Tijdschrift voor Privaatrecht

Payment issues have always been with us. Where a debtor is no longer able to pay the sums owed under his financial obligations, the latter may resort to pleading force majeure. However, this will only be possible in exceptional circumstances, given that money is a replaceable item, and only seldom is there a transfer of risk for the actual payment of the sum in question.

Nevertheless, there are a number of exceptional circumstances which may give rise to force majeure. In the first instance there are the faits du prince, i.e. measures taken by the public authorities, such as restrictions on bills of exchange, or embargos.

Secondly, insolvency on the part of the debtor could also give rise to force majeure in relation to obligations to pay the sum owed. This is because there is trend among the courts to interpret the impossibility requirement for force majeure in a more qualified and humane manner. Thus the difficulties experienced by the debtor in meeting his obligations could sometimes be qualified as force majeure, regardless of the replaceable nature of money. However, the Supreme Court (Hof van Cassatie) has consistently held that a debtor’s insolvency cannot release him from his obligation, but can only give rise to its suspension. Thirdly, force majeure could also apply where meeting the obligation in question would place the debtor in an intolerable position – if only in respect of future transactions. Fourthly, the seller of a specific coin or banknote could plead force majeure if they are destroyed.

However, in all these circumstances the other requirements for force majeure will need to be met, to wit (i) that the debtor cannot be held responsible for his failure to meet his obligations, (ii) the fact that the debtor had not assumed the risk of the circumstances in question arising, and (iii) that these circumstances arose after the contract was concluded. In the light of these requirements, there are a number of obstacles which the debtor will need to overcome before being able to rely on force majeure. Thus, for example the debtor will need to demonstrate that he managed his financial affairs competently and that he had taken adequate financial precautions before entering into the obligation to pay the sum in question.

Force majeure can either temporarily suspend performance of the obligation – where the impossibility to perform is only temporary, or it can release the debtor from further performance where the impossibility is permanent. The courts have at times been inconsistent when applying these principles.

However, where the requirements for force majeure have not been met, the debtor can rely on a number of alternatives, including unforeseeability, the mitigating effect of having acted bona fide, periods of grace, and certain measures of support taken in the context of the Covid-19 pandemic. These legal concepts are speedier to invoke than force majeure, but their consequences are frequently less effective.

Finally, where the Vienna Convention on the Sale of Goods applies to the agreement in question, the debtor may rely on Article 79 thereof. The Supreme Court (Hof van Cassatie) interprets this provision in such a flexible way that payment issues based on this rule can prompt the renegotiation of the said agreement.

Acquisitive prescription is frequently regarded as raising ethical problems, entailing as it does that the owner loses his ownership rights against his will and without any compensation. Such acquisition could be tolerated where the beneficiary of this type of prescription possesses the property in question on a bona fide basis, and cannot be faulted, given that here, we have a conflict between two parties who are deserving of protection. However, acquisitive prescription by someone who does not possess property on a bona fide basis (or possesses it mala fide under Belgian law) gives rise to a higher level of objection. This is because the latter merely deserves very limited protection, so that his dominant position should not be an automatic given.

Traditionally, Belgian law has allowed the non-bona fide possessor to obtain property through acquisitive prescription, subject to the proviso that he cannot claim any reduced prescription periods. It is certainly the case that the courts frequently adopt a reluctant attitude towards non-bona fide possessors of property, and the rules that prevent possession provide several openings for such reluctance. For many years, Dutch law refused to recognise acquisitive prescription by the non-bona fide possessor.

This was changed in 1992. However, the Netherlands Supreme Court (Hoge Raad) places possessors who can be seriously faulted at a great disadvantage, given that they remain capable of being held liable in tort. South African law, on the other hand, adopts an indifferent position when it comes to bona fide, and merely applies a uniform 30-year prescription period.

Acquisitive prescription by a non-bona fide possessor can be justified by a number of decisive arguments: (a) possession for a sufficiently long term brings about a reversal in legitimate title, i.e. in the legitimacy of the parties’ position, (b) it serves the interest of legal certainty – including that enjoyed by third parties – given that acquisitive prescription forms the basis of secure property rights; (c) possession by prescription puts the former owner in the wrong and serves to penalise him for an idleness on his part which is socially undesirable, (d) it also serves to protect bona fide possessors, given that can be difficult to prove at what precise time the possessor ceased acting in good faith, and the lack of bona fide was established.

