17 February 2023

Book 5, your new travel guide through the contractual landscape

On 1 January 2023, the new contract law came into force. Although it mainly confirms or rephrases existing principles, it also introduces some novelties. In this article, we give a foretaste of the most relevant topics related to the conclusion, performance and termination of contracts.

Old vs. New Civil Code

Former Minister of Justice Koen Geens initiated the reform of civil law at the time. After the introduction of the relationship property law (book 2), property law (book 3), inheritance law (book 4) and law of evidence (book 8), now the law of obligations (book 5) has also been given a new look. Other areas of law, such as tort law, securities law and law governing limitation periods are still covered by the 1804 Napoleonic Code for the time being.

5 novelties from Book 5

1.  As a potential contracting party, one should act carefully during the negotiation phase. Indeed, one who breaks off a negotiation incorrectly must compensate the other party’s “negative contract interest” (e.g. due diligence costs). If the legitimate expectation was created that the contract would be concluded without any doubt, one can even be liable for the other party’s “positive contract interest” (the expected net benefits).

2.  The new law also answers the question whose general terms and conditions take precedence (e.g. purchase- vs. sales conditions) if no explicit agreements were made about this. It concerns the so-called knock-out rule: In principle, the general terms and conditions of both parties apply and only those provisions that contradict each other remain ineffective, but thus do not prevent the conclusion of the contract. However, the parties can explicitly indicate (in advance, or at the latest shortly after acceptance) that they do not want to be bound by such a contract.

3.  Next, the ban on “manifestly unbalanced” contractual terms is introduced, albeit only for terms “which could not be negotiated” (keeping evidence of negotiations can thus be useful). The already existing similar regulations in the B2B Act of 4 April 2019 and in consumer law (B2C) continue to apply as special legislation, so Book 5, which should actually constitute the ordinary law, is (currently) only relevant in a C2C context at this point (whether Book 5 applies to public procurement and financial services, unlike the B2B Act, is still unclear).

4.  An important innovation concerns the doctrine of “hardship”: under certain conditions, one can request to renegotiate the contract if new circumstances have made it unreasonably onerous to continue its performance. If a mutually agreed solution cannot be reached, the court can adjust or even terminate the contract. In the current climate of strong price fluctuations, invoking (or contractually excluding in advance) this provision may become highly relevant.

5.  Finally, it will also be possible to unilaterally apply different sanctions in case of a breach of contract. Thus, for example, dissolution (exceptionally even in case of fear of a future shortcoming – anticipatory breach), replacement of the debtor or price reduction. The other side of the coin is that a court can still evaluate in retrospect whether such unilateral sanction was justified or not.

In future editions, we will elaborate on the doctrine of hardship and these unilateral sanctions.

Entry into force

Book 5 governs contracts concluded as from 1 January 2023. Since the old law continues to apply not only to contracts concluded before then, but also to extensions, renewals and amendments thereof (even to new contracts implementing old framework contracts), the two legal systems will coexist for many years to come. In these cases, parties can explicitly opt for the new law. Also, in discussions governed by the old law, courts can already take into account the new law to resolve ambiguities. It is therefore worthwhile to get to know this new law.

Wibo Van Poeck and Bruno Thoen
De Langhe Attorneys

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