Joris DeeneYes, but not under the rules governing liquidated damages. According to the Antwerp Court of Appeals, a stipulated termination indemnity is not a liquidated damages clause and is therefore not subject to the mitigation provisions of Article 1231 of the old civil code (former Civil Code). However, anyone who demands such compensation in a manifestly excessive manner is committing an abuse of rights, and in that case the court may reduce the amount. The court of appeals ruled on this in a judgment dated May 20, 2026, concerning a franchisee in the automotive sector who terminated his five-year contract after just over four years. The franchisor demanded three years’ worth of compensation, totaling 29,340 euros, and was awarded eight months’ worth.
In short:
- On May 20, 2026, the Antwerp Court of Appeals ruled that a clause allowing the franchisee to terminate the contract early upon payment of three years’ worth of location and marketing fees constitutes a termination clause and not a liquidated damages clause.
- A termination clause cannot be moderated under Article 1231 of the former Civil Code, but it can be moderated on the grounds of abuse of rights: claiming three years’ compensation while the contract still had thirteen months remaining was, in the court’s view, clearly going too far.
- In doing so, the court drew inspiration from the B2B rules on unfair terms, even though those rules did not yet apply to a 2018 franchise agreement, and thus awarded compensation of 6,520 euros.
The facts
A franchisor in the automotive tire industry and a franchisee entered into a five-year franchise agreement in 2018. The contract was undated, and the start date was left blank. The first invoice for franchise fees covered July and August 2018, and a press release confirmed that the franchise began in July 2018. The agreement was therefore, in principle, set to run through July 2023.
On June 8, 2022, the franchisee announced that he was terminating the partnership. He cited the difficult times in the automotive sector. He closed his doors at the end of October 2022, according to an announcement on his own website. It was not until a letter dated July 18, 2022, that he invoked Article 16, paragraph 5, of the contract, which allowed for termination without compensation in the event of structural losses, but only after a written notification accompanied by evidence and an investigation by an auditor appointed by the franchisor.
The franchisor invoked Article 16, paragraph 6 of the contract. That provision stipulated that a franchisee who terminates the contract early at his own request is liable for “compensation” immediately due and payable, equal to the location and marketing fees for three years. The franchisor estimated this amount at 29,340 euros and issued an invoice for it on December 26, 2022. The trial court classified the clause as a liquidated damages clause and, pursuant to Article 1231, § 1 of the old Civil Code, reduced it to the remaining contract term of eight months, or 6,520 euros. Both parties filed appeals: the franchisor sought the full amount, while the franchisee sought no more than three months’ worth, or 2,445 euros.
The ruling
The judgment addresses four distinct issues.
The start date and term of the franchise agreement
The court upheld the lower court’s ruling: the agreement began in July 2018 and ran through July 2023. The franchisee insisted that the partnership had already begun in January 2018 and had therefore expired by operation of law at the end of 2022, but failed to submit any documents to support that claim. Without invoices for the first six months of 2018, the court of appeals found there was no reason to deviate from the first invoice and the press release.
The claim based on termination due to structural losses
According to the court, the franchisee could not invoke Article 16, paragraph 5, of the contract. The letter dated June 8, 2022, merely referred to “the difficult times we have been through and the bleak outlook in the automotive industry,” which the court did not accept as an assertion of structural losses. The franchisee did not submit any figures at that time, so the franchisor never had the opportunity to appoint an auditor. An email from the franchisee’s own accountant dated November 8, 2022, containing internal balance sheets for 2018–2021, was submitted too late to the court and was, moreover, a one-sided document.
The invoice for the termination fee
The franchisor could not base its claim on the invoice dated December 26, 2022. According to the court of appeals, such a document does not constitute an invoice within the meaning of Article 8.11, § 4 of Book 8 of the Civil Code (BW). An invoice confirms primary obligations, such as a delivery or a service. Secondary obligations, such as damages for breach of contract or compensation upon termination, do not give rise to an invoice. Therefore, the franchisee was not required to dispute the invoice.
The Validity of the Clause and the Reduction of the Termination Indemnity
At the hearing, the court itself raised the question of whether Article 16, paragraph 6, was in fact a liquidated damages clause, and then asked the parties to respond. Its answer was in the negative. According to the court, a clause that allows the franchisee to unilaterally terminate the agreement in exchange for payment of compensation is a termination clause. Unlike a liquidated damages clause, a termination clause is not subject to mitigation under Article 1231, § 1 of the old Civil Code. On that point, the court revised the reasoning in its judgment.
