Belgium Sets Rules on Prohibited Unfair Terms in B2B Contracts

14 Jul 2020
14 JULY 2020

As of 1 December 2020, a new legal framework of mandatory rules on prohibited unfair terms in business-to-business (B2B) contracts will enter into force in Belgium.  We summarize below the main features, application and practical significance of these rules, which will restrict the contractual freedom of businesses and could have a substantial impact on many B2B relationships.  We hereby recommend that businesses already consider the new rules in contract negotiations as well as review their standard B2B terms and conditions now in order to ensure future compliance.

1. Main Features

In general, the Law of 4 April 2019 amending the Belgian Code of Economic Law (“CEL”) (“the Law of 4 April 2019”) established a new framework for B2B contracts in Belgium by introducing (i) a general prohibition on unfair terms as well as (ii) “black” and “grey” lists of terms which are deemed to be unfair.

The Law of 4 April 2019 provides in this regard that any unfair terms in B2B contracts are prohibited and therefore null and void.  The B2B contract at issue will remain valid and binding unless it cannot continue to exist after the exclusion of the unfair term(s), in which case the contract will also be null and void.

1.a. General Prohibition

Similar to what currently applies to business-to-consumer (“B2C”) contracts in Belgium, the new “catch-all” prohibition provides that a term in B2B contracts is unfair and therefore prohibited if it creates, by itself or in combination with other terms, a “significant imbalance” between the rights and obligations of the parties.

The Law of 4 April 2019 specifies that such imbalance will be assessed on the basis of the following elements, which must be considered at the time of conclusion of the contract and taking into the account the nature of the products to which the contract applies:

·         All the circumstances surrounding the conclusion of the contract;

·         The general economy of the contract;

·         All applicable trade practices;

·         All other terms of the contract or of other related contracts; and

·         The extent to which the terms in written contracts are drafted in a clear and understandable manner.

However, the assessment of an imbalance will not extend to the terms that define the object of the contract or the price or compensation for the products to be delivered, provided that such terms are drafted in a clear and understandable manner.

1.b. “Black List”

In addition to the general prohibition, the Law of 4 April 2019 lists the following types of terms that are always considered to be unfair and therefore prohibited without any possibility to prove the contrary:

1.       Terms that create an irrevocable commitment for the other party while the performance of the obligations of the business itself is subject to a condition whose realization depends solely on the business’s will;

2.       Terms that grant the business the unilateral right to interpret any terms of the contract;

3.       Terms that make the other party waive any means of redress against the business in the event of a dispute; and

4.       Terms that irrefutably establish the other party’s knowledge or acceptance of terms with which that party had no real opportunity to become acquainted before the conclusion of the contract.

It is hereby worth noting that the above list is non-exhaustive and may be expanded, by Royal Decree, with additional prohibited terms for specific professional sectors or product categories.

1.c. “Grey List”

Last, the Law of 4 April 2019 also sets out a list of types of terms that are presumed to be unfair unless proven by the party benefitting from those terms that no manifest imbalance is created between the rights and obligations of the parties.  In particular, this list includes terms which have the effect of:

1.       allowing the business to unilaterally and without a valid reason modify the price, characteristics or terms of the contract;

2.       tacitly extending or renewing a contract of fixed duration without providing a reasonable notice period;

3.       placing, without compensation, the economic risk on a party where that risk would normally be borne by the other business or another party to the contract;

4.       inappropriately excluding or limiting the legal rights of a party vis-à-vis the business in the event of total or shared non-performance or inadequate performance by the business of any contractual obligations;

5.       binding the parties to a contract without providing a reasonable notice period;

6.       releasing the business from liability for its willful misconduct, for its gross negligence or that of its employees or, except in cases of force majeure, for the non-performance of the essential obligations that form the object of the contract;

7.       restricting the means of evidence available to the other party; and

8.       imposing compensation amounts that are manifestly disproportionate to the prejudice that could be suffered by the business in the event of non-performance or delay in the performance of the other party’s obligations.

As was the case with the “black list”, this “grey list” may similarly be expanded by Royal Decree with additional prohibited terms for specific professional sectors or product categories.

2. Application

In terms of scope, the new rules are applicable to any type of B2B contract regardless of the size or market power of the businesses involved.  In this regard, the Law of 4 April 2019 defines the term “business” in a broad manner as “any natural or legal person who pursues an economic purpose in a sustainable manner, including its associations”.  Financial services and public procurement contracts are not subject to the new rules, although certain provisions may at some point be declared applicable to these sectors by Royal Decree.

In terms of timing, the new rules will apply to new contracts entered into after 1 December 2020, as well as to existing contracts that are renewed, extended or amended after said date.

3. Practical Significance

As a general matter, the new rules will restrict the contractual freedom of businesses and could have a substantial impact on many B2B relationships.  For example, boilerplate clauses such as exclusion of liability and unilateral change of price or delivery term are at risk of invalidation, and new boilerplate clauses might therefore be envisaged to protect existing standard contracts.  In addition, contracts that are too one-sided could face a similar risk of invalidation, and the new rules may create new leverage in contract negotiations.

In terms of practical steps, we first recommend that businesses already consider the new rules when negotiating contracts that might be (tacitly) renewed, extended or amended after 1 December 2020.  In addition, businesses are well-advised to review, and where necessary update, their standard B2B terms and conditions now in order to ensure future compliance with the new framework.

 

Hannes Abraham                                            Maarten Vanderhaeghe

Senior Associate                                                 Partner

 

E: hannes.abraham@pierstone.com              E: maarten.vanderhaeghe@pierstone.com