There’s quite a lot going on in the contractual landscape. We have already discussed the B2B Law of 2019, which brought with it important innovations in the area of unfair B2B market practices, rules on abuse of economic dependency and unlawful B2B conditions. Meanwhile, the Belgian legislature is also steadily working on the reform of the Civil Code, two books of which, on the law of evidence and property, have already entered into force.
In this blog post, we would like to explain a number of new features.
Statutory period of payment
On 1 February 2022, the most recent amendments to the Law of 2 August 2002 on penalties for late payment in commercial transactions entered into force. The legislator’s intention was to reduce the existing loopholes for longer payment periods, so that payments could be made more quickly.
What is new is that the overall period, including the inspection and verification period, may now only be a maximum of 60 calendar days. Any payment period that would amount to more than 60 calendar days is now automatically reduced to the statutory period. In addition, interest is automatically charged on the outstanding amounts without a reminder and the creditor may add a flat-rate fee of EUR 40 to compensate for the recovery costs. All this in order to protect creditors who may be in a weaker position than their debtors.
In addition to the new legislation, there is also a lot going on in the economy and the impact of this on contractual relationships should not be underestimated.
The price increases during the past year may be costly for companies that charge their customers fixed prices. However, there are contractual mechanisms that allow you to anticipate price fluctuations and place the risk with the counterparty.
This is the price review clause and the doctrine of unforeseen circumstances.
The review clause
Companies can (partly) absorb rising costs by means of contractual price review clauses. We are thinking here of changes in the price of raw materials, electricity or rising labour costs. However, price review clauses are subject to a number of conditions which must be strictly observed. If this is not done, the clause is null and void. A valid clause meets the following requirements:
- 20% of the price must be fixed from the outset, a price review may only be carried out with regard to 80% of the total price;
- The clause must cover both positive and negative price increases, so that price reductions cannot be contractually ruled out;
- The price increase is based on objective parameters corresponding to real costs and attributable to identifiable components of the total price. In other words, the percentage of a certain cost in the total price is taken into account;
- Automatic price adjustments based on an index are prohibited;
- The price review clause refers to the full basic price, unless otherwise stipulated, and is therefore independent of advances or down payments. The VAT must be calculated and paid on the final price.
If the clause meets these requirements, the price will be adjusted unilaterally without the need for renegotiation. Of course, the clause is only enforceable if the customer is aware of and accepts the clause. In order to avoid discussions, it is advisable to always require the customer to sign the general terms and conditions or the agreement in which the clause is included.
The doctrine of unforeseen circumstances
In addition to the price review clauses, the doctrine of unforeseen circumstances may also offer a solution. This allows a contract to be adapted to new, unforeseen circumstances that make the execution of the contract unreasonable for that party.
The more well-known force majeure theory does not offer a solution to price increases. Force majeure requires an absolute, impossible fulfilment of the obligation. A company that suffers from price increases does not find itself in an absolutely impossible situation as selling at a loss or with a small margin is possible.
The threshold is therefore lower for the doctrine of unforeseen circumstances. It is sufficient that an unforeseeable event significantly hampers or complicates the fulfilment of the agreement for one of the parties. In that case, the parties are obliged to renegotiate the agreement with a view to its amendment or even termination. If the parties do not jointly succeed in reaching an agreement within a reasonable period of time, the court may adjust the contract or terminate it in whole or in part.
Although the revision doctrine was not recognised in Belgium for a long time, it has now been included in Article 5.74 of the New Civil Code. Contracts concluded after 1 January 2023 are subject to the revision doctrine as long as it is not explicitly excluded.
Our Bofidi experts will be happy to help you
All these developments have an impact on your contracts and general terms and conditions that should not be underestimated. A contractual check-up therefore offers a solution. If you are interested in such a well-being scan, Bofidi’s team of experts will be happy to help you.
Please do not hesitate to contact us via firstname.lastname@example.org.