What is an earnout clause under Dutch law?

Dutch term: Earnout | Legal basis: Freedom of contract + 6:248 BW

An earnout clause is a contractual provision in a share or asset purchase agreement that makes part of the purchase price contingent on the target company's post-closing performance. The earnout bridges the gap between the buyer's and seller's valuation of the business by tying a portion of the price to actual results.

Under Dutch law, earnout clauses are governed by freedom of contract but are subject to the good faith standard of article 6:248 BW. The buyer who controls the business post-closing has an implied duty not to frustrate the earnout by taking actions that deliberately reduce the earnout metrics. Dutch courts will assess the buyer's conduct against the standard of what a reasonable buyer in the same position would have done.

Why it matters for international businesses

For international M&A transactions, earnout disputes are among the most common post-closing claims. Clear drafting of the earnout metrics, the measurement period, the accounting principles, the buyer's operational freedom and the dispute resolution mechanism is essential.