That did not mean the compensation was beyond challenge. The court first applied Articles 6 and 1131 of the former Civil Code: a termination indemnity that is so high that the franchisor speculates on a termination, or that functions as a private penalty, is contrary to public policy and has an unlawful cause. According to the court, that was not the case here, nor had the franchisee argued that it was.
The court then applied the doctrine of abuse of rights. The exercise of a termination clause may be subject to the moderating effect of good faith under Article 1134, paragraph 3, of the former Civil Code. Abuse of rights is the exercise of a right in a manner that manifestly exceeds the limits of what a prudent and cautious person would do, including when the resulting harm is disproportionate to the intended benefit. Claiming three years’ worth of compensation—or three-fifths of the total contract term—even though the franchisee had indicated his intention to terminate the contract and the contract was set to expire in July 2023 anyway, was deemed excessive by the court of appeals. The fact that the franchisor also cited loss of revenue, lost income from manufacturers, and missed commercial opportunities in the region did not change this: as of July 2023, the franchisor would have had to find a new franchisee in any case.
In its ruling, the court referred to the B2B Act of April 4, 2019. Both parties agreed that the Act did not apply, because the rules regarding unfair terms between businesses did not take effect until December 1, 2020, and the contract dated from 2018. Nevertheless, the court ruled that the clause fell under the general standard of review set forth in Article VI.91/3, § 1 of the Code of Economic Law (WER) would apply: a termination indemnity that is clearly higher than the costs incurred and the lost profits creates an obvious imbalance, especially since the franchisor itself was not liable for a similar indemnity. The court saw no objection to applying that provision “in advance, to the extent necessary” as a source of guidance for the trial court.
The penalty was a reduction to eight months’ compensation of 815 euros, or 6,520 euros. A lower amount was not permitted: the franchisee had indeed terminated the contract eight months before its expiration, and no document showed that he had remained active until December 2022. The court of appeals thus upheld the amount awarded by the trial court, but on a different basis: abuse of rights rather than Article 1231 of the former Civil Code.
Legal analysis and interpretation
Why the term “compensation” in the contract didn’t matter
The parties themselves had referred to the clause as “compensation for damages.” Nevertheless, the court interpreted it as a termination clause. This is consistent with established case law of the Court of Cassation: a clause that specifies a sum of money not as compensation for damages, but as consideration for the contractually granted right to unilaterally terminate the agreement, is not a penalty clause (Supreme Court, September 6, 2002, C.00.0150.N; previously Supreme Court, October 22, 1999, C.98.0134.F). Whether compensation serves to remedy damage or whether the price is for a right of termination is determined by the trial court based on the intent of the clause, not on its name (Supreme Court, April 28, 2011, C.10.0117.F).
The franchisor had a counterargument. Article 16, paragraph 6 did not refer to a right to terminate, but to a franchisee who “terminates the agreement early at his own request” and is liable for “immediately payable compensation” as a result. Under that interpretation, the clause penalizes a breach of contract and is, in fact, a liquidated damages clause. The court of appeals chose the other interpretation: the clause offers the franchisee the option to terminate, and the compensation is the price of that option. That choice is defensible, but it shows just how fine the line is. Two nearly identical clauses—one stating “may terminate upon payment of,” the other stating “is liable to pay damages in the event of early termination”—may fall under different legal regimes. Under the new law, this is no different: the mitigation provided for in Article 5.88, § 2 of Book 5 of the Civil Code applies only to indemnity clauses, and therefore not to the termination indemnity.
This distinction has been criticized in legal scholarship. The party that fails to comply with its contract thus enjoys greater protection—since its liquidated damages clause can be moderated—than the party that properly exercises a contractual right of termination and pays the full price. Claeys and Tanghe point out that this does not render exorbitant termination clauses sacrosanct, as they may run afoul of the prohibition against abuse of rights (I. CLAEYS and T. TANGHE, New General Contract Law, Brussels, Intersentia, 2023, 736, no. 972). The Antwerp ruling illustrates this precisely: the outcome was 6,520 euros in both instances; only the path to that outcome differed. For the parties, therefore, the recharacterization made no difference in terms of euros, but it did make a difference in terms of legal basis.
