New Book 6 of the Civil Code nears entry into force

Historically, in the absence of clear legal rules regarding extra-contractual liability, Belgian doctrine had been structured around two principles: 

1. The prohibition of concurrency between contracting parties, as consolidated by a landmark ruling of the Supreme Court (“Hof van Cassatie” / ”Cour de cassation”) in 1973. This principle has consistently prohibited the possibility between contracting parties to pursue extra-contractual liability claims for damages caused by a breach of contract, with the main aim of avoiding contracting parties circumventing agreed contractual liability limitations through the extra-contractual way. Therefore, within this legal framework, the main remedies for contractual defaults for parties within a contractual relationship remained within the realm of contractual claims, while extra-contractual claims were considered secondary. However, exceptions to this principle, especially in cases of criminal activities by a contracting party, illustrate the complex application of this doctrine in various contexts (e.g. if the damage results from a criminal offense or if failing to perform the contractual obligation constitutes a criminal offense). 

2. The quasi-immunity of the auxiliary person, shielding auxiliary persons ("uitvoeringsagent” / “agent d’exécution”), called upon by contracting parties for the effective execution of their contractual obligations (such as directors, subcontractors, independent service providers, employees), from liability claims from their principal’s co-contractor, neither on a contractual nor on an extra-contractual basis, unless in very exceptional circumstances, mainly that of criminal activity. 

Book 6 abolishes both principles:

1. Concurrency has become the rule, unless otherwise provided by law or agreement – In the event of damages caused by a breach of contract, the new Book 6 will offer the injured party the choice between pursuing indemnification based on contractual liability or extra-contractual liability, if the conditions to apply these liability regimes are met. In turn, the new regime will allow the defendant to invoke contractual limitations of liability or other contractual defences in the framework of an extra-contractual claim (with certain exceptions). 

   While concurrency will become the rule under Book 6, it remains of supplementary nature and parties can decide to explicitly prohibit it in their contract. There is, however, one exception on the possibility to exclude the choice between pursuing indemnification based on contractual liability or extra-contractual liability. In case the damage results from an impairment of physical or psychic integrity or from a fault committed with the intent to cause damage, a non-contractual claim is always possible. 

   In practice, this alteration could increase the insurer’s obligation to cover, while policyholders’ premiums would remain unchanged. If the insurer had excluded all claims for contractual liability, the insurer might still need to provide coverage if the plaintiff were to bring a claim based on a “requalified” extra-contractual liability. Despite the fact this risk was not included in the premium calculation, the abolition of the prohibition of concurrency would implicitly extend the coverage obligation. 

2. Auxiliary persons are no longer quasi-immune – The new Book 6 abolishes the longstanding principle of quasi-immunity of the auxiliary, as it will allow a contracting party to hold the auxiliary of its co-contractor directly liable for a fault in the execution of the contract.  

   In terms of possible defences for an auxiliary, confronted with an extra-contractual liability claim, Book 6 provides for a double protection whereby the auxiliary can generally invoke contractual defences from both (i) the contract between the auxiliary and its principal, and (ii) the contract between the principal and its co-contractor (to the extent the auxiliary has knowledge of the content of such contract), as well as defences from any particular laws applicable to such contracts. Furthermore, it is possible to contractually exclude the extra-contractual liability of the auxiliary. 

   However, the auxiliary who commits an error that was either made with the intent to cause harm or causes harm as a result of an infringement on physical or psychological integrity will not be able to invoke the contractual defences from the contract between the auxiliary and its principal and the contract between the principal and its co-contractor.  

The abolishment of the quasi-immunity of the auxiliary has a direct impact for directors of a company, as directors act as the auxiliary of such company for the execution of contracts entered by the company. Therefore, directors were previously in principle shielded from liability claims from a contracting party of the company for faults made in the performance of the contract due to the quasi-immunity principle. Further to the adoption of the new Book 6, directors will now become exposed to the risk of direct liability claims by co-contracting parties of the company for faults in the execution of the contract, next to the risk of directors’ liability towards the company of which they are a director.  

Such increased risk should however be nuanced. As stated earlier, due to the principle of double carry-over of contracts, the directors shall benefit from protection mechanisms included in the contract between the company and the third party, as well as the contractual relationship between the director and the company, including the protective measures from the Belgian Code of Companies and Associations (hereinafter, the BCCA), which governs the “contract” between a company and its directors and which will have priority over Book 6 of the Civil Code. 

