Is a termination fee in a contract between businesses an unfair term?

Anyone who hires a service provider and terminates the contract early may sometimes face a hefty termination clause. Is this permissible between businesses, or is such a clause void as an unfair term? On January 13, 2025, the French-speaking Business Court in Brussels ruled that a termination fee of 50 percent of the estimated savings does not create a manifest imbalance and therefore remains valid. A Luxembourg school, which had engaged a Belgian cost consultant on a no-cure-no-pay basis, thus failed in its appeal based on the regulations regarding unlawful B2B clauses.

The facts

A consulting firm, hereinafter referred to as C., provides cost-saving advice to companies. Its revenue model is performance-based: it receives 50 percent of the actual savings achieved, measured over a monitoring and follow-up period of twenty-four or forty-eight months. During the engagement, it invoices advance payments based on estimated savings.

In 2021, C. signed a “Consulting and Cost Optimization Agreement” with G., an international school in Luxembourg with approximately 850 students. The assignment covered five cost categories, including facility management, IT and telecommunications, catering, and utilities. C. prepared a status report for each category, followed by a report outlining specific cost-saving proposals.

After the first two option reports, friction arose. G. felt that the proposed options were not suitable for her situation and wanted to continue working with some of the existing suppliers. C. accused G. of a lack of willingness to invest and of being unresponsive. Ultimately, G. unilaterally terminated the partnership in the fall of 2022.

C. subsequently claimed a termination fee of 258,879.40 euros, based on Article 6 of the agreement. That article provided for a progressive exit fee: 15,000 euros per category prior to the option report (Art. 6.1), thirty percent of the estimated savings after presentation but before acceptance of the option report (Art. 6.2), and fifty percent after acceptance with confirmation of the selected options (Art. 6.3). G. argued that Article 6 was an unlawful clause within the meaning of Article VI.91/3 of the Code of Economic Law and therefore void.

The decision

The court rejected the defense of nullity and ruled that Article 6 does not create a manifest imbalance.

The court applied the standard of review set forth in Article VI.91/3 of the CEL. In doing so, the court exercises only a marginal review, while respecting the freedom of contract and the freedom of business. The review concerns only a legal imbalance, not the economic balance of the agreement, and is conducted in concreto based on the assessment criteria set forth in Article VI.91/3, § 2 of the CEL.

Regarding the circumstances surrounding the conclusion of the contract, the court found that there was no economic dependency. G. had approached C. of his own accord; the initiative for the collaboration did not come from C. The agreement was not an accession contract in the strict sense: G. had had a long period to consider the matter, held several preparatory meetings, adjusted the payment terms from eight to thirty days, and even chosen the working language. This indicated an effective opportunity to negotiate.

With regard to the general structure of the contract, the court rejected the argument that C. unilaterally determined whether a cost-saving measure was “successful.” After all, Article 2.8 allowed G. to raise well-founded objections within thirty days; in that case, C. was required to revise its report. G. was therefore not at the mercy of C.’s discretion once an option report had been sent. The court also emphasized that C. had been flexible with that deadline.

The comparison with general law was decisive. The court classified the agreement as a contract for services. Pursuant to Article 1794 Old Civil Code the client may terminate a contract at will, provided that he compensates the contractor for all his expenses, all his labor, and everything he could have gained from the contract, including lost profits. Against this background, the termination fees under Article 6 did not appear to be manifestly disproportionate. G. had not submitted an estimate of what C. could have claimed under general law in the absence of a termination clause, so the disproportion had not been demonstrated. On the contrary: given the amount of the general law compensation and the claimed state of the works, the stipulated compensation appeared to be in line with what C. would have earned under general law.

The court ruled that Article 6 was valid. However, in determining the amount of compensation, it found that the fifty percent compensation provided for in Article 6.3 did not apply, because G. had not “confirmed” or “retained” any option. The compensation for those categories had to be calculated at thirty percent (Art. 6.2).

Legal analysis and interpretation

The comparison with supplementary law as a guide for B2B assessments

The crux of the ruling lies in the methodology. The court explicitly applies the comparative analysis used in the Court of Justice’s consumer law case law. In the ruling Banco Primus , the Court held that, in order to assess whether a term causes a significant imbalance, particular account must be taken of the rules that would apply under national law in the absence of such a term. In this way, the court can “measure the gap” between the contractual and statutory regimes.

