UNFORESEEN CIRCUMSTANCES IN BELGIAN LAW Denis

UNFORESEEN CIRCUMSTANCES IN BELGIAN LAW
Denis PHILIPPE
Extraordinary Professor at the Catholic University of Louvain
Visiting Professor at the University of Paris x
Lawyer in Brussels and Luxemburg.
Change of circumstances can occur in all kinds of contracts. When you buy a newspaper, the
room for change of circumstances is very limited; but it can occur more frequently in other
sales contracts, for example a long-term supply contract with fixed prices. This case is
interesting because it deals with the application of the doctrine of unforeseen circumstances in
a aleatory contract affected by the financial crisis.
We will begin with a study of the Belgian law and we will say a few words on French law.
Then we will analyse how we think that the case submitted to the Portuguese courts would be
solved by the Belgian judge.
1.
Belgian law: an overview
1.1.
Definition
In the Belgian legal discourse, the doctrine of imprévision is the focus of attention as a form
of relief in cases in which one party is extraordinarily burdened by the contract because of
unexpected circumstances. Like in French law, this concept applies if new circumstances arise
which are beyond the control of the parties and which were unforeseeable, render the contract
substantially more burdensome, or substantially alter the economic balance between the
obligations.1
The more general approach of frustration of purpose is not covered by this doctrine. We can
give an example of frustration of purpose: a ten-year licence contract for the use of a patent
with fixed royalties is agreed; each party assumed that the patent would keep its value over
the ten-year period; however, two years later, a new invention renders the patent useless,
thereby frustrating the purpose of the licence contract. This hypothetical scenario is not
directly dealt with by imprévision.
1
Cass. 30 October 1924, Pas. 1924, I, 565; H. DE PAGE, Traité élémentaire de droit civil belge,II , Brussel,
Bruylant, 1964, 560; see for criticism against these definitions: D. PHILIPPE, note comm. Brussels 16 January
1979, JT 1980, 459 f.f.; D. PHILIPPE, Changement de circonstances et bouleversement de l’économie
contractuelle, Brussels, Bruylant, 1986, p 660; P. WERY, ‘L’imprévision et ses succédanés’, JLMB 1996, 105;
L. VAEL, ‘Beschouwingen over het imprevisieleerstuk: omtrent de eventuele ontsluiting van de overeenkomst in
geval van een gewijzigd contractueel verhoudingskader’ in L. CORNELIS, D. DE MAREZ, Y.-H. LELEU, M.E.
STORME, A. VERBEKE and A. WYLLEMAN (eds.), Liber Amicorum Tijdschrift voor Privaatrecht en Marcel
Storme, Brussels, Story Scientia, 2004, 703 f.f.; D. PHILIPPE, ‘French and Belgian Reports’ in E. HONDIUS
and H.C. GRIGOLEIT (eds.), Unexpected Circumstances in European Contract Law, Cambridge University
Press, 2011, 144–163; D. PHILIPPE, ‘France and Belgium’ in A.G. CASTERMANS, K.J.M. JANSEN, M.W.
KNIGGE, P. MEMELINK and J.H. NIEUWENHUIS;(eds.), Foreseen and unforeseen circumstances, Deventer,
Kluwer, 2012, 157–171.2 D.PHILIPPE, Le juge et la revision du contrat: le bouleversement de l’économie
contractuelle, in Le juge et le contrat, Séminaire UCL KUL Ed S. STIJNS & P. WERY, La Charte, 2014, p 373;
Cass. 14 April 1994, Pas. 1994, I, 365; Cass. 20 April 2006, www.juridat.be; see also: Cass.7 February 1994,
Pas. 1994, I, 150 and www.juridat.be; Cass. 4 September 2000, Pas. 2000, I, 345,www.juridat.be; Cass. 20 April
2006, www.juridat.be; Liege 16 December 2002, JL02CG1_2.[15] Juridat , JC064K1_6. [16].
1
1.2.
Recognition in Belgian law
Until recently, the Belgian Cour de cassation did not recognise explicitly the doctrine of
imprévision.
However, some lower courts have referred to this principle, but have frequently rejected its
application because the conditions for its application have not been met.2 In the literature,
various authors argue that this principle should be recognised.3
Unlike in France, the Conseil d’Etat is not competent to deal with public contracts; therefore
the restrictive approach of the Belgian Cour de cassation to unforeseen circumstances would,
in principle, also be applied to public contracts.
The Belgian case law seems to initiate an evolution. We have to stress an important decision
of the Supreme Court of 19 June 2009.4 A French seller entered into a long-term sales
contract for steel with a Dutch buyer. The steel price increased sharply at the beginning of this
century due to a rise in demand in developing countries. The seller asked the buyer for a
renegotiation of the price due to hardship. It was refused by the buyer. The seller brought the
case before the Commercial court of Tongeren. The judge considered that the Vienna
Convention on the sale of goods (the ‘CISG’) applied. Article 79 of this Convention deals
with exemption in the case of new circumstances beyond the control of the parties. The
exemption requires the presence of an impediment; however, concluded the judge, a rise in
the price does not constitute an impediment and the claim was dismissed.
P. WERY, ‘L’imprévision et ses succédanés’, JLMB 1996, 105; S. HEREMANS, ‘Le bouleversement de
l’économie contractuelle à la suite d’un changement de circonstances : quelques éclairages nouveaux’, RGDC
2000, 573 (with the analysis of various decisions, among others Comm. Liege 15 September 1995, RDC 1998,
446).
3
See D. PHILIPPE, Changement de circonstances et bouleversement de l’économie contractuelle, Brussels,
Bruylant, 1986, p 609; S. HEREMANS, ‘Le bouleversement de l’économie contractuelle à la suite d’un
changement de circonstances: quelques éclairages nouveaux’, RGDC 2000, 573; J.-F. ROMAIN, ‘Le principe de
convention-loi (portée et limites): réflexions au sujet d’un nouveau paradigme contractuel’ in Les obligations
contractuelles, Brussels, Editions du jeune barreau de Bruxelles, 2000, 142, nr. 38.1; L. VAEL, ‘Beschouwingen
over het imprevisieleerstuk: omtrent de eventuele ontsluiting van de overeenkomst in geval van een gewijzigd
contractueel verhoudingskader’ in L. CORNELIS, D. DE MAREZ, Y.-H. LELEU, M.E. STORME, A.
VERBEKE and A. WYLLEMAN (eds.), Liber Amicorum Tijdschrift voor Privaatrecht en Marcel Storme,
Brussels, Story Scientia, 2004, 70; A. VAN OEVELEN, Kroniek van het verbintenissenrecht (1993–2004), RW
2004–05, 1644; C. DELFORGE, La spécificité des contrats à long terme, thesis, UCL, 2006, note. p 247; A.
VAN OEVELEN, ‘Overmacht en imprevisie in het Belgische contractenrecht’, TPR 2008, 603, D. PHILIPPE,
Unforeseen circumstances and prescription in I. CLAES & R. FELTKAMP The Common European Sales Law
and Belgian Law, Intersentia, p 299; S. VAN LOOK, De imprevisieleer in België : Quousque tandem abutere
patientia nostra ? R.G.D.C, 2013, p.445 ; See also La force majeure état des lieux Anthémis, 2013 and more
specifically, MM J.F GERMAIN, Y. NINANE & J. VAN ZUYLEN, La force majeure dans le droit commun
des obligations contractuelles, p 7 and of E. FELTEN, Force majeure, état de nécessité et imprévision en droit
commercial, p 81.
4
See for a comment: D. PHILIPPE, ‘Renégociation du contrat en cas de changement de circonstances: une porte
entrouverte?’ (note under Cass. 19 June 2009), DAOR 2010, 156–162; R.D.C., 9/2009, p and obs. K.
SZYCHOWSKA, p. 988; D. PHILIPPE, P. ANCEL, B. FAUVARQUE-COSSON and R. WINTGEN, ‘Droit
compare des contrats. Renégociation du contrat en cas de changement de circonstances dans la vente
internationale’, Revue des contrats, 2011, 963–985; see also D. PHILIPPE, ‘Les clauses relatives au changement
de circonstances dans les contrats à long terme’ in La rédaction des contrats internationaux, Brussels, Bruylant,
2012, 181 ff.; See also M. FONTAINE, Hardship, C.I.S.G. and Unidroit Principles Estudos em Homagem a Luiz
Olavo Baptista, 2013, Editora Quartier latin do Brasil (Éditeurs U. Celli, M. Basso et A. Do Amaral), p 123 ;
2
2
On appeal, the court of appeal of Antwerp considered that the CISG did not address the
question of hardship. In the event of a gap, article 7.2 of the CISG applies. To fill the gaps,
the judge said that in accordance with article 7.2 of the CISG, one must find the rules
applicable firstly in the general principles which underlie the CISG, and secondly in the law
applicable by virtue of the rules of international private law. The appeal court considered that
no principle underlying the CISG could apply, and so applied the law applicable on the basis
of international private law, i.e. French law.5
The French law introduced an obligation of renegotiation of the contract in the case of
hardship.6 The buyer refused the renegotiation and was thus liable for the damage suffered by
the seller. The damage was fixed ex aequo et bono at 450.000 euro. The buyer brought an
appeal before the Supreme Court. The appeal revealed that the CISG sanctions the pacta sunt
servanda principle. The Court rejected the appeal. The two main grounds for the Court’s
decision were the following:
1. Article 79 of the CISG applies in the case of hardship and not only in the case of force
majeure.
2. The CISG does not contain a provision organizing the renegotiation of the contract in
case of change of circumstances. The gap has to be fulfilled by virtue of article 7.2.
The Supreme Court considered that the gap in the CISG must be filled with the
principles underlying the CISG whereas the court of appeal did not find any general
principles underlying the CISG to regulate this question of unforeseen circumstances
and applied the rules of international private law.
The Unidroit principles are, according to the Supreme Court, the underlying principles for the
CISG; notably, article 6.2.2 of the Unidroit Principles foresees the renegotiation of the
contract in case of a change of circumstances. In this case, the Belgian buyer had to
renegotiate the contract with the French seller.
In a decision dd. 12 April 20137, the Supreme Court has once more explained his view
concerning article 79 CISG. We can read in the summary preceding the decision of the Court
that a force majeure has another interpretation in Belgian law and in the CISG. The conditions
of application are broader in article 79 CISG. We think that this abstract does not reflect the
decision. In fact, in this case, there was absolute impossibility of performance and the Court
has considered that the solution would be the same in case of application of article 79 CISG or
in the common law of obligations. In the body of the text, the Court does not declare that the
concept of a force majeure is more strict in internal law than in the CISG.
Another interesting and recent case was rendered by the Belgian Supreme Court on 14
October 2010 concerning alimony.8
5
In France, the case law prescribes an obligation for negotiation in the case of hardship.
Cass. (Fr.) 3 November 1992, ‘arrêt Huard’, Bull. Civ. 1992, IV, 241, nr. 338 and JCP 1993–11–24,469, nr.
46–47; see also: Cass. (Fr.) 24 November 1998, Bull. Civ. 1998, IV, 232, nr. 277 and JCPE 1999–07–22, 1242,
nr. 29, note C. JAMIN; Voy. aussi, J.C.P., 1999-12-01, n° 48, p 2151, note Y. PICOD. Cass.fr., 16 mars 2004,
Dalloz, J., 2004, p 1754 et note D. MAZEAUD, the author analyses the various decisions of the French Supreme
court. See H. BOUTHINO-DUMAS, « Les contrats relationnels et la théorie de l’imprévision », R.I.D.E., 2001,
p 339-373, spec. p 360.
6
7
8
Cass., 12 avril 2013, Pas., I, n° 231, p. 864.
Cass. 14 October 2010, C.09.0608.F/1, www.juridat.be.
3
In 1979, a husband promised his wife, before their divorce, to pay a monthly alimony of 8,500
Belgian Francs. Some 20 years later, the alimony amounted to 568.91 euro, the incomes of the
man decreased to 1049 euro whereas the incomes of the wife amounted to 1050 euro. In the
meantime, the wife had established a new household with another partner.
The court of first instance of Tournai considered that the wife had committed an abuse of
rights by continuing to claim this amount in these new circumstances and that the husband
was released from the payment of this alimony.
The plaintiff on appeal to the Supreme Court saw in this decision a violation of the pacta sunt
servanda principle. The Supreme Court rejected this appeal, considering that the tribunal had
rightly applied the concept of abuse of rights in this case.
We think that in this case, to our knowledge the first case of its kind, the Supreme Court
endorsed the application of the doctrine of abuse of rights in the case of a substantial change
of circumstances creating a disequilibrium between the obligations of the parties.9 10
We hope that the Belgian Supreme Court will recognise the doctrine of unforeseen
circumstances in a more explicit way, as other countries and European and international
instruments do, and as economical and equitable principles require.
There are also some specific provisions concerning different kinds of contract (lease contract,
alimony, publics works)11
Finally, other legal mechanisms are used indirectly to adapt the contract.12 The judge has
adapted the contract in case of unforeseen circumstances under the cover of the concept of
interpretation of the contract.13 In a case of 12 April 2012, the appeal court of Ghent applied
the force majeure in a case of unforeseen circumstances.14
See in the same direction: C. BIQUET MATHIEU, ‘Soubresauts en matière d’imprévision, Les arrêts des 19
juin 2009 et 14 octobre 2010’, RFDL 2012, 239 ; S. VAN LOOK, Quousque, Mons (21e chambre) du 30 mai
2013, "A propos du déséquilibre du contrat et de l'obligation de renégociation", Observations de D. PHILIPPE,
J.L.M.B., 2014/23, 6 juin 2014, Larcier.
10
In the Netherlands, hardship is expressly recognised in article 6:258 of the Civil Code, but the conditions of
application of this article are interpreted very strictly by the case law E. HONDIUS and H.C. GRIGOLEIT
(eds.), Unexpected Circumstances in European Contract Law, Cambridge University Press, 2011, p 70; R.
MOMBERG URIBE, 2011 "The effect of a change of circumstances on the binding force of contracts.
Comparative perspectives", 328 p., Intersentia, Antwerpen; 2011 "The Duty to Renegotiate an International
Sales Contract in Case of Hardship - International Case Note", European Review of Private Law, Volume 19,
Issue 1, 119-135
11
See D.PHILIPPE, Le juge et la révision du contrat, p 377.
12
See D.PHILIPPE, Changement de circonstances, p 169 ; P. WERY, ‘L’imprévision et ses succédanés’, JLMB
1996, 105.
13
See civ. Brussels, 24 May 1884, Pas., III, p 247.
14
See NJW, 2013, p.32 and obs. C.LEBON, see also VAN LOOK, Quousque..
9
4
II How would this case be approached by the Belgian courts?
In Belgium we have, as far as we know, no cases related to unforeseen circumstances due to
the financial crisis.
This case is interesting because it deals with the consequences of the financial crisis of 2008
on a swap contract.15
A swap is a contract in which the parties to it exchange liabilities on outstanding debts, often
exchanging fixed interest-rate for floating-rate debts 1617
The contract aims to cover financial risks18 and the fluctuation is of the essence of the
contract. The defendant also underlined that the plaintiff was assisted by persons who
presented themselves as specialists in these financial matters.
The Portuguese Court considered that the risk, assumed by parties, exceeded the risk that
parties could reasonably foresee at the conclusion of the contract and underlined that it would
be contrary to the good faith to stick to the clauses of the contract, which were envisioned in a
total other contractual frame than the frame resulting from the financial crisis.
The Court underlined that the increase of interests was a mutual assumption of the parties.
The presence of this assumption is a question of interpretation of the contract, and can be
15
See on the application of the doctrine of unforeseen circumstances in case of depreciation of the currency or
in case of fluctuation of foreign currency: E. HONDIUS and H.C. GRIGOLEIT (eds.), Unexpected
Circumstances in European Contract Law, Cambridge University Press, 2011, case 2, p 250; see over the
inflation and the foreign currency agreement, the following references
16
See also the definition of the Oxford dictionary: An exchange of liabilities between two borrowers, either so
that each acquires access to funds in a currency they need or so that a fixed interest rate is exchanged for a
floating rate.
17
See on the effects of monetary depreciation on the contract in general, among others, H. CABRILLAC, De
quelles incidences des variations monétaires sur la règle de droit privé (Aix-en-Provence: 1937); J.
CARBONNIER, Le principe du nominalisme monétaire et ses limites en droit français, Travaux et conferences
(Brussels: Larcier, 1960), VIII, p 113 à 126; see on monetary depreciation in contractual relations, Travaux de
l’Association Capitant, 1953 et 1971,; J. Ph. LEVY, Jurisclasseur civil, art 1895 C. civ., 1977; see on
indexation, J. P. DOUCET, L’indexation (Paris: L.G.D.J.), Tome 61; E. S. DE LA MARNIERE, ‘Observations
sur l’indexation comme mesure de valeur’, R.T.D.Civ., 1977, p 54 ;C.E., 8 November 1935, S., 1936, 3, p 48 and
p 313 with note by J. DELPECH (depreciation of the pound in the thirties); Cass. Fr.Civ, 25 February 1929,
Clunet,1929, p.1306; G. VAN HECKE, Problèmes juridiques des emprunts internationaux Leiden, 1964 ; See
the following authors: S. DAVID-CONSTANT, ‘Erosion monétaire et droit privé‘, Annales de Droit, 1977, p
443 to 457; H. DE PAGE, ‘Avis’ , B.J., 1924, spéc. p 374; H. DE PAGE, Traité elementaire, vol. II, n° 569, p
578; J. DUBAERE, ‘Het principe van het monetaire nominalisme’, Iura Falconis, 1978 to1979, p 57 to 76; R.
PIRET, Les variations monétaires et leurs répercussions en droit privé belge (1935); ‘La réadaptation monétaire
du 21 septembre 1949 et les conflits de droit privé’, J.T., 1949, p 491; ‘L’influence des variations monétaires en
matière de contrats de prêts et de rente viagère’, Travaux de l’Association Capitant, 1953, Paris, 1955, p 131.,
spec. p 134 et 135; Y. SCHOENTJES-MERCHIERS, De waardebeveiligingsclausule in het recht van de landen
der europese economische gemeenschap (Brussels, 1968); ‘Les effets des variations monétaires sur les rapports
juridiques contractuels en droit civil et en droit commercial belge’, Travaux de l’Association H. Capitant, 1971,
p 355 and seq., spéc. p 375 à 377; ‘Geld, tijd, waarde en recht, De Rechtsbescherming tegen de
waardeschommelingen van het geld’, in Recht in beweging, t. II, p 831 to 847, spéc. p 842 et 843; R.
VANDEPUTTE, De overeenkomst, p 186 and seq.; G. VAN HECKE, Travaux de l’Association H. Capitant,
1953, p 219 and seq.; J. VAN MULLEN; R. ZONDERVAN, ‘L’inflation : le droit et les faits’, Mélanges J.
Baugniet, 1977, p 917 to 968.
In the case law, the following decisions refused to take depreciation into consideration: civ. Brussels, 7 February
1924, B.J., 1924, p 384; Brussels, 3 May 1927 et 13 January 1928, comm. Brussels, 8 December 1925, J.C.B.,
1928, p 28 à 43; Brussels, 20 February 1932, Pas., 1932, II, p 226. The following decision, on the contrary, gave
effect to monetary depreciation civ. Brussels, 3 January 1938, Pas., 1938, III, p 138. H. DE PAGE, avis sous civ.
Brussels, 7 February 1924, B.J., 1924, p 361 a.f. See Travaux de l’association Capitant, 1953 & 1971.
18
R. MOMBERG URIBE, 2011, The effect, p 77
5
disputable but we agree with the Court that the subprime crisis of 2008 was unforeseen for the
ordinary economic operators but we are not convinced that parties could count on an increase
of the interests on the 8th of August 2008. We can add that, in August 2008, time of
conclusion of the swap contract, the first signs of the subprime crisis could be detected, but
maybe only professionals could foresee them or the effects of the crisis on the interest rate
were unforeseeable. The interest rate decreased in fact sharply.19
We think however that in Belgium, even if the doctrine of unforeseen circumstances was
expressly recognised, the judge would consider that the swap contract is an aleatory contract
and that the risk of fluctuation of interests must be supported by the contracting parties and
are not subject to adaptation. The parameters of the risk cover were well-defined in the
contract. Furthermore, the decrease of the interest rate had occurred already before the
subprime crisis.
In some legislations, the aleatory contract is always excluded from the scope of application of
the doctrine of unforeseen circumstances20.We think however that the aleatory contract must
fall within the scope of the doctrine of unforeseen circumstances but the application must be
more severe due to the nature of these contracts21.
Maybe the fact that the bank took a very advantageous position in the contractual relations
was sufficient to convince the judge that the doctrine of unforeseen circumstances must apply
even if the contract was aleatory.
In Italy, where this concept exist, case law stated that the concept of normal risks includes the
fluctuation in the value of the performances deriving from regular and normal market
fluctuations, but maybe the Italian judge would also consider that the financial crisis of 2008
was an exceptional event. 2223
The doctrine of unforeseen circumstances finds generally application in contracts with
successive obligations. The Supreme Court has decided that it was a case for a swap contract.
This affirmation is of course justified.
Finally, we think also that it would be more appropriate in this case to adapt the contract so
that the risk of the new circumstances would be shared on an equitable basis between both
parties.
19
See for instance the evolution of the Euribor rate among others on the website fr.euribor-rates.eu ( captured the
4th of August 2014)
20
See article 1469 of the Italian Civil Code; See D. PHILIPPE, « Changement de circonstances et
bouleversement de l’économie contractuelle », op.cit., p 115
21
See D. PHILIPPE, « Changement de circonstances et bouleversement de l’économie contractuelle », p 624
22
See R. MOMBERG URIBE; Cass. It., 17 July 2003, n° 11200; Cass., 4 March 1998, n° 2386; for a refusal of
application of eccessiva onerosità in case of a put option contract affected by the financial crisis, Tribunal of
Milan, section entreprise, sentence 1419/2014 registration number 43201/2011
23
We can also stress that swap contracts can be annulled if the bank has not respected its obligation of
information See C.J.E.U. - Judgment of May, 30 2013 in the case no C-604/11; see in Italian law, appeal Milan,
causa RG 2652/09, 17 July 2013; see on Mifid in Belgian law, S. DELAEY, De contractuele verhouding inzake
portefeuillebeheer: op de wip tussen Mifid en privaatrecht, Intersentia, 2010.
6