When one of the parties in a contractual relationship does not uphold his/her end of the bargain, this will give grounds for a potential termination of the contract. From the 1st of January 2023, Book V of our new Civil Law Code provides two new ways of obtaining such a termination. Which two you ask?
Firstly, we are already familiar with the judicial termination and the termination as a result of specific contractual clauses. Those will remain intact under Book V. However, the legislator has now chosen to accept the unilateral termination after simple notification. This follows the latest tendencies in our case law.
Secondly, creditors will be able to terminate their contract in the case of an anticipatory breach from the debtor. Both the unilateral and anticipatory termination are supplementary in nature and can be excluded or modified in any contract. Moreover, the following does not diminish the additional right of the creditor to claim any incurred damages.
- Unilateral termination
It will be possible for a creditor to terminate the agreement after only sending a simple written notification, but at his/her own risk. As a sidenote it is important to clarify that this regime will not make the contractual termination clauses moot, because the parties will still be able to tweak the conditions of a termination as they seem fit.
The creditor needs to inform the debtor of the specific breaches that justify the termination. It is essential that those breaches are of a sufficient severity.
If the debtor is not convinced that the motivation of the creditor is founded, he/she retains the right to contest the termination before a judge. That judge will then have to assess whether the necessary conditions are met and if there is any abuse of the creditor’s rights. If the judge finds any problems with those conditions or if the creditor did not act in good faith, there will be no termination of the contract.
Finally, it is interesting to realize that an abusive termination can result in a breach of contract from the creditor’s side, giving grounds for the debtor to terminate and claim damages.
- Anticipatory termination
This new way of termination has a lot of similarities with the unilateral termination. However, the main difference is that an anticipatory termination presupposes that the creditor has the profound believe that the debtor will not honour his/her obligations, even though those are not yet due and payable.
The creditor first needs to notify the debtor of the obligations at issue and has to offer a rectification period. Only if the debtor does not fulfil his/her obligations within that period, the creditor can send a notification stating that the contract will be terminated for anticipatory breaches.
It will be essential for the creditor to prove extraordinary circumstances if the debtor fights the termination before a judge at a later stage.
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Interested in the other novelties concerning the new contract law under Book V? Please read our previous articles:
- The modernisation of contractual obligations – EY Law Belgium
- New legislation will impact contractual relationships as from 1 January 2023 – EY Law Belgium
Make sure to keep checking our EY Law-website and our LinkedIn-page for our coming articles concerning the many other novelties on contract law.