Where the old Civil Code contains only a few articles regarding the mandate (mandat / lastgeving), the new Book 1 now defines the concept of representation and partially codifies the principles we know from case law and legal doctrine.
Definition
Book 1 defines the concept of “representation” as occurring when a person is authorised to perform a legal act with a third party on behalf of another person.
Representation can originate from a legal act (e.g., a mandate), from law (apparent representation or the organ theory for companies (the companies are represented
by their directors)) or from a court decision (e.g., the appointment of a provisional administrator).
The “legal act” is rather a broad notion, and it can be for instance to conclude a contract, handle negotiations, make a payment, etc.
The concept of representation might seem rather theoretical, but it is not. We can for example think of negotiations handled by an asset manager on behalf of an investor. If in that example, the asset manager had no powers to negotiate with the third party or exceeds the powers granted to it by the investor, it can have some serious consequences.
Perfect representation
The representation is considered as “perfect” (représentation immédiate ou parfaite / onmiddelijke of volkomen vertegenwoordiging) when the representative performs the legal act in the name and on behalf of the represented person (who is called the principal). In that case, the legal act performed by the representative will be directly attributed to the principal and will have effects between the principal and the third party.
For example, the mandate, where a person acts in the name and on behalf on another person, is considered as a “perfect representation”.
In case, however, the representative performs a legal act that exceeds the powers granted by the principal, the principal is not bound, unless he ratifies it. The ratification will have retroactive effect to the date on which the
legal act was performed, without prejudice to the rights acquired by third parties.
In the example previously mentioned, if the asset manager who had no powers to negotiate with a third party, signed a letter of intent on behalf of the investor, the investor is in theory not bound by this letter of intent, unless it ratifies it.
Apparent representation
It can however be that the represented person is still bound by a legal act performed by an agent (e.g., the asset manager) without authority if (i) the appearance of sufficient authority is attributable to the principal and (ii) the third party could reasonably have taken that appearance to be true in the given circumstances.
The appearance will be attributable to the principal if it has freely contributed to the creation or maintenance of the appearance by his statement or behaviour.
In our example, the appearance will be attributable to
the investor if for instance the investor made believe somehow that the asset manager could represent the company during the negotiations with the third party. In that case, the investor will be bound by the letter of intent with the third party even though the asset manager had no power to represent it.
Imperfect representation
In case the representative acts on behalf of the represented person but in his own name, there
is an imperfect representation (représentation médiate ou imparfaite / middellijke of onvolkomen vertegenwoordiging).
Name lending (contrat de prête-nom / naamlening) and commission (commission / commissie) are two examples of imperfect representation.
In that case, no direct attribution will take place between the principal and the third party with whom the representative (e.g., the commission agent) has acted. The legal act performed by the representative will have effect between the representative and the third party.
Conflict of interests
The legislator also added a new general principle in Book 1 which forbids the agent to act as a counterparty or intervene in case he has a conflict of interests with the represented person. The concept of conflict of interest is however not defined, leaving the interpretation of this new rule with some uncertainties.
Any legal act performed by an agent who had a conflict of interest will be null and void unless the represented person has expressly or tacitly consented to it.
However, if the represented person was aware of the conflict of interest (e.g., because it was notified by the representative) and the represented person did not or could not be expected to oppose (e.g., by not replying to the representative’s notification within a reasonable period of time), this will not lead to the nullity of the legal act.
This new provision raises many questions from a corporate law perspective since the Belgian Companies and Associations Code (BCAC) also provides for a regime regarding conflict of interests.
The preparatory works clarify that the new provision of Book 1 does not affect the special rules of corporate law and that the relevant provisions of the BCAC
must therefore be considered as lex specialis taking precedence over the lex generalis of the Civil Code.
The BCAC provides, for certain forms of legal entities, a definition of the conflict of interests and the procedure to be applied within the administration body in case of such a conflict. The definition of the BCAC refers to an interest of a financial nature which is directly or indirectly opposed to the interest of the legal entity regarding a decision to be made by the administration body. It does not cover moral, functional (e.g., the fact that the conflicted director is also a director of the counterparty of the legal entity) or other non-financial conflicts of interests.
One may wonder whether the new general rule on conflict of interests in the Civil Code is entirely ruled out by the BCAC or is intended to apply on top of it insofar as compatible. This could have an important impact
as there is a risk of nullity of the legal act concerned. Therefore, as long as no clarification is available on the interaction between the two rules, when there is a conflict of interests between a legal entity and its director or other representative which does not fall within the definition
of the BCAC but may be covered by article 1.8 of the Civil Code (e.g. a non-financial conflict), it is advisable to follow the stricter approach and obtain (and document) the consent of the legal entity represented (e.g., in the minutes of the meeting of the administration body).
In that case, no direct attribution will take place between the principal and the third party with whom the representative (for example, the commission agent) has acted. The legal act performed by the representative will have effect between the representative and the third party.