The BCCA includes a set of rules with respect to the liability of directors, including several limitations on the liability of directors. Specifically, directors can only be held liable towards a third party for faults in the performance of their function to the extent the fault is of an extra-contractual nature. In addition, the directors are only liable for decisions or acts that are manifestly outside the scope of what can be reasonably expected from a normally prudent and diligent director in the same circumstances. Other than that, the BCCA provides for a maximum cap on the liability of directors for certain faults. 

Although the BCCA puts limitations on the liability of directors, it should be noted that it explicitly states that the liability of directors cannot be limited to an extent beyond what is provided in the BCCA. It prohibits a company from providing a full exoneration of liability in advance to its directors, both in relation to liability towards the company and towards third parties.  

Lastly, directors’ and officers’ insurances could play an important role in mitigating the increased risk of liability for directors under the new Book 6 (although renegotiations of such insurance could be necessary). 

Under the current legal framework, two legal grounds limit the liability of employees. On the one hand, the general principle of quasi-immunity of executive agents exists, as explained above. On the other hand, article 18 of Employment Contracts Act (hereinafter, the ECA), states that if the employee causes damage to the employer or third parties in the performance of his employment contract, he is only liable for his fraud, serious shortcoming and regular minor shortcoming. This means that employees cannot be held liable for incidental minor shortcomings. Article 18 ECA applies to both contractual and extra-contractual civil liability.  

Article 18 provides for a “relative” limitation (with different concepts that are subject to interpretation), while the principle of quasi-immunity of executive agents blocks claims against employees in a much more “absolute” way. As a result, civil liability caused by an employee of a contractor is currently resolved per contractual relationship: (i) the principal can hold his contractor liable and (ii) the contractor-employer can seek recourse from his employee, subject to the limitations of article 18 ECA.  

With the new rules entering into force, it will be possible for principals to assert liability claims against employees of a contractor (qualified as “auxiliary persons”) on an extra-contractual basis. 

Employees who are confronted with such claims will have 3 lines of defence: 

1. The employee could always try to argue that his shortcoming is minor and incidental (regardless of the type of damage that is caused) and that therefore he is not liable (application article 18 ECA). 

2. The clauses of the contract between the employer and his principal could provide for exoneration clauses (which are presumed to have been entered into to the benefit of the employee if they are not explicitly drafted in this sense). If the employer wants to maximize the means of defence of his employees, it is of course recommended to specify that they cannot be held liable by the principal on an extra-contractual basis.  

3. The clauses of the employment contract. Due to the specific wording of article 18 ECA, there is some legal debate on whether an employment contract can contain an exoneration clause to the benefit of the employee. Based on the parliamentary documents, which refer to the aim of protecting the employee there are strong legal arguments that only aggravations of the employee’s liability are precluded by article 18 so that exoneration clauses are indeed possible. 

Way forward – While Book 6 broadens the scope for filing claims against auxiliary persons, it remains to be seen how these developments will manifest in practice.  

1. For claims against company directors, it will have to be seen how Book 6 will interact in practice with the framework of the BCCA relating to the liability of directors (lex specialis to the Civil Code) and whether it will effectively lead to a higher risk of liability for directors. D&O-insurances will possibly also need to be renegotiated to cover the increased risk.

2. For claims against employees, time will tell whether these will become more frequent. There might indeed be reasons for principals to assert such claims vis-à-vis employees, for example to put pressure on the party with whom they have a commercial relationship (the employer) or simply to exhaust all their legal recourse possibilities. But there also various reasons to refrain from asserting such claims. Employees are for instance in general evidently much less solvent than their employers. 
    
   Nonetheless, it is recommended for employers to take the broadened possibility of extra-contractual liability of their employees into account when drafting and negotiating commercial contracts and employment contracts. If the intention is to exonerate employees from such liability to the utmost extent possible, exoneration clauses (subject to the requirements of article 5.89 of the Civil Code) can – but must not necessarily – be included in both types of contracts.  

Book 6 introduces a new liability regime for minors. On the one hand, a minor under the age of 12 would never be liable for damage caused by his fault. On the other hand, minors aged 12 and over would be liable for damage caused by their fault or by any other event giving rise to liability, unless the court, in its discretion, limits the compensation or declares it not due. However, if the liability of a minor is covered by an insurance contract, the minor is obliged to pay full compensation which cannot be limited to an amount less than that covered by the insurance contract. The result is that an insurer is bound by the compensation for which a minor is liable or by the limit of cover provided by the insurance contract. 

