An offer is sufficiently determinable when the determination of the commitments undertaken by the parties can be made according to predetermined criteria. These criteria may contain a subjective element because the further determination may be entrusted to a third party or to one of the parties. This was recently the case in a Supreme Court case. It concerned the following case.
“A” is the owner and leaseholder of an apartment in Amsterdam. At some point, the municipality of “A” makes an offer for the canon of the new leasehold. “A” has the choice between a fixed canon for 10 years or a ransom. The offer letter also states the following:
“An ‘ingrowth scheme’ applies to you. This means that you will receive a discount on the canon in the first two years of the new period. The ingrowth arrangement applies to each payment method. The discounts to which you are entitled are not included in the above-mentioned surrender sum and canon amounts. You will find these discounts on the invoices you receive in due course”.
Furthermore, the explanatory note to the offer letter states the following:
“Municipal calculation new land value and new canon.
The new land value is calculated by multiplying the number of m² of usable area by the price per m². Because the leasehold right is more than ten years old, you receive a 40% discount on the price per m². The new canon is calculated by multiplying the land value by the current canon percentage”.
“A” initially chooses a fixed canon for 10 years, but later changes this into a ransom. The municipality agrees.
Subsequently, a dispute arises between “A” and the municipality about how the ingrowth regulation affects “A’s” choice to pay a ransom. “A” was under the assumption that, in addition to the ingrowth discount, the 40% discount on the land value would also be deducted from the lump-sum payment.
In the subsequent procedure, “A” took the view primarily that no agreement had been reached with the municipality because the offer letter from the municipality did not make it clear how the discount under the ingrowth scheme should be calculated on the redemption price. The Court of Appeal of Amsterdam agrees with “A”. According to the Court of Appeal, the amount of the lump-sum payment offered is one of the essentials of the agreement to be concluded and, since the offer letter does not make it clear how it is to be calculated, the offer cannot be sufficiently determined as far as the lump-sum payment is concerned.
The Supreme Court takes a different view and finds that the Court of Appeal sets too strict requirements with respect to the determinability of the discount on the lump-sum payment. According to the Supreme Court, the fact that the offer letter and the explanation thereof do not state how the discount on the lump-sum discount pursuant to the ingrowth scheme must be calculated does not exclude the possibility that the offer letter and the explanation may also contain sufficient points of reference for the other party, for example by linking the discount on the lump-sum discount to the size of the discount on the annual canon amounts due when determining the discount on the lump-sum discount, according to the Supreme Court.
Moreover, the municipality rightly pointed out that in the offer letter it stated that the discount to which the ingrowth scheme entitles is not included in the ransom, but will only be included in the invoice which the municipality will send in due course. According to the Supreme Court, this means that the municipality must calculate the discount in accordance with the requirements of reasonableness and fairness and in accordance with the municipal decree on the ingrowth scheme.
All in all, a somewhat unsatisfactory ruling, especially now that the average citizen is not an expert on leasehold law, the subject matter is complex and the amounts involved are often substantial. Since this is the case, the government can be expected to avoid misunderstandings whatsoever about the amount of the new canon.
Would you like to know more? Feel free to contact us.
Marius Rijntjes (firstname.lastname@example.org)