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The modernization of the Belgian Civil Code - Part V: Anticipatory breach

  • Belgium
  • Commercial agreements

04-11-2022

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, as our last topic of this week, we will discuss the possibility to dissolve a contract in case of an anticipatory breach of a contractual obligation.

As referred to in yesterday’s article, in exceptional circumstances, a contract could be dissolved in case of a premature failure to comply with the obligations stipulated therein – i.e., in case of ‘anticipatory breach’ (Cfr. Article 5.90 of the new Civil Code). Such provision envisages situations where e.g. a recipient of a service has serious reasons to fear that the service provider will not be able to execute its services on time / at all. Another example is a buyer who realises that its goods will not be supplied anymore and wants to dissolve the contract as soon as possible.

Equivalent to the requirements to invoke the right of dissolution, anticipatory breach could be invoked when (i) the contract is reciprocal, and (ii) the non-performance is sufficiently serious or the parties have agreed that it justifies the dissolution.

The doctrine of anticipatory breach requires the following strict conditions to be met:

  1. Exceptional circumstances exist (e.g. in case of urgency);
  2. The debtor is being reminded to provide adequate safeguard of the proper performance of its obligations within a reasonable time which remains without effect (i.e. through a notice of default);
  3. It is clear that the debtor will not perform its obligations in due time (on the expiry date) – however the preliminary works do not provide an explanation on the manner in which ‘clear’ must be interpreted; and
  4. The consequences of such non-performance are sufficiently serious.

The dissolution could result from either a judicial decision, through the application of a contractual dissolution clause or through a written notice at the own risk of the creditor addressed to the debtor. In any case, remain careful when dissolving the contract too quickly when it was not lawful to do so, as you might be liable to pay damages to the other parties.

 

Tip of the day

Parties could contractually exclude or adapt such possibility of invoking anticipatory breach. For example, by making the application stricter/easier, only allowing it for certain defaults, or even by excluding it completely.

If you have any queries on the matter, our team would be happy to assist.