In addition, Book 6 introduces strict liability for a titular of custody of a minor under the age of 16. As a result, under the forthcoming law and contrary to current law, proof of proper upbringing or careful supervision could not rebut liability anymore. On the other hand, liability for damage caused by minors over the age of 16 can be rebutted if it can be proved that the damage was not caused due to a lack of careful supervision.  

At the same time, Book 6 creates a rebuttable presumption of liability on the part of persons responsible for the supervision of others (grandparents, sports clubs, etc.).  

As it significantly increases the liability of titulars and persons responsible for the supervision of others, the legislator has made it compulsory in the legislative proposal for these to have civil liability insurance. The introduction of compulsory family insurance was not retained in the final text. 

Book 6 codifies the different types of damages and confirms two fundamental principles in Belgian law: the principle of compensation in full (all damages suffered are eligible for compensation) and the principle of objective redress (damage should be quantified concretely). This is a confirmation of the indemnifying function of Belgian liability law. As a reminder, in contrast to Anglo-Saxon countries Belgian law does not provide for compensation in addition to the actual damage (so-called punitive damages). The codification confirms the prevailing principles with which both the aggrieved party and the defendant are confronted when assessing their claim for damages. 

In addition, Book 6 provides for a broadening of the compensation, whereby the affected party, who has been compensated for damages resulting from an impairment of its physical or psychological integrity, may claim additional compensation for new damages or aggravation of damages resulting from the same impairment (i) which was not previously taken into account and (ii) of which he or she could not reasonably have been aware at the time of the court decision or out-of-court settlement. An aggrieved party may therefore, within the term of limitation, go back to court to claim compensation for damages that were not considered in a first settlement or for an aggravation of his initial damage, provided that these circumstances could not have been foreseen at the time of the first settlement.  

The affected party cannot waive this right. This triggers the question of how the above provision would affect settlement agreements, especially since settlement agreements aim to end the dispute once and for all. 

This is one of the biggest changes brought about by Book 6 for the real estate sector: from 1 January 2025, the principal will have the option of taking direct action against the subcontractor, which has been denied until now. 

The repeal of the quasi-immunity of the auxiliary (formerly called the executive agent) prevented the principal from having such a means of action directly against the subcontractor or subcontractors. Conversely, based on article 1798 of the old Civil Code, subcontractors already have such a direct action against the principal. 

At present, the principal generally has very few options for bringing an action against a subcontractor to whom the main contractor has entrusted all or part of its own work. 

Unlike the subcontractor, who has a direct action against the principal under article 1798 of the old Civil Code, the principal can only bring an action forward against the subcontractor based on extra-contractual liability under two strict conditions: 

1. Firstly, the subcontractor must not only be in breach of a contractual obligation but also in breach of a duty of care that would apply to everyone; and

2. This breach causes damage distinct from that caused by the contractual breach. 

If these two conditions - which are rarely met in practice – are not met, the principal is prohibited from seeking to sue the executive agent (e.g. the subcontractor) extra-contractually. 

At present, the principal is at a disadvantage in the event of bankruptcy of the main contractor, as the principal cannot act against the subcontractors of his defaulting co-contractor. 

It should be noted, however, that in Book 5, which came into force on 1 January 2023, Article 5.110 now provides that a direct action may be granted by statute in very general terms. This provision opens the doors to other direct actions and discussions are already underway about direct actions as part of the drafting of the proposed legislation relating to Book 7 (“Special contracts”). At this stage, however, only direct actions by auxiliaries would be provided for (cf. art. 7.4.31 Civ. C.). 

Book 6 takes a remarkable step forward in this respect in Article 6.3, which states that: 

• The current prohibition on the concurrence of contractual and extra-contractual liability is ended by enshrining the parties' freedom of choice between the two systems of liability (contractual and extra-contractual) (§1); 

• The repeal of this prohibition paves the way for executive agents (now called auxiliaries) to be held accountable to their instructing party's creditor (§2). 

More specifically, a subcontractor's liability could, on this basis, be called into question directly by the principal.  

As a mitigating measure, the legislator provides that the subcontractor (or, more generally, the auxiliary) will be able to rely on a double level of defences, firstly drawn from his own contract and, secondly, drawn from the main contract concluded between the principal and the main contractor.