In five weekly updates, we shall discuss this third set of rules, which introduces a ‘black list’ and a ‘grey list’ of unfair/prohibited clauses in B2B contracts. These new rules will apply to any agreement concluded, renewed, extended or amended as from 1 December 2020. Our weekly updates will focus on the application of these lists to specific types of agreements in the field of M&A, distribution, real estate, etc.
The new rules on unfair clauses in B2B agreements have a very broad scope, as they will apply to all agreements entered into between professionals, except for (i) agreements relating to financial services, and (ii) public procurement agreements (or agreements executed in the framework thereof, e.g. agreements with subcontractors).
The protection offered by these new rules is not limited to small and medium- sized companies, nor is a relationship of 'dependency' required.
Importantly, these new rules are also (generally) considered to fall within the category of ‘special mandatory law’ in Belgium. This means that agreements that contain a ‘choice of law’ clause in favour of the laws of another jurisdiction, may still fall within the scope of the Belgian unfair B2B clauses legislation (cf. consumer contracts).
General principle – ‘black list’ & ‘grey list’
First, a general transparency rule is introduced, which provides that all written contract provisions must be drafted in a clear and comprehensible way. The law does not provide for a specific sanction in case of non-compliance with this rule. However, the transparent nature of a clause may of course play a role in the assessment of the fair or unfair nature of a clause. This is important as each contract clause, individually or taken together with other clauses, that creates a significant imbalance between the rights and obligations of the contracting parties, is prohibited.
It is however worth noting that so-called ‘core clauses’ – i.e. clauses determining the actual object of an agreement and the balance between a price and the corresponding goods/services – are exempted from this general ‘fairness’ assessment, provided they are sufficiently transparent.
Second, the law introduces a ‘black list’ and a ‘grey list’ of unfair clauses. Whereas the clauses on the ‘black list’ are considered unfair in any event (no rebuttal), the clauses on the ‘grey list’ are only presumed to be unfair unless proven otherwise. According to the legislative history, this presumption will be rebutted if, taking into account the circumstances and characteristics of the agreement, the clause does not create a significant imbalance between the rights and obligations of the parties, and if it is demonstrated that both parties ‘truly’ wanted the arrangement.
The clauses on the ‘black list’ are clauses that aim to:
- create an irrevocable obligation for one contract party while the performance of the other party’s obligations is subject to a condition whose fulfilment depends solely on the will of that party;
- confer on a party the right unilaterally to interpret a contract provision;
- in the event of a dispute, have the other party renounce all means of recourse; or
- irrefutably establish the other party’s knowledge or acceptance of terms of which that party did not have actual knowledge before the conclusion of the contract.
The clauses on the ‘grey list’ are clauses that aim to:
- give a party the right unilaterally and without valid reason to modify the price, characteristics or terms of a contract;
- tacitly extend or renew a fixed-term contract without providing a reasonable notice period;
- place the economic risk on one party without compensation, where that risk is normally borne by the other party or by another party to the contract;
- inappropriately exclude or limit the legal rights of a party in the event of total or partial non-performance or defective performance of the other party’s contractual obligations;
- without prejudice to Article 1184 of the Belgian Civil Code [termination for breach], bind the parties without providing a reasonable notice period;
- discharge a party from its liability for its wilful misconduct, its gross negligence or that of its employees, except in case of force majeure, for the non-performance of essential obligations that are the subject-matter of the contract;
- limit the means of evidence a party may rely upon;
- fix damages which are manifestly disproportionate to the damage that a party may suffer in the event of non-performance of the other party’s obligations.
Unfair clauses are prohibited and will be null and void. The agreement itself will remain binding for the parties, provided it can continue to exist without the unfair clause.
Interested parties may also initiate cease-and-desist proceedings or bring actions for damages. Under certain conditions (such as bad faith), criminal sanctions can be imposed as well.
How to prepare?
As the new B2B rules on unfair clauses are mandatory law, any contract provision whereby parties exclude their application (or waive any rights resulting therefrom) will be unenforceable.
However, while the clauses on the ‘black list’ generally reflect existing case law in B2B relationships, many provisions that are typically included in distribution agreements, general terms and conditions of sale, services agreements, M&A agreements, etc. will easily fall within the ‘grey list’.