The counter-arguments are based on the moral repugnance attaching to the non-bona fide possessor’s position. As far as Dutch law is concerned, an additional objection is that insufficient attention is given to the requirement that the non-bona fide possessor should justify his position, which serves to undermine this legal concept.

In practice, the law has succeeded in managing these “for and against” arguments in several ways. The most significant factor here is that the non-bona fide possessor is required to complete a longer term of prescription, i.e. 30 years in Belgium and 20 years in the Netherlands. In addition, a great deal of attention is given to the notion of possession itself, being one of the essential requirements for obtaining acquisitive prescription. More particularly the various rules preventing possession are capable of keeping non-bona fide possessors in check. Consideration is also given to the various types of compensation which are chargeable to the non-bona fide possessor – and here, Dutch law has been in the vanguard. The new Belgian property legislation has also taken a big step in this direction, but its implementation leaves a great deal to be desired. It also needs to be said that there are considerable differences among the legal systems in question as regards the protection of public property. Belgian legislation provides a high degree of protection, whereas this is not the case when it comes to The Netherlands – which may explain why the Dutch authorities tend to frown on non-bona fide possessors given that, in the Netherlands, it is possible to acquire major items of public property from the authorities).

When it comes to legal reform, two solutions suggest themselves. In the first instance, one could subscribe to the Dyal Chand theory, and emphasise the importance of all such legitimate interests as are involved. As a result, applying the requirements for prescription is no longer and black-and-white issue, but is subject to various nuances.

For example, the possessor could be awarded a right of use.

However, a more attractive proposition would be to oblige the mala fide possessor to pay compensation, as is currently the case in The Netherlands and Belgium.

This makes it possible to enhance the legitimacy of acquisitive prescription and to protect the interests of all those involved, including third parties. This also serves to discourage taking possession on a non-bona fide basis. However, it is important to ensure that the former owners are protected against the non-bona fide possessor, which is not the case in Belgium. It is also necessary to take into account the relevant circumstances, but even the existing mechanisms pay but little heed to this requirement.

A rental option agreement is an agreement under which at least one of the parties (“the option provider”) gives its beneficiary (“the option taker”) the right to decide to conclude with the latter a rental agreement, the creation of which subsequently merely lacks the option taker’s consent. The option taker may decide independently whether to exercise – or not – his right of option. Thus option rights become an interesting instrument in situations where the parties need a degree of flexibility and certainty with a view to concluding the contract envisaged. Contracts of sale are an example of this, but the inclusion of option rights can also be useful when it comes to rental agreements. When seeking out a suitable property for rent prospective lessees do not act with ill-considered haste. Because a waiting period is capable of causing uncertainty, the renters will seek to consolidate their chances of securing the property in question. A right of option can be a useful mechanism here. Conversely, rental options can also benefit the lessor. By acquiring several rental options the latter can make a better considered choice before committing himself to a rental agreement.

This contribution examines option agreements, focusing specifically on their use in rental agreements. This is because rental option agreements only represents a useful mechanism for achieving certainty and flexibility if the parties have themselves ensured certainty concerning the option agreement – and possibly also its scope and implications.

For this purpose, the author examines in the first instance the legal characterisation of option agreements and of option rights. Thus a distinction is drawn between option agreements applied to rental agreements and other pre-contractual rental arrangements (such as rental offers and preference agreements) which may be concluded during the negotiations – which can occur within a tight timeframe. The author also examines the divergences in the way the expression rental option can be understood – rental options are not all the same. Thus, a distinction can be drawn between rental options, options to renew commercial leases, and options to extend rentals. In all these cases the rights will be different as to their scope.

The paper then discusses the lawfulness, creation and terms and conditions of rental option agreements.

The lawfulness of rental option agreements between two private parties is accepted in principle. However, where the option taker is a business, and the option provider is a consumer or another business, its lawfulness in principle comes under challenge in the light of the rules concerning unlawful terms and conditions [Article VI.83 (1) and VI.91/4 (1) of the Business Law Code (WER)]. This is because rental agreements cause an asymmetric situation to arise as regards the consent of both parties to the rental agreement. However, the automatic voidance of the rental option agreement is not a desirable outcome, because this would render the option impossible to be exercised where the agreement in question has a lawful purpose.

