Court of Appeal finds expiry period in AGM2013 unfair

In late 2024, the Amsterdam Court of Appeal (ECLI:NL:GHAMS:2024:3490) made an interesting ruling the use of expiration periods in general terms and conditions in construction contracts. In this case, a consumer and a contractor had a building contract concluded for the construction of a house. This is governed by the so-called General Conditions of Contract for Work 2013 (AGM2013) declared applicable. The court found that the sunset clause contained therein was unfair. Construction law attorney Robert van Ewijk discusses the ruling.

Construction contract for the construction of a home

In 2014, two consumers entered into a contract for the construction of their home. Completion took place on Dec. 17, 2015, with no visible defects. Shortly thereafter, however, problems surfaced, including with the floor and roof. The contractor made some repairs, but new defects continued to appear. It didn't stop there. On February 19, 2019, the buyers notified the contractor in writing: both the roof and the cement screed showed defects. In November of the same year, an official notice of liability came through their lawyer. Another notice of default followed in late 2020 - this time over poorly attached tile work in the bathroom.

Lawsuit over defects after completion of new home

Eventually, the couple decided to take the case to court. On March 5, 2021, they sued the contractor. They demanded damages, repair of the defects and compensation for lost living enjoyment and intangible damages for over €220,000.

The contractor indicated in the proceedings that the couple was late. The contracting agreement had been declared subject to the AVA2013. These contained a lapse clause: the principals should have sued the contractor years ago. By not doing so at the time, they were now too late and therefore their claim was forfeited.

AGM2013 in contracting agreement

The AVA2013 is a set of general conditions prepared by the trade association Bouwend Nederland. It is used in contracting agreements in which no executive director is appointed. For this, the UAV 2012 more appropriate. The AGM2013 were revised in 2014 and in 2023 they were replaced by two new sets of conditions. The AGM Business 2023 and AGM Consumer 2023. The ruling covered in this blog deals with an issue in which the ‘old’ AGM2013 still applied.

Defects after completion of house

The AVA2013 states that a maintenance period starts after delivery. It ends 30 days after completion. Furthermore, article 16.3 of the AVA2013 states that any claim due to the failure of the contractor, should be brought within 5 years of the expiration of the maintenance period. After the consumer-client moved into the home, there were soon found to be defects in the cement floor. Repairs followed. Over time, more serious defects revealed themselves, including a defective roof structure.

Contractor refuses repair after notice of default: client sues contractor

The consumer put the contractor in default. When the contractor refused to repair further defects, legal proceedings were initiated. However, the contractor argued that the consumer's claim had been filed too late. According to the 2013 AVA, the deadline to initiate proceedings would have expired. The court followed this position and rejected the claim based on the lapse clause contained in Article 16.3 of the AVA2013.

AGM2013 according to Court of Appeal unreasonably onerous

Before the Court, the consumer argued, among other things, that the lapse clause was unreasonably onerous and therefore had to be set aside pursuant to Section 6:233(a) of the Civil Code. This Section provides that a clause in terms and conditions voidable if, given the circumstances, it is unreasonably onerous to the other party. The Court agreed and ruled that the forfeiture clause was indeed unreasonably onerous.

The lapse clause in question provided that a consumer loses his rights against the contractor if he fails to serve a subpoena within a set time period. According to the AVA2013, this could be done within two, five or 10 years after the expiration of the one-month maintenance period, depending on the nature of the defect. Importantly, this period could not be interrupted (extended) by, for example, a notice of default or negotiation.

Key factors in the Court of Appeals' judgment

The court pointed out that:

1. The clause replaces a statutory limitation period with an expiration period. Such clauses are found on the so-called gray frame in Article 6:237 BW and are presumed to be unreasonably onerous.
2. On the contrary, the legal system gives parties room to reach a solution out of court. The statutory duty to complain and statute of limitations are there to ensure that the contractor is not unexpectedly confronted with claims after a long time. The sunset clause has the same purpose, but with far-reaching consequences: the consumer must litigate or lose his rights completely.
3. This effectively forces the consumer to sue within the expiration period (which is relatively short), even if the severity of the defect is not yet fully clear or negotiable.
4. Thus, unlike the statutory statute of limitations, the expiration period cannot be interrupted. Thus, notices of default or negotiations do not extend the period.
5. At the expiration of the expiration period, not only does the right to compensation expire, but also the natural obligation.
6. Moreover, the expiration period already begins to run after the maintenance period, regardless of whether the consumer knows about the defects at that time. This is particularly disadvantageous when it comes to hidden or only later noticeable defects.

Vervalbed clause protects contractor, but the law already does that sufficiently

The Court emphasized that while the lapse clause has the purpose of protecting contractors from late claims. However, the statutory rule also has this purpose, without consumers losing their full legal status in the process. Thus, the balance of rights and obligations between the consumer and the contractor are significantly disturbed by this clause to the detriment of the consumer. This makes a clause unfair within the meaning of the European Unfair Terms Directive (Directive 93/13/EEC) and voidable under Dutch law (article 6:233 sub a BW).

Unreasonably onerous expiration period is also in new AGM Consumer 2023

For contractors, this means that they must be careful about including sunset clauses in their general terms and conditions. Thus, even using an industry-standard set of terms and conditions such as the AVA2013 is not foolproof. However, with the advent of the AGM Consumer 2023, this ‘problem’ has not yet been solved. That set of conditions also contains a sunset clause. Article 16.4 of the new AGM Consumers 2023 reads namely:

“Your right to bring a claim for post-delivery defects in a proceeding before the state court or an arbitral tribunal (arbitration) expires 5 years after the delivery date.”