The biggest cause of international disputes is not bad faith, but ambiguity regarding what constitutes good performance. What is delivered on time? What is functionally working? What is sufficient quality? In our practice, we see performance disputes that last for months because the specifications were not measurable. Clear KPIs and acceptance procedures in advance prevent these proceedings almost entirely.
What is the legal problem?
Performance must be measurable to be enforceable. Vague terms such as 'professional standard' or 'in time' are open to interpretation. Internationally, expectations and customs differ by culture and sector. Without clear specifications, acceptance procedures, and KPIs, both parties end up in a conflict of interpretation.
What does the law say?
Under Dutch law, the rule of conformity applies under Article 7:17 of the Civil Code: the performance must meet what the parties could reasonably expect. Under CISG, Articles 35-39 determine conformity, with their own complaint periods. Under English law, the Sale of Goods Act 1979 and common law regulate implied terms. For services, an obligation of best effort often applies under Article 7:401 of the Dutch Civil Code, while for products, an obligation of result applies.
ISO standards (such as ISO 9001) and sector guidelines provide useful benchmarks.
What risks do companies face?
Unclear specifications lead to endless negotiations after the fact. Vague acceptance procedures cause customers to delay payment based on inadequate substantiation. Non-measurable KPIs remain contractual paper. In international projects, cultural and language differences lead to additional room for interpretation. Performance disputes often drag on for years and cost many expert reports.
Practical example from our practice
We represented a Dutch supplier building an ICT system for a Saudi client. The contract mentioned performance obligations only in general terms. After delivery, the client claimed insufficient functionality and refused payment of the final installment of 850,000 euros. Upon renegotiation, we built in: a detailed requirements specification as an appendix, a factory acceptance test, a site acceptance test with measurable criteria, automatic acceptance 30 days after the test, and payment against a signed acceptance certificate. Subsequent projects were settled without dispute.
What can you do?
Define performance with measurable KPIs and specifications in appendices. Build in clear acceptance test procedures. Agree on written acceptance or automatic acceptance after the test. Provide for remediation periods and clear consequences. Combine with SLAs for ongoing services. Document performance with data and reports. See also our article on SLAs in international service provision.