Settle a dispute: what to bear in mind when entering into a settlement agreement under Book 7 of the Belgian Civil Code

With the introduction of Book 7 “Specific Contracts” into the Belgian Civil Code, the legislator is about to take the next step in the far-reaching reform of Belgian contract law. Where Book 5 already modernised the general law of obligations, Book 7 seeks to bring clarity to the fragmented and at times outdated rules governing specific types of contract (sale and barter, hire and loan, service contracts, certain contracts of chance, sequestration and settlement).

The provisions of Book 7 generally apply as supplementary law unless the law itself stipulates that no deviation is permitted. Book 7 will apply to contracts concluded on or after 1 September 2027.

Regarding settlement agreements (dading), Book 7 largely adopts the existing rules, although settlement agreement remain a highly relevant instrument for dispute resolution. In this article we discuss a number of key points of attention concerning the settlement agreement and its potential impact on businesses.

What is a settlement agreement?

A settlement agreement is a contract whereby the parties, through mutual concessions, bring an existing dispute to an end or pre-emptively avoid a future one. For example, consider a dispute with a supplier or service provider over a defective product or service. Instead of engaging in an expensive and potentially protracted lawsuit, the parties may choose to make some concessions (e.g. limited repairs and a price reduction). Once the settlement agreement has been concluded, neither party can bring the original dispute before the courts. Where proceedings are already pending, the settlement agreement can be used to bring them to an end.

What if the terms of the settlement agreement itself are not complied with?

Many settlement agreements go beyond the mere resolution of past disputes. The parties may also make arrangements for the future, e.g. paying off an outstanding balance in instalments, carrying out repair works, imposing a non-compete obligation, or agreeing new terms for an ongoing collaboration.

However, parties should be aware that, where difficulties arise regarding the further performance or the validity of the settlement agreement, their options are more limited than under ordinary contract law, due in part to the exclusion of:

• termination upon notice: termination without court intervention is precluded (e.g. if the customer fails to pay the balance, the court must intervene to terminate the settlement agreement or compel the other party to pay the balance). Parties often agree that the court cannot terminate the settlement agreement and can only order specific performance, this in order to prevent the dispute from being reignited;
• unilateral price reduction upon notice: if the other party fails to fulfil its obligations under the settlement agreement properly, a unilateral decision to pay less is not permitted;
• annulment upon notice or annulment due to a mistake regarding the law: annulment due to a defect in the validity of the settlement agreement without court intervention is excluded. Furthermore, a settlement cannot be set aside due to a mistake regarding the legal position at the time of signing (if you subsequently discover that your case was stronger than expected, this does not provide a way out).

What to consider during negotiations?

A settlement agreement does not imply an admission of liability nor a confirmation of the other party’s claims. Therefore, negotiations can take place without revealing one’s legal position.

However, the context and course of negotiations are important, as parties can enter into obligations through correspondence, email exchanges or even verbal commitments without being aware. Therefore, it is strongly recommended to conduct negotiations subject to the express reservation of a final, signed settlement agreement or to have the negotiations conducted by respective attorneys, who are bound by confidentiality until the proposal is unconditionally accepted.

Finally, since the settlement brings the dispute to an end, it is in the parties’ best interests to thoroughly assess all aspects of the dispute and its consequences in advance, translating these into contractual terms. Once the settlement agreement is concluded, the terms are final and binding on both parties.

How can we help you?

As a law firm specialising in commercial law, we assist companies with a seamless transition to Book 7 of the Civil Code. You can turn to us for, amongst other things:

• negotiating and drafting settlement agreements that bring the present dispute to an end and ensure future obligations are met;
• reviewing settlement agreements before signing;
• providing assistance where settlement agreements are not complied with.

Are you facing a dispute you would like to resolve amicably or is a settlement proposal already on the table? Please feel free to reach out for an initial meeting. As commercial lawyers, we always consider the legal and commercial impact for your business.

Pieter-Jan Aerts and Laurens Huysveld
De Langhe Attorneys

*This article forms part of our series on the reform of contract law under Book 7 of the Civil Code.

Part 1: Service contracts under Book 7 of the civil code: what you need to know
Part 2: The reform of sales law: what do you need to know as a buyer or seller?
Part 3: Settle a dispute what to bear in mind when entering into a settlement agreement under Book 7 of the Belgian Civil Code
Part 4: Coming soon