Incidentally, this comparison with supplementary law is suggested by the parliamentary preparatory work for the Act of April 4, 2019, itself. Nevertheless, it warrants some nuance. The rationale behind consumer protection—the power imbalance between seller and consumer—is, by definition, absent in a B2B relationship between two professional parties. The court addresses this by treating the comparison not as a protective instrument but as an objective standard: supplementary law reflects the “normal” balance against which the deviation is measured. This makes the marginal test concrete and workable, without falling into a restoration of economic balance, which Article VI.91/3 CEL specifically prohibits.

The burden of proof as a pivotal point

It is striking how much the outcome hinges on the burden of proof. The court finds that G. did not submit an estimate of the compensation that C. could have claimed under Article 1794 of the old Civil Code in the absence of a termination clause. In the absence of such an estimate, it has not been demonstrated that the stipulated compensation is manifestly disproportionate.

This places a significant burden on the party invoking nullity. Anyone seeking to challenge a termination clause as unlawful must not only criticize its amount but also specifically compare the contractual amount with the compensation under general law. This approach is consistent with the marginal nature of the review and with the rule of evidence that the party asserting a fact must also prove it, but it makes a successful challenge anything but straightforward in practice.

The distinction between a termination fee and a penalty clause

The court notes that a termination clause differs from a penalty clause: it does not compensate for damages resulting from a breach of contract, but rather constitutes the consideration for the right to terminate the agreement early, regardless of any contractual breach. That distinction is not a mere technicality. A penalty clause is subject to the court’s power to mitigate and to stricter scrutiny; a genuine termination fee, in principle, is exempt from this. The classification thus helps determine the framework for review. It is precisely because Article 6 is interpreted as a termination indemnity, and not as a disguised penalty clause, that the marginal B2B review and the comparison with Article 1794 of the old Civil Code constitute the appropriate standard. Anyone who had wished to reclassify the clause as a penalty clause could have invoked a different and stricter assessment regime.

Specifically, what does this mean?

For service providers with a performance-based revenue model.
A progressive termination indemnity is justifiable, provided that it is consistent with what general law would grant. If you explicitly define the clause as the consideration for a unilateral right of termination and not as a penalty for breach of contract, you avoid it being reclassified as a penalty clause and subject to mitigation. A phased arrangement, in which the indemnity increases in line with the degree of performance achieved, increases the likelihood that it will pass the marginal review.

For clients who wish to challenge an exit clause.
It is not sufficient to refer to the amount of the compensation or to the fact that it is performance-based. You will have to specifically compare the agreed amount with the compensation that the service provider could have claimed without an agreement under Article 1794 of the old Civil Code, including expenses, labor, and lost profits. Without this calculation, the apparent imbalance remains unproven. Furthermore, any prior acknowledgment of part of the compensation works to your disadvantage.

For those who draft B2B contracts.
The comparison with supplementary law has become the touchstone. Align any deviating provisions with the general law regime they replace, and document why the deviation is justified. A provision that limits the departure from general law is more difficult to challenge as unlawful.

Frequently asked questions (FAQ)

Can a company challenge a termination fee as an unfair term in a contract with another company?
Yes. Pursuant to Article VI.91/3 of the CEL, the court reviews clauses in contracts between businesses for manifest imbalance. However, this review is limited in scope and concerns only the legal balance, not the price or the economic value of the performance.

When is a termination fee in a B2B contract considered manifestly unfair?
Not simply because it is high. The court compares the clause with the rules that would apply in the absence of such a clause. In a service contract, that is Article 1794 of the old Civil Code, which entitles the contractor to compensation for his expenses, labor, and lost profits. If the agreed-upon compensation is in line with that, then there is no apparent imbalance.

What is the difference between a termination fee and a penalty clause?
A penalty clause compensates for damages resulting from a breach of contract and may be moderated by the court. A termination fee is the consideration for the right to terminate a contract early, regardless of fault, and is generally not subject to such moderation.

Conclusion

The French-speaking Business Court of Brussels has confirmed that a graduated termination fee between companies remains valid as long as it is consistent with what would be granted under general law. The comparison with supplementary law, derived from the Court of Justice’s consumer case law, serves as the guiding principle here, and the burden of proof rests heavily on the party invoking nullity. For those drafting or disputing B2B contracts, the message is clear: it is not the amount of a clause that matters, but the deviation from the regime it replaces.