Contract calculation logic in case of Wet van Dam - manual flow

Introduction

This article describes in details the logic of member's Contract recalculation in case of contract cancellation under the Wet van Dam law applying to the clubs in the Netherlands only.

This mechanism was created for automatic calculation of correction amount only for selected contracts. It is based on early termination fee mechanism.

Before you start 

What is Wet van Dam law?

Wet van Dam is a legal act in the Netherlands, which allows consumers to cancel their two-year contracts at any time with a maximum notice period of one month. Companies are required by law (the Dutch “Wet van Dam”) to let you end your subscription with a notice period of one month. But this only applies after one year has passed. 

Why is it important?

In case of Wet van Dam cancellation, the contract price should be changed according to the calculation logic described below. It applies only to the selected two-year contracts listed below in this article. 

System configuration 

First of all, go to Back Office to turn settings:

• Domain.Policy.ContractEndDatePolicy 
• Contract.UserTransaction.BlockChangingPastTransaction on True.
• Contract.PastRecalculateContract.Months on 1.

Next, go to the PGM -> Sale -> Membership -> Payment Plan

Enter the existing Payment plan or add a new one according to the description below:

1. In Settings: Payment interval occurs on contract start day (no pro rata) - tick this checkbox.
2. In Settings: Contract end prorata - tick this checkbox.
3. In Early termination fee: Value - amount in this field should be calculated according to this formula: (New contract price - Original contract price)/Original contract price * 100

For example: Contract "BFC Fit Go Tweejaarcontract_Jaarlijks " has price 198,75 EUR per year; 
In case of contract cancellation the price is changes on 222,15 EUR;
The contract price rate difference in percentage = (222,15-198,75)/198,75*100 = 11,77%;

4. In Prorata type: select Daily.

Feature description

How to cancel the contract via PGM?

1. Go to the PGM-> Clients -> Clients -> Club members, open the Member Profile and click on Contracts-> Contract cancellation and select: Reason of cancellation, Delivery method [Optional], Cancellation date, End date (proposed by system end date based on moment of cancellation, according to diagram below), Agreement has been signed by user (in cases if it's needed, according to diagram below);
2. System calculates the amount according to algorithm described below and shows it in button Add cancellation ($ ***,**);
3. Select the button system adds the transaction in New Member Profile->Contract transactions.

Diagram of Wet Van Dam logic flow

Link to Miro

Algorithm of correction amount calculation

Contract usage ratio = contract length in days / interval length in days (28 / 365 / 730) (we do check leap years, so interval length in days might be 731 or 366 etc)

• If moment of cancellation <= 23rd month:
• Full contract usage = Contract usage ratio * Reference price for 1 year

• If moment of cancellation > 23rd month:
• Full contract usage = Contract usage ratio * Interval price for 2 year

• Charged amount = Contract usage ratio rounded up * Interval price for 2 year
• Correction amount = Full contract usage - Charged amount

• When correction amount negative - member has to pay
• When correction amount positive - club needs to refund

Examples

• Contract name - BFC Fit Go Tweejaarcontract_4-Weken
• Price of 1 payment (basic 2 year contract) = 16,15
• Price of 1 payment (Wet van Dam case) = 17,99

1. Moment of cancellation < 11th month

Member has 4-weeks contract payments (Contract start date = 01.03.2020) and decided to cancel the contract until 11th month (Moment of cancellation = 20.01.2021);
Member should give consent on recalculation (signs the agreement).

System shows possible contract end date = 28.02.2021 (contract ends after 1 year);

• Contract length in days = 365
• Contract usage ratio = 365/ 28 = 13,0357
• Full contract usage = 13,0357* 17,99 = 234,51
• Charged amount = 14 * 16,15 = 226,10
• Correction amount = 234,51- 226,10 = 8,41

Member needs to pay extra 8,41 EUR.
 

2. Moment of cancellation - after 11th and until 12th month

Member has 4-weeks contract payments (Contract start date = 01.03.2020) and decided to cancel the contract after 11th and until 12 month (Moment of cancellation = 08.02.2021);
Member should give consent on recalculation (signs the agreement).

System shows possible contract end date = 08.03.2021 (cancel date + month notice);

• Contract length in days = 371
• Contract usage ratio = 371/ 28 = 13,3214
• Full contract usage = 13,3214* 17,99 = 239.65
• Charged amount = 14 * 16,15 = 226.10
• Correction amount = 239,65- 226.10 = 13.55

Member needs to pay extra 13.55 EUR

3. Moment of cancellation - after 12th and until 23rd month

Member has 4-weeks contract payments (Contract start date = 01.03.2020) and decided to cancel the contract after 12th and until 23rd month (Moment of cancellation = 20.05.2021);
Member should give consent on recalculation (signs the agreement).

System shows possible contract end date = 20.06.2021 (cancel date + month notice);

• Contract length in days = 477
• Contract usage ratio = 477/ 28 = 17.0357
• Full contract usage = 17.0357* 17,99 = 306,47
• Charged amount = 18 * 16,15 = 290,70
• Correction amount = 306,47- 290,70= 15,77

Member needs to pay extra 15,77 EUR.

4. Moment of cancellation - after 23rd month

Member has 4-weeks contract payments (Contract start date = 01.03.2020) and decided to cancel the contract after 23rd month (Moment of cancellation = 10.02.2022);

System shows possible contract end date = 10.03.2022 (cancel date + month notice);

• Contract length in days = 740
• Contract usage ratio = 740/ 28 = 26.4286
• Full contract usage = 26.4286* 16.15= 426.82
• Charged amount = 27 * 16,15 = 436.05
• Correction amount = 426.82- 436.05= -9.23

Club will refund 9.23 EUR to member.

List of two year contracts included in Wet Van Dam logic

For payment intervals = 4 weeks payments

For payment intervals = Yearly payments

For payment intervals = Two years payments