\n\u201cNevertheless, the court ... mitigates the damages clause if it is manifestly unreasonable<\/strong> , taking into account the damage and all other circumstances, especially the legitimate interests of the creditor.\u201d<\/em> (Art. 5.88 \u00a72 CC)<\/p>\n<\/blockquote>\n\n\n\nWhat has changed?<\/strong> Whereas judges used to be sometimes straitjacketed by the \u201cforeseeable damage at the time of contracting,\u201d Article 5.88 now explicitly gives them leeway to test for manifest unreasonableness. The court may now