Laura Van Gompel – 20/8/2022 – We continue to offer #LegalInsights on Book 5 of the new Belgian Civil Code (CC). In this article, we discuss the general outlines on contract termination and dig a little deeper on the new rules on anticipatory breach.
The CC first of all confirms the – already existing – ways to terminate a contract:
– Judicially (upon ruling of the court),
– By simple notice of the creditor and,
– Pursuant to an explicit termination clause.
These three dynamics share the common factor that an attributable breach of contract is required. In principle, the creditor can only end the contract if the other party commits a serious breach of its obligations.
Article 5.90 CC however introduces the – new – possibility for the creditor to end the agreement in anticipation of the debtor’s shortcomings. This is a – far reaching – solution for a creditor who fears that a debtor shall not comply in the future, even though the obligation is not yet due.
To give an example: your client is facing cash flow problems and even before receiving delivery, has informed you that payment will be delayed for indefinite term.
The remedy is quite drastic and that’s why article 5.90 CC imposes strict conditions in order for the anticipatory breach to proceed.
We may not just assume that a debtor won’t comply. He needs to be given the opportunity to proof otherwise. So beforehand, the debtor should get the chance, during a reasonable period of time, to offer sufficient warranties that guaranty his proper performance. Besides, exceptional conditions need to be involved, for example situations of urgency or the threat of significant damage.
In our example, it would imply significant damage for the supplier to deliver a great amount of merchandise, knowing almost for certain that payment will be considerably delayed.
This new provision will be suppletive law. As such, parties may explicitly exclude the possibility of anticipatory breach in their contract. They may as well include a specific clause describing the situations and/or exceptional conditions that qualify for a lawful termination due to anticipatory breach. In case you are confronted with a possibly shortcoming contract party, we will gladly assist you on how to protect your interests best.