As regards the actual conclusion of the agreement, the author considers the form – whether compulsory or not – assumed by the rental option agreement. The latter is free-standing innominate agreement which is not in itself subject to statutory requirements as regards its form. Whether the written agreement requirement to which a rental agreement itself is subject also applies to the right of option relating to it needs to be determined by means of a purposive interpretation.

Finally, the author briefly examines the price, duration and lifting of the option.

The parties are free to agree to a price by way of consideration for the awarding of an option right. Although some are of the opposite view, a substantial price cannot be automatically equated with a situation whereby the option taker had already committed himself to a rental agreement. The parties are in principle free to fix the duration of the rental option agreement. If the latter has been concluded for an indeterminate period, the option provider may free himself from it by cancelling it subject to a period of notice.

This contribution analyses the relevant Belgian procedures governing financial conflicts of interest affecting company directors (Article 7:96 of the Belgian Companies and Associations Code) and transactions with related parties (Article 7:97 of the Belgian Companies and Associations Code). The focus here is on the recent changes caused by the introduction of the Companies and Associations Code and the Law implementing the Shareholder Rights Directive II (“SRD II”). The paper analyses the rationale and history underlying these conflict of interest procedures and assesses how these procedures reconcile the protection of shareholders with the flexibility to manage the company in question.

The author concludes that the recent changes have rightly increased shareholder protection. For example, the rule prohibiting conflicted directors from voting has been extended to unlisted companies under Article 7:96. In addition, the scope of article 7:97 has been greatly extended by the new definition of what constitutes a related party; also, the relevant procedure has been strengthened considerably by the rule that (a) the company directors involved in the transaction are no longer allowed to vote on it, and (b) the information pertaining to the transaction must now be published immediately, and not merely in the annual report.

Nevertheless, the author makes a number of proposals for improvement. For example, the scope of the conflict of interest procedure in article 7:96 continues to include a number of gaps with regard to affective and functional conflicts of interest. However, this is already partially solved by the fact that Article 7:97, which lays down a stricter procedure, will often also apply to financial conflicts of interest affecting directors.

A second issue is that no general procedure governing conflicts of interest procedure has been formulated for transactions which come within the jurisdiction of the General Meeting. The Belgian lawmaker would be well advised either to give the Board of Directors a veto over transactions with related parties – and to apply the conflict of interest procedure to that decision – or to introduce a rule prohibiting conflicted shareholders from voting on transactions with related parties.

Thirdly, the rule exempting subsidiaries contained in Article 7:97 is formulated very broadly. The only case where the exemption does not apply arises where a controlling shareholder has a holding of 25 per cent or more in the subsidiary. It does apply where a different category of related party (such as a director or a shareholder with significant influence) has such a holding. The author takes the view that this constitutes an infringement of the Shareholders Rights Directive II, because the procedure does not, in certain cases, provide adequate protection against conflicts of interest involving transactions with subsidiaries. The author therefore proposes that the law be amended in such a way that the exemption relating to subsidiaries does not apply where a party related to the listed company has an interest in the subsidiary which conflicts significantly with that of the listed company.

Fourthly, the lawmaker could still adopt measures making the independent directors even more independent from the primary shareholders – for example by protecting them against dismissal by the primary shareholder or by having directors appointed and dismissed by minority shareholders. In addition, the role of these independent directors should also be expanded: instead of giving non-binding advice when the transaction ends, they should be involved in the negotiation of transactions with related parties from the outset and be granted a right of veto.

During the past few decades, the Belgian regions have introduced a number of information requirements which need to be complied with by the seller of real estate. Failure to comply is frequently and expressly penalised with the voidability of the underlying sale. For other information requirements, the penalty merely consists in an administrative fine. However, the relationship between these penalties and the ordinary law of obligations is not entirely clear. Nevertheless, a closer association with these ordinary rules could be of considerable benefit to all concerned. Thus it is that, on the one hand, an administrative fine gives but inadequate protection to the purchaser. On the other hand, to render the sale in question voidable as a penalty for non-compliance with these information requirements is in many cases a disproportionate measure which unnecessarily affects the seller as to his legal certainty. It is precisely by viewing these measures in the light of the ordinary law of obligations that this contribution examines whether the resulting penalty could not be applied in a more proportionate manner.