Abuse of Process as a Remedy: What the Court of Appeals Considered and What It Did Not
The abuse-of-rights test applied by the court of appeals is the classic one. Abuse of rights in the performance of a contract is the exercise of a right in a manner that manifestly exceeds the limits of what a prudent and conscientious person would do (Supreme Court, February 8, 2001, C.98.0470.N). If the abuse concerns the application of a contractual provision, the remedy may consist of denying the creditor the right to invoke that provision (Supreme Court, February 2, 2018, C.17.0386.F). Since January 1, 2023, that prohibition has been set forth in Article 1.10 of Book 1 of the Civil Code and, for contracts, in Article 5.73 of the Dutch Civil Code.
The court’s calculations are clear. The franchisor sought 36 months’ compensation for a contract that still had 13 months remaining—and that for a franchisee who had closed his business. The disadvantage to the franchisee was disproportionate to the benefit the franchisor could claim: starting in July 2023, the franchisor would need a new partner anyway. The court’s rejection of the additional claims for damages is consistent. Anyone who stipulates a fixed compensation amount has precisely the advantage of not having to prove their damages; they cannot then increase that lump sum by adding the damages they believe they can prove.
Still, it is striking what the court chose not to do. The franchisee requested a reduction to three months. The court refused, because he had indeed terminated the contract eight months early. The reduction thus remained fixed at the remaining term of the contract, as if the judge had reduced a liquidated damages clause to the amount of potential damages. In cases of abuse of rights, the standard is different: the court restores the right to its normal exercise. That this normal exercise in this case coincides with compensation for the remaining term is plausible but not self-evident, because a franchisor who can quickly re-let the premises after a termination may not suffer eight months of loss. On this point, the ruling concurs with the trial court without elaborating further.
Can a judge apply a law that was not yet in effect?
The most discussed aspect of the ruling is the reference to Article VI.91/3, § 1 of the WER. That provision was inserted by the Act of April 4, 2019, and, according to Article 39 of that law only for agreements entered into, renewed, or amended after December 1, 2020. Existing contracts are expressly excluded. Parliament therefore deliberately set that cutoff date.
The counterargument is obvious. A judge who applies an inapplicable law “in anticipation” is doing what the legislature has ruled out. This debate is well-known from the lead-up to Book 5 of the Dutch Civil Code: Claeys and Tanghe criticized anticipating a legislative proposal as creating a democratically problematic relationship between the legislature and the judiciary, but accepted that the new law could serve as a source of inspiration for resolving disputed issues under the old law, as long as the legitimate expectations of the parties at the time of entering into the contract are not betrayed (I. CLAEYS and T. TANGHE, New General Contract Law, Brussels, Intersentia, 2023, 52–53, no. 52). The court appears to be aware of this distinction: it first refers to “anticipatory application,” but immediately corrects itself to “source of inspiration for the judge.” The actual legal basis remains the abuse of rights under Article 1134, paragraph 3, of the former Civil Code, which was undisputedly applicable in 2018. The B2B standard merely provides the criterion for determining when compensation is “manifestly” excessive.
In terms of substance, however, that interpretation is rather idiosyncratic. First, Article VI.91/6 of the WER declares an unlawful clause null and void, not subject to mitigation. Anyone who had truly applied the B2B law would have had to strike the clause and refer the franchisor to common law; the court, however, moderated the clause and upheld it. Second, the court held that the franchisor itself was not liable for similar compensation. That requirement of reciprocity is indeed included in the blacklist for consumer contracts (Article VI.83, 17° WER), but not in the B2B rules, where the legislature deliberately omitted it. Third, the court assessed the compensation against “the costs incurred and the lost profits,” which is the standard set forth in Article 1794 of the former Civil Code for contracts for services. The French-speaking Commercial Court in Brussels applied that same comparison with supplementary law when it upheld an exit compensation of 50 percent under the B2B Act, as we discussed earlier in our blog post on the Termination compensation as an unlawful clause between businesses (Brussels (Fr.) Court of Appeal, January 13, 2025, JLMB 2026, 992). The Antwerp Court of Appeal ruled in favor of a reduction, while the Brussels District Court upheld the original ruling; the difference lay not in the legal standard but in the figures: 50 percent of an estimated savings versus 36 months for the remaining 13 months.
Specifically, what does this mean?
For franchisors and other parties that stipulate an exit fee. Make a conscious choice between a termination clause and a damages clause, and draft the clause accordingly. A termination clause (“the franchisee may terminate the agreement upon payment of”) is not subject to the limitations of Article 5.88 of the Dutch Civil Code, but not from the prohibition against abuse of rights, nor—for contracts entered into after December 1, 2020—from the B2B test under Article VI.91/3 of the WER. Therefore, link the compensation to a justifiable criterion: the remaining term, the unrecovered investments, or a degressive percentage. A fixed amount for three years, regardless of the timing of the termination, is precisely the type of clause that will be invalidated. If you are unsure whether your termination clause in a franchise or distribution contract will pass that test, the classification and calculation of the compensation are the first things we will examine for you.
For franchisees who want to close their business early. Read the contract before you terminate it, not after. The franchisee in this case had a clause that allowed him to exit the franchise at no cost in the event of chronic losses, but he did not invoke it until after he had sent his notice of termination—and without providing any financial figures. A certified letter explicitly invoking the relevant clause, accompanied by the financial statements, would have required the franchisor to appoint an auditor and would have shifted the terms of the debate. Also specify when you will actually stop operations: the website announcement from late October 2022 set the eight-month notice period.
For the parties to the proceedings and their attorneys. A judge may question the classification of a clause on his or her own initiative, as the court of appeals did here at the hearing, provided that the parties are given an opportunity to respond. Anyone challenging an exit payment should therefore base their defense on two grounds: primarily, seeking a reduction in the damages clause; secondarily, arguing abuse of rights with concrete figures regarding losses and gains; and for contracts entered into after December 1, 2020, seeking nullity under the B2B Act, as in the case we discussed in our blog about a High termination fee for early termination of a B2B contract. Do not charge a termination fee: an undisputed invoice does not constitute acceptance in this case. And do not count on a reduction for the remaining contract term without demonstrating that the other party did not actually suffer any loss during that period.
Frequently asked questions (FAQ)
What is the difference between a termination clause and a liquidated damages clause?
A liquidated damages clause specifies in advance the compensation a party must pay if it fails to comply with its contract; it compensates for damages, and the court may reduce the amount if it is manifestly unreasonable (Article 5.88 of the Dutch Civil Code, formerly Article 1231 of the old Dutch Civil Code). A termination clause grants a party the right to terminate the contract early in exchange for payment of a fee; that fee is the price of that right, not damages, and is not subject to mitigation. The specific wording in the contract is not decisive; rather, its purpose is.
Can my franchisor demand the full termination fee if I quit early?
In principle, yes, because a termination fee is not subject to mitigation like a liquidated damages clause. However, the court may reduce the claim if the franchisor abuses its right, for example, if it demands compensation that far exceeds the remaining term of the contract and its actual loss is disproportionate to the amount claimed. Furthermore, for contracts entered into or amended after December 1, 2020, the clause may be void as an unlawful clause between businesses.
Does the B2B Act on Unfair Terms also apply to contracts entered into before December 2020?
No. The provisions of Article VI.91/1 et seq. of the WER apply only to agreements concluded, renewed, or amended after December 1, 2020. For older contracts, general law continues to apply, with the prohibition against abuse of rights serving as a corrective measure. The Antwerp Court of Appeal did use the B2B standard as a source of inspiration in such an older contract to determine when a termination indemnity is manifestly excessive, but the legal basis remained the prohibition against abuse of rights.
Should I dispute an invoice for a termination fee?
Not necessarily. According to the Antwerp Court of Appeals, an invoice for damages or severance pay is not an invoice within the meaning of Article 8.11, § 4 of the Belgian Civil Code, because an invoice merely confirms primary obligations such as deliveries or services. The absence of a protest therefore does not constitute acceptance. As a precaution, however, it is still advisable to file a substantiated protest within a reasonable time, especially if you also dispute the nature or amount of the compensation.
Conclusion
In its ruling of May 20, 2026, the Antwerp Court of Appeals confirmed that a termination indemnity in a franchise agreement is not a liquidated damage clause and is therefore not subject to mitigation under Article 1231 of the former Civil Code or Article 5.88 of the Civil Code. However, anyone who claims such compensation to a manifestly excessive extent—such as three years’ worth of compensation for a contract with thirteen months remaining—is committing an abuse of rights and will have their claim reduced. The B2B rules on unfair terms served as a source of inspiration in this regard, not as a legal basis, which in Belgian law marks the line between interpreting the law and anticipating the legislature.
ICT Rechtswijzer is the knowledge platform of the Intellectual Property, IT Law, AI Law, Data Protection, and Media Law department at Everest Advocaten, led by Joris Deene, Esq. Our attorneys assist franchisors, franchisees, and other businesses in drafting and challenging exit and termination clauses in commercial contracts, as well as in calculating compensation in the event of early termination.
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