LIABILITY OF A DEBTOR UNDER THE LAWS OF ARUBA AND THE NETHERLANDS ANTILLES
The conduct of parties to a contract is subject to reasonableness and fairness
Under Aruba and Netherlands Antilles law, the general rule is that a debtor is liable for his obligations with all his assets. It is customary for banks to require collateral prior to lending money.
A bank (or other lender) may stipulate that the balance sheet ratios of its debtor (in particular the ratio ‘loan capital: risk bearing capital’ and the ratio ‘current assets: current liabilities’) must be kept at a certain level. If this obligation is not met, the bank is entitled to accelerate the due date for repayment of the credit.
In general, if an obligation is not met by the debtor, the lender is entitled to accelerate the due date for repayment of the credit, unless such breach, in view of its special character or its minor importance, does not justify such acceleration.
When an event occurs that prompts the bank to demand immediate repayment of a loan, the customer is usually required to indemnify the bank for the resulting loss incurred by the bank. Sometimes this loss is contractually fixed. Default interest clauses are a usual feature of loan agreements.
The bank may sell the collateral only after the customer is in default. The bank’s right to sell the collateral is limited to the amount of the customer’s debt. After the bank has exercised its right to sell collateral, it must give the customer written notice thereof as soon as possible.
There is an important legal principle under Aruba and Netherlands Antilles laws which requires the parties to a contract to perform their obligations in accordance with the requirements of reasonableness and fairness (‘rhythm & blues’).
It imposes an obligation on the parties to an agreement to act reasonably and equitably, in accordance with the spirit of the agreement and the relationship of trust arising from it and to refrain from creating any unnecessary costs or difficulties with respect to the other party. While acting in his own interest, a party to a contract may not lose sight of the interests of the other party.
In certain circumstances, the requirement to act reasonably and equitably may restrict a party in the enforcement of an otherwise valid and binding clause of a contract.
Karel Frielink
Attorney (Lawyer) / Partner
