Annulment by unilateral notice: soon to be a legal possibility.
On 1 January 2023, Book 5 ‘Obligations’ of the New Civil Code will enter into force. With the introduction of this new code, the legislator is implementing a number of innovations in our Belgian law. One of these innovations is that it will henceforth be possible for a contracting party to annul the contract by means of unilateral notice.
The agreement binds the parties as law, states our Civil Code. When one enters into an agreement, one is therefore bound to comply with the obligations arising from that agreement in the same way one complies with the law. However, there is a major difference with regard to the influence one has over the existence, and thus the consequences, of the law on the one hand and the agreement on the other.
Contracting parties can bring about the end of an agreement in, broadly speaking, three different ways. First, the agreement can be terminated by one or both parties, so that the agreement no longer produces effects after the expiry of the notice period, or upon payment of a termination indemnity. Second, in the event of a contractual default by one of the parties, an agreement can be dissolved, whereby the agreement will de facto no longer produce effects from that moment onward. Finally, an agreement can be annulled when it was formed in a defective manner. In the event of annulment, the agreement will not only cease to have effect for the future, but an attempt will also be made to reverse its effects in the past.
With regard to this last method of termination, the legislator has expanded the possibilities available to contracting parties.
Today, an agreement can only be annulled in two ways.
First, a party wishing to invoke a ground for annulment may turn to the court and claim the annulment of the agreement or raise it as a defence: this is referred to as judicial annulment. The court will examine whether the party in question is justified in invoking the annulment and will either recognise it or not. The agreement will only cease to exist at the moment the court rules on the ground for annulment raised.
Second, the parties may also jointly agree that an agreement is null and void: this is referred to as amicable annulment.
As of 1 January 2023, a third possibility will exist for contracting parties to obtain the annulment of an agreement:
A contracting party will be able to annul the agreement by means of unilateral notice. When, as a party, one is certain of the presence of a ground for annulment in an agreement, it will therefore no longer be necessary to go to court to have the agreement annulled on the basis of that ground. A written notice to the other party will suffice.
Because the annulment of an agreement has far-reaching consequences, the legislator decided to somewhat temper annulment by written notice.
For instance, if the agreement is divisible, the annulment will be limited to the part of the agreement affected by the ground for annulment. Furthermore, the notice must be given in writing. In addition, the annulment is carried out at the risk of the party issuing it. If the other party contests the annulment before a court and the court determines that the annulment was indeed unlawful, the agreement will be deemed never to have ceased to exist. The person who issued the annulment and thus stopped complying with the contract will have done so unlawfully.
Finally, an agreement contained in an authentic deed cannot be annulled by unilateral notice.
Despite these limitations, Article 5.59, paragraph 3 of the New Civil Code will offer possibilities, for example if, after concluding an agreement, you notice that you have been misled.
Should you have any questions regarding your contractual relationships, please do not hesitate to contact us (contact@alisadvocaten.be). Our team is at your disposal!
