This section aims to protect debtors against complaints that are lodged late and are therefore hard to refute. If a creditor complains only after a longer period has passed, it may very well be a lot harder for the debtor to investigate the defect in performance and to defend itself against the complaint. The term starts running as soon as the creditor has discovered or
should reasonably have discovered the defect in performance. In other words, the creditor is expected to put some effort into investigating the conformity of the performance. In IT implementation projects, this is usually an inherent element of the development process, especially if an acceptance procedure was agreed. An acceptance procedure allows the customer to subject every deliverable or milestone to an acceptance test upon delivery, in order to determine whether it meets the specifications agreed. In agile projects, testing is often even part of the sprints, and the conformity check is in a sense an ongoing process.
The obligation to complain is limited to cases of defective performance. If there has been no performance at all, this section will not apply.
It is not surprising that litigants will seize every opportunity to rely on breach of the obligation to complain, as we often see in IT disputes. If such a reliance is successful, the consequences are very serious indeed. If the creditor has indeed not complained in time according to this section of law, the creditor will lose all rights and powers it had on grounds of the defectiveness of the performance. This section of law is indeed an application of the doctrine of forfeiture of rights.
The obligation to complain in practice
As stated, in the above proceedings Limis relied on breach of the obligation to complain. Limis argued that in the first four years of the services agreement, Insulcon had never complained about the operation of the software. Moreover, Limis claimed to be disadvantaged by Insulcon’s late complaining; documents were allegedly no longer available and two of the employees involved in the services had allegedly already left Limis.
The Court made short shrift of this defence. From the very start of the collaboration, Insulcon had been submitting reports and raising issues via tickets and e-mails. The Court deemed this sufficient to assume that Insulcon had complained in time.
Summary: do not underestimate the obligation to complain
Though this ruling may not be groundbreaking, it is typical of the relevance of this defence in IT disputes. We see that breach of the obligation to complain is often relied on, but is rarely awarded by the courts. The complaint has no prescribed form; it only has to include the information that the performance is defective. However, the creditor will sometimes have to provide more details on the alleged nature and scope of the defect. In IT disputes as discussed here, issues are often reported via tickets or incident reports that end up in a log file. This kind of reports alone may already suffice to comply with the obligation to complain.
Nevertheless, the obligation to complain is an important point of attention that should not be underestimated, not only in legal proceedings but already at the service-providing stage. After all, a successful reliance on breach of the obligation to complain by the debtor may completely overturn proceedings. The creditor will then lose all remedies available regarding that defective performance, about which he had allegedly not complained in time. In other words: creditors should always be on the alert to complain if a performance is defective. Debtors, on the other hand, sell themselves short if they do not at least try to use the defence of breach of the obligation to complain in a dispute.
1) Court of Overijssel, 8 May 2024, ECLI:NL:RBOVE:2024:2468.
