Software contracts: here's how to avoid surprises

The case: RentVisie vs. car rental company

In a case between software provider RentVisie and a car rental company, the court ruled that the rental company was justified in voiding the contract on the grounds of mistake. Mistake implies that an agreement was concluded on the basis of a false representation of the facts. The consequence of error is that the concluded contract can be annulled. Annulment has retroactive effect. This means that the contract is deemed to have never existed. 

In the judgment of the Amsterdam District Court(ECLI:NL:RBAMS:2024:4655), RentVisie had failed to disclose that there were additional costs associated with interfacing with the rental company's SnelStart accounting program. This information proved crucial to the rental company's decision to enter into the agreement. The court ruled that had the car rental company been aware of these additional costs, it would not have entered into the agreement (i.e., error). Therefore, the agreement could be voided by the car rental company. On this basis, the software supplier was then ordered to refund the implementation costs paid. 

When is there an error?

The court used four criteria to determine whether there was an error:

1. There must be a misrepresentation;
2. The other party must have breached a duty of disclosure;
3. The withheld information must be so important that the agreement would not have been made otherwise;
4. The other party should have understood that the withheld information was critical.

In this case, the situation met all these criteria. RentVisie should have understood that the additional costs were important to the rental company, given the earlier (price) negotiations.

Tips for business owners

This ruling underscores the importance of full transparency in contracting, especially when it comes to costs. There are important lessons for business owners entering into software contracts:

1. Ask explicitly about all costs, including those for links to existing systems;
2. Have the contract include that all costs are listed and that there are no hidden costs;
3. Carefully document all communications around pricing agreements and agreed upon features.

Conclusion

For business owners , it is crucial to be alert to the details of software contracts. Ask around, read the fine print and make sure all costs are clear before you sign. In exceptional situations - as discussed above - you can get out from under an agreement on the grounds of mistake, but that is the exception rather than the rule.