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The modernization of the Belgian Civil Code - Part III: Changed circumstances? A judge could soon adapt your contract.

  • Belgium
  • Commercial agreements

02-11-2022

Over the last few years, the Belgian legislator has been working on the reformation of the Belgian Civil Code in order to modernise its content and structure; but also to incorporate long standing case law. Certain books have already entered into force, such as Book 8 on ‘Evidence’ and Book 3 on ‘Property Law’.

On 1 January 2023, Book 1 on ‘General Provisions’ and Book 5 on ‘Obligations’ will enter into force. Most of this new content is codification of case law rather than creation of new legislation. In order to help you navigate through Book 5 of the new Civil Code and to understand the important changes, the Eversheds Sutherland’s team will highlight and explain a noteworthy topic during each day of this week.

Today, we will dive deeper into the doctrine of hardship.

An unforeseeable change

Imagine a situation where you are confronted with changing circumstances which occurs after the conclusion of a contract and which makes the performance of your contractual obligations seriously difficult. One could think of circumstances such as epidemics, pandemics, labor disputes, strikes, lockouts, internet or telecommunications failures, wars, terrorist or cyber attacks, fires, illnesses, natural disasters, domestic or foreign government measures, etc. Are you obliged to continue performing your contract in such a situation?

Pursuant to current law practice and unless specifically contractually agreed, the contract must continue to be performed as the situation does not meet the high threshold of ‘force majeure’. More specifically, force majeure can only be invoked if the party is unable to perform the contractual obligations, and not merely if the party is seriously impeded to do so.

Recognition of the doctrine of hardship

The new hardship provision stipulates that a contractual party is entitled to demand the other party for a renegotiation with the view of adapting or dissolving the contract (i.e. the doctrine of hardship, as codified in Art. 5.74 of the new Civil Code (the "new CC")) when the below conditions are met. Nevertheless, the principle remains that the contract must in the first place be performed when changed circumstances make the performance of the contract more onerous, because the cost of performance has increased or the value of the compensation has decreased. The party is only allowed to rely on the doctrine of hardship under exceptional circumstances.

Art. 5.74 new CC sets out the following five conditions which must be met:

  1. A change in circumstances renders the performance of the contract excessively onerous, to such an extent that its performance can no longer reasonably be required.
  2. Such change was unforeseeable at the time of the conclusion of the contract. In assessing such unforeseeability, a company/professional natural person will typically be considered to reasonably expect certain risks associated with its business activity in comparison to consumers who do not possess such expertise.
  3. The change is beyond the debtor's control.
  4. The debtor has not assumed this risk. The acceptance of the risk could be implicit (deriving from the nature of the contract), or explicitly (by waiving the right to invoke (part of) possible changes in circumstances).
  5. Neither the law nor the contract excludes the possibility to apply hardship.

If the parties do not reach an agreement within a reasonable period of time, the dispute may, at the request of one of the parties, be settled in summary proceedings by the court which may (or may not) adapt or dissolve the contract.

Bear in mind that during the renegotiations and the judicial proceedings, parties must continue to honour their contractual obligations.

 

Tip of the day

Pay due attention when drafting contracts as this provision is supplementary law in its entirety.

More specifically, you could contractually delete or amend the right to renegotiate and the right to adapt the contract (subject, of course, to the principle of abuse of rights and unfair clauses provisions). Furthermore, if you prefer to rely on the doctrine of hardship, avoid that certain ‘standard’ clauses could be interpreted as limiting the ability to invoke it.

 

Do not hesitate to reach out if you have any queries on the matter, our team would be happy to assist.