Renting or licensing of software?

As a business owner, you enter into contracts on a daily basis. Often these are standard contracts presented to you by a supplier or financing partner. A common construction is the "renting" of business equipment, from copiers to specialized software. But what if the title of the contract does not match the actual content? A recent ruling by the Antwerp Court of Appeal on March 3, 2025 shows that the consequences of such a misnomer can be far-reaching.

The facts: a software package that doesn't work

A businesswoman, active in the healthcare sector, needed a software platform for her administration and billing. She got in touch with a software developer (Docit Consult) and signed two agreements:

1. A service agreement with the developer himself.
2. An "interest contract" with a finance company (Grenke Lease) for the use of the software for a period of 84 months.

Shortly after the businesswoman received the access code for the platform, she found that the software was full of flaws and lacked promised features. For months she complained about this to the developer, but no solution was forthcoming. Despite paying the rents correctly, she eventually decided to terminate the agreements because of the ongoing problems. She sent a registered letter to both the developer and the finance company to dissolve the partnership out of court.

The finance company ignored this notice, continued to send invoices, and eventually sued the businesswoman in court to demand back rent and a hefty severance payment.

The verdict of the Antwerp Court of Appeal

Both at first instance and on appeal, the entrepreneur's reasoning was followed and the finance company's claim was rejected. The court of appeals' reasoning is particularly instructive for any entrepreneur faced with similar contracts.

Qualification of agreement: not renting but licensing

The crux of the case revolved around the question: was this really a renting contract? According to the court, a court may deviate from the name the parties give to their contract if that name is irreconcilable with the content and obligations of the contract.

An renting agreement is a specific structure in which the interest lender (the finance company) purchases an asset from a supplier (according to the client's specifications) and becomes the legal and beneficial owner of that asset. This asset is then made available to the customer (the interest borrower) in exchange for a rent.

In this case, the court found that there was no such transfer of ownership. The finance company had not purchased the software and had not become its owner. The businesswoman was not provided with software (for example, on a USB stick or via a download), but merely an access code to an online platform that remained the property of the developer.

Accordingly, the court correctly held that the agreement was not a renting, but a (sub)license agreement. The fact that the parties themselves, including the finance company, used the word "license" in their communications strengthened the court's conviction.

The implications of requalification

This recharacterization was significant. The finance company argued, as usual in interest-rate cases, that its role was limited to financing the operation and that it was not responsible for the defects of the "leased" property.

This argument was dismissed by the court. Because this was a licensing agreement, the finance company (as sublicensor) was indeed bound to ensure the proper functioning of the software platform and to indemnify the entrepreneur for defects. She could not hide behind the supplier.

The extrajudicial dissolution: justified and valid

The court then addressed the question of whether the businesswoman could simply terminate the contract out of court. According to Article 1184 of the old Civil Code (and the principles now enshrined in Article 5.90 et seq. Civil Code), a party may terminate a contract out of court at his own risk, provided that:

• There is a sufficiently serious contractual default.
• The other party is expressly informed of this through a notice.
• A prior notice of default was sent unless it became useless.

The court ruled that all of these conditions were met. The software immediately showed serious and persistent defects. The businesswoman's registered letter was clear and unequivocal notice of her decision to terminate the agreement. Given the breach of trust, an additional formal notice was pointless. Thus, the out-of-court dissolution was valid.

As a business owner, what can you learn from this ruling?

1. The title is not sacred: Do not stare blindly at the title of a contract ("renting," "leasing," "renting"). A judge will always look at the real commitments of the parties to determine the nature of the contract.
2. Know the characteristics of your contract: The distinction between renting, leasing, renting and a license is important, especially when it comes to software and other intangibles. Your counterparty's obligations are fundamentally different.
3. A 'confirmation of delivery' is not foolproof: In this case, the businesswoman had signed a standard "confirmation of delivery" document even before she had been able to test the software. The court did not attach any value to this because the document could not materially correspond to reality. So be extremely careful about signing such documents.
4. Respond quickly and correctly to problems: The businesswoman in this case was able to preserve her rights because she immediately and repeatedly reported and documented the problems. In the event of continued nonperformance, a non-judicial cancellation be an effective weapon, but its use requires legal caution.

Conclusion and how we can help you

This ruling is a clear warning to every business owner: be vigilant when entering into contracts for software and other IT services, especially when they are "rented". The qualification of the contract directly affects your rights and the obligations of your co-contractor.

Are you dealing with a complex software contract, an interest rate agreement that raises questions, or a dispute with a supplier or finance company? If so, contact our firm. We will analyze your contract, advise you on your rights and assist you in negotiations or any proceedings to best defend your interests.