In the first instance, the author examines the effect of these penalties on the conclusion of real estate sales. Experience reveals this effect to be minimal. Given the importance which the relevant law-making authorities have attributed to the underlying elements of the sale on the basis of these information requirements, it appears to us appropriate to draw the conclusion that the assumption can be made that these elements are essential to the purchaser. This can even be assumed on the basis that it is merely in certain exceptional circumstances that this will not be the case. The author argues that the effectiveness of such qualifying considerations is ensured because of the broad scope of the ordinary rules of obligations, which acts as a threshold for the system that enables these transactions to be made. A non-existent agreement cannot be unlawful.

The author further examines the relationship between these information requirements and the ordinary rules on the conclusion of agreements. It is frequently the case that voidability as a penalty for non-compliance with an information requirement exceeds the scope of the same type of penalty as applied under the ordinary laws on this subject. Thus, unlike the validity-affecting factors mistake and misrepresentation, there is no requirement that the purchaser was drawn into error on a fundamental aspect of the agreement. This ensures that this penalty is applied too drastically and too automatically. A restriction is therefore necessary. Here, the prohibition of abuse of law can be invoked. The innovative application of the partial voidance theory could also provide a solution.

The author also examines the impact produced by the regional pre-contractual information requirements on the obligations of the parties when it comes to the performance of the contract. Here, it becomes clear that the information exchanged definitely influences the seller’s obligations. These information requirements also appear to ensure that the seller will find it more difficult to invoke an exemption clause.

The Law of 4/2/2020 has comprehensively and substantially reformed the Belgian law of property. The previous legislation remained largely that which dated from 1804 and was hopelessly outdated. The Belgian law of property had to a large extent become court-based, given that the case law had become its main legal source. This did not serve the cause of durability, legal certainty or equity.

The said Law introduces Book 3 of the new Civil Code and will automatically enter into effect on 1/9/2021 – with the exception of the provisions governing public access to land charges, which will enter into force by 1/7/2022 at the latest. This Book contains new provisions regarding ownership, joint ownership, land leases, building rights, usufruct, servitudes, public access to land charges, etc. Book II of the previous Civil Code, as well as legislation such as the Laws governing land leases and building rights (both dated 10/1/1824) will be repealed. This paper examines this reform in the light of the differences it presents with the previous law, and taking into account the relevant legal practice. It also has a comparative element in the shape of the legal position in the Netherlands, France and Québec – and to a lesser extant that of Germany and Switzerland.

The reform as adopted is based on the following tenets; (1) an integrated approach towards the law of property, (2) its instrumentalisation, (3) its modernisation, (4) rendering it more flexible and (5) an extensive comparative approach. The reform also serves to make the law of property more durable. As regards the latter, attention should be drawn to, inter alia, the additional opportunities for the multiple use of the land, the extension to 99 years of the maximum duration of a building right; in addition, under certain exceptional conditions the duration of a building right may even stretch to eternity. Where such exceptional conditions apply, they may give rise to some type of “volume ownership”. Of this aspect, the notion that jointly-owned items of property should be used taking account of the general interest – including that of future generations – is a significant example.

A novel feature of the reform is the appearance of a general section containing provisions which are common to all property rights. These determine in the first instance what are the existing property rights as well as the extent to which freedom of action applies – the law or property is permissive law, with the exception of the applicable definitions and those provisions which expressly lay down that they are incapable of derogation. This Title also contains general provisions governing the creation, extinction and transfer of property rights, their nature (property substitution, confusion of property, property adjustment, unity principle) – as well as public access to property rights, a significant aspect of which is the opportunity to enter additional deeds, such as land purchasing options, pre-emption rights, and deeds of succession, in the registers of land charges.

When it comes to the practical application of the law, the reforming legislation has extended the range of options. Thus there is a reduction, to 15 years, of the maximum duration of a land lease, the extension, to 99 years, of the maximum duration of the right to usufruct by legal persons, and a set of generally applicable rules governing personal and property rights in relation to public property, as well as legislation governing consensual joint ownership and its termination.

In structural terms there is also a new feature in the shape of a separate Title governing neighbourly relations, in which the rules regarding excessive neighbourly nuisance have been codified for the first time; however, this Title also contains provisions simplifying the rules on common fencing and servitudes. Thus, acquisitive prescription and owner designation have been made an option for all visible servitudes.