The impact of changed circumstances on your contract

“Pacta sunt servanda”, or “agreements become law”, but what if circumstances change? The new Civil Code introduces the legal anchoring of the “imprevision doctrine”. Since the new Civil Code, parties can renegotiate agreements entered into after January 1, 2023 if circumstances change. Below is a small summary.

In a time of crises, pandemics, wars and material shortages, it is sometimes difficult for certain parties to fulfill agreements. After all, it is becoming increasingly common for circumstances to change unforeseeably but significantly, making the execution extremely disadvantageous for one of the contracting parties.

For a long time there has been a need for legal certainty in the event of changed circumstances of agreements. After all, until now parties could only break away from a contract if there was force majeure. However, force majeure only applies if the contract can no longer actually be performed (temporarily or permanently) due to the circumstances. But what if the agreement is not impossible, but extremely difficult to implement?

Art 5:74 of the new Civil Code establishes the possibility of renegotiating agreements under certain conditions:

• A change of circumstances makes the performance of the contract excessively burdensome, to such an extent that its performance can no longer reasonably be required;
• The change was unforeseeable at the time the contract was concluded;
• The change is not attributable to the debtor;
• The debtor has not taken this risk into account;
• Neither the law nor the contract exclude the possibility.

The new article of law does not provide a concrete exemption from the performance of contract obligations, but it does provide an option to renegotiate and change the initially agreed conditions. As long as these negotiations are still ongoing, the parties must always comply with the originally applicable conditions. If they cannot reach an agreement, they can possibly go to court.

In this situation, the court can (1) change the contract to what would reasonably have been agreed if they had taken the changed circumstances into account; or (2) terminate the contract in whole or in part.

Improvisation theory involves exceptional circumstances in which strict conditions must be met. After all, the change must be unforeseeable, irresponsible and 'excessively onerous'. The concrete interpretation of the concept of 'excessively onerous' will have to be further determined by practice and case law. We recommend that you specify this in the contract itself.

An important note: the doctrine of improvisation is supplementary law. Contracting parties therefore still have the choice to exclude, moderate or modulate this option when drawing up the agreement. However, this takes into account the prohibition on unbalanced clauses.

In short: the anchoring of the doctrine of improvisation can therefore have major consequences for future agreements. Contracting parties are better aware of this when drawing up an agreement.

Do you have any questions when drawing up your agreement? Are you confronted with changed circumstances? Do not hesitate to contact us.

Jeroen Lison - Charlotte Van Belleghem

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