In these unfortunate times of surging energy prices, all businesses experience a sharp increase in production and supply costs. With any luck, these businesses will be able to pass on (part of) these extra costs to their own customers.
However, in long-term agreements, the price for the supply of goods or services may have been agreed long before the recent events materialised, resulting in a party now being required to settle its obligations at a loss, as the increased cost of raw materials and/or energy have in the meantime eaten away the foreseeable profit margin of the time.
What if, upon verification of the relevant contract, the affected party’s tough break is worsened even further due to the absence of a (valid) price revision formula and of a contractual hardship-like mechanism? Is there a default provision of Belgian law to offer some relief?
The short principled answer to this question from a Belgian law perspective is “not yet”. Even though the upcoming “new” Belgian civil code will contain a default hardship provision, this is not the case under the “old” civil law which is still applicable (and will continue to apply) to existing agreements. The starting point under the current law thus remains that even if the agreement becomes excessively onerous to perform, there is no default legal obligation or procedure to the effect of renegotiating that agreement.
Admittedly, there are certain “workarounds” available based on the doctrine of the abuse of rights or on the anticipated application of the new civil code advocated by some scholars, but these are uncertain solutions.
There is, however, one field of Belgian private law where a framework for hardship exists: contracts for the international sale of goods, provided that the parties did not disclaim the application of the CISG (i.e., the UN Convention on Contracts for the International Sale of Goods).
Since 2009, the Belgian Supreme Court’s has admitted that there is a hardship regime in these contracts based on the following reasoning:
- Article 7 (2) of the CISG provides that “questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based”;
- There are no express provisions regarding hardship in the CISG;
- The UNIDROIT principles reflect the “general principles” on which the CISG is based;
- Article 6.2.3 of the UNIDROIT principles contains default hardship provisions that impose a duty to renegotiate and the possibility to sue for amended contract terms or even termination.
In contracts subject to the CISG – which, for a reason that is not really clear, is unfortunately often reflexively disclaimed at the drafting stage -, there is more hope than meets the eye to cause (serious) renegotiations.
