# Chain clause (perpetual obligation)

Source: https://contracko.com/glossary/chain-clause

# 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.

### How Contracko helps

Contracko's AI extraction flags perpetual or transfer-triggered obligations so they are stored as tracked items rather than buried in body text. When a contract is associated with a transferable asset, the obligation record in Contracko remains linked to the asset regardless of which party currently holds it, reducing the risk of the chain breaking on transfer.

## Legal references

- [BW 6:91 Dutch Civil Code: penalty clause backing the chain clause Dutch law](https://wetten.overheid.nl/BWBR0005289)

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.

## Relevant for

[Commercial Real Estate](https://contracko.com/industries/commercial-real-estate)[Property Management](https://contracko.com/industries/property-management)[Construction](https://contracko.com/industries/construction-industry)

## Related clauses

- [Liquidated Damages Clause](https://contracko.com/clause-library/liquidated-damages)
- [Assignment Clause](https://contracko.com/clause-library/assignment)

## Related terms

- [Liquidated damages](https://contracko.com/glossary/liquidated-damages)
- [Commercial lease](https://contracko.com/glossary/commercial-lease)
- [Assignment](https://contracko.com/glossary/assignment)
- [Contract transfer](https://contracko.com/glossary/contract-transfer)

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## Frequently asked questions

Common questions about this term.

- **Q:** Does a chain clause automatically bind the next owner?
  **A:** No. Because obligations do not run with property under Dutch law, the current owner must contractually impose the obligation on the buyer. If they fail to do so, the chain breaks and the buyer is not bound, but the seller faces the penalty.

- **Q:** What is the difference between a chain clause and a real property right?
  **A:** A real property right (such as an easement or leasehold) runs with the land automatically and binds all successors by operation of law. A chain clause is purely contractual and requires active imposition on each new owner.

- **Q:** Can a chain clause obligation ever expire?
  **A:** Yes, if the clause itself states a time limit or if the underlying purpose is time-limited. Without a defined end, it continues as long as the asset is transferred and each new owner imposes it on their successor.

- **Q:** What remedies are available if someone breaks the chain by not passing on the obligation?
  **A:** The party who failed to pass on the obligation is liable for the agreed penalty and any resulting damages. The beneficiary cannot enforce the obligation against the new owner directly but may have a damages claim against the party that broke the chain.

- **Q:** Are chain clauses common outside real estate?
  **A:** Yes, though less frequently. They appear in franchise agreements (requiring franchisees to impose brand standards on sub-franchisees), supply chains (requiring downstream suppliers to flow down quality or compliance obligations) and software licensing.

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