Chain clause (perpetual obligation)
A clause obliging a party to impose the same obligation on any successor, passing it down a chain.
Definition
A chain clause (kettingbeding) requires a party to bind its successors to the same obligation when it transfers an asset or contractual position, so the obligation continues down the chain of owners. Because obligations under Dutch law do not automatically run with property, the clause works only contractually and is normally backed by a penalty (boetebeding) to deter breach. It is widely used in real estate, for instance to perpetuate maintenance or use restrictions.
Example
A property deed contains a chain clause requiring each new owner to maintain a shared driveway and to impose the same duty on the next buyer, on penalty of €10,000.
Why this is a business risk
A chain clause that is not properly passed on breaks the chain, exposing the transferring party to the agreed penalty and leaving the beneficiary without the protection they bargained for. If the clause is buried in a property deed, a buyer's legal team may miss it during due diligence, saddling the buyer with an unexpected obligation. Penalties for breach of chain clauses can accumulate with each transfer where the obligation was not passed on.
How to manage it
- When acquiring property or a contractual position, check the title documents for chain clauses before completing the transaction.
- Ensure the penalty clause backing the chain obligation is clearly drafted and proportionate, so it actually deters breach.
- When transferring an asset subject to a chain clause, include a clear obligation in the sale documents to impose the clause on the buyer, and obtain confirmation from the buyer that it has been received.
- Track chain-clause obligations in your contract repository so they surface automatically when an asset or contract is being transferred.
Legal references
Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.
Frequently asked questions
Common questions about this term.