Master, am I still free to terminate the contractual negotiations?

Conducting frivolous negotiations or inadvertently interrupting contract negotiations can have serious consequences. Be aware of your pre-contractual responsibility.

This is the question we received this week from our client, an independent consultant. The client had conducted parallel negotiations with 2 potential clients over the past few weeks and was ready to make the decision and go for 1 project. Until he became aware of the legislation on pre-contractual liability which came into force in 2023. Had the client managed matters correctly or was he now risking a claim from the rejected client?

New Civil Code

The Belgian legal system has indeed undergone important changes with the introduction of the new Civil Code.

One of the striking aspects of this revision is the introduction of Article 5.17 of the new Civil Code, which relates to pre-contractual liability. Although this article is new, we must emphasize that the general duty of care in negotiations has been in force for some time and has been confirmed in settled case law and the Civil Code now provides a legal basis for it.

Freedom of contract – freedom of negotiation

Freedom of contract and negotiation still applies as the basic principle. Article 5.15 of the Civil Code expressly states that parties are free to initiate, conduct and terminate pre-contractual negotiations. However, this must be done in accordance with good faith: the parties must behave in a careful and prudent manner. Otherwise, there is a risk of being held pre-contractually liable and this may, for example, lead to the payment of compensation.

Pre-contractual liability

Article 5.17 of the Civil Code now formally states that if negotiations are broken off incorrectly, for example by stopping them untimely or carelessly, this can give rise to extra-contractual liability. The injured person can then be put back in the situation he would have been in if no negotiations had taken place, for example by compensation for the negotiation costs or lost time.

Where legitimate expectation has been created that the contract would be concluded without any doubt (for example by already allowing the other party to make investments with a view to future cooperation), this liability can compensate for the loss of the expected net benefits from the contract not concluded.

Finally, the parties must provide each other with the information required by law, good faith and custom (in light of their capacity, reasonable expectations and subject of the contract). The violation of this information obligation can lead not only to pre-contractual liability but also to the nullity of the contract if there is fraud, error, violence or abuse of circumstances.

Conclusion

It is therefore indeed important not to enter into the pre-contractual phase lightly or recklessly and to conduct the negotiations leading up to the conclusion of a contract very carefully and in good faith. Otherwise, one risks being held extra-contractually liable.

In addition, there are techniques to exclude the risks of extra-contractual liability, for example by prior signing a declaration of intent in which the parties make it clear that although negotiations will start, they do not guarantee any results and will therefore bear no liability in the event that would not reach an agreement.

Jeroen

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