Do changed circumstances justify a renegotiation of the contract?

Recently, an article appeared in Trends about the fact that, due to uncertainty in the construction materials market, some quotations are only valid for three hours. A contractor recently told us that he is making losses on some projects due to the increase in material prices. More and more contractors are asking whether they can pass on this unexpected price increase to their clients.

This is an interesting question and involves what lawyers refer to as the “doctrine of imprévision,” also known as the doctrine of unforeseen circumstances.

When two parties conclude a contract, that contract is binding between them as law. This is an important principle in our legal system, ensuring that you, as a contracting party, can enforce the obligation of the other contracting party. But what happens when circumstances suddenly and unforeseeably change after the conclusion of the agreement? Would it not be justified to expect some flexibility from the other party? Under Belgian law, the answer has traditionally been: No. But this is about to change.

In case you haven’t noticed: our legislation has been undergoing modernization for several years now, and it is now contract law’s turn. Book 5 of the New Civil Code will soon enter into force and will recognize the doctrine of imprévision under Belgian law, albeit under strict conditions.

Article 5.74 of the New Civil Code first reiterates the general rule that parties must perform their obligations. However, the debtor may ask the creditor to renegotiate the contract, with a view to adjusting or terminating it, if the following five conditions are met:

• A change in circumstances makes performance of the contract excessively onerous, to such an extent that performance can no longer reasonably be required;
• The change in circumstances was unforeseeable at the time the contract was concluded;
• The change in circumstances is not attributable to the debtor;
• The debtor has not assumed the risk of such changes in circumstances;
• Neither the law nor the contract excludes the possibility of renegotiation.

Such renegotiations are possible both in cases where the cost to the debtor has increased excessively and where the value of the counter-performance has decreased excessively.

Please note: during these renegotiations, the parties must continue to fulfill their obligations towards each other. Only once these negotiations lead to a result can the debtor rely on it.

Is the request for renegotiation rejected by the creditor, or can no satisfactory outcome be reached within a reasonable period? In that case, either party may turn to the court. The court will then have the power to adjust the contract to what the parties would reasonably have agreed upon had they taken the change in circumstances into account when concluding the contract. Naturally, all specific circumstances of the case will be taken into account.

In addition, the court also has the power to partially or fully terminate the contract, even with retroactive effect. Such retroactive effect will then extend back to the date on which the circumstances changed.

Finally, we would like to point out that this new provision introducing the doctrine of imprévision is purely a matter of default law (suppletive law). This means you have the option to exclude the doctrine of imprévision from your agreements altogether, or to elaborate on it in more detail, and so on…

Do you find yourself in a situation where you wish to invoke the doctrine of imprévision? Would you like to exclude the doctrine of imprévision or define it more precisely in your agreements? For more information, please feel free to contact us without obligation at contact@alisadvocaten.be