Exemption clauses are an important part of contracts, as they allow parties to limit their liability for contractual breaches toward each other and for possible damage claims or negative consequences suffered by third parties. These kinds of arrangements allow parties to minimize possible damage claims following a contractual breach from the get-go. Book 5 of the new Belgian Civil Code has finally codified the current case law on exemption clauses. In this article, we will discuss the practical consequences thereof.
The Belgian Supreme Court already recognized the lawfulness of exemption clauses in the early 20th century. However, it also excluded some types of situations from the possibility, e.g., gross errors. The codification of these rules was long overdue.
In which situations can you lawfully limit your liability?
Article 5.89 CC states that, in principle, all exemption clauses are allowed unless explicitly stated otherwise by law. For example, manufacturers cannot exempt themselves from any liability toward the victim who has suffered damages because of a faulty product (Art. 10 of the Belgian Product Liability Law).
Furthermore, the new CC explicitly allows parties to exempt themselves from liability due to gross errors. However, it is still not possible to exclude liability for willful misconduct. Exemption clauses that would go as far as “essentially hollowing out the contract”, are not allowed either.
Let us illustrate with a specific situation. Two parties conclude a purchase contract. The seller has to deliver vegetables (perishable goods) to the buyer, who is a restaurant owner. The main objective of the contract is the timely delivery by the seller of the perishable goods to the buyer within a specific timeframe. Therefore, a clause exempting the seller from any liability in case of delayed delivery or bad quality of the vegetables essentially hollows out the contract.
Subsequently, the CC also adds a new exception: exemption clauses for errors that impinge on any person’s physical integrity are under no circumstances lawful.
Lastly, the contractual exemption will now also extend to the auxiliary persons on which parties rely for the performance and execution of their contractual obligations. However, a contracting party can no longer exclude or limit its liability for willful misconduct of its auxiliary.
Consider this example. A transport company fixes a maximum lump sum in case of shortcomings or deficiencies in transportation services. Any (sub)contractor involved during or for the transport will only be liable for the same maximum amount.
In conclusion, article 5.89 CC mostly codifies established case law. Nonetheless, it does provide the necessary legal certainty by explicitly including rules on limitation and exemption clauses. Such legislative work can only be welcomed.
Laura Van Gompel
Lawyer – Managing Partner
- Corporate law
- Technology & Privacy
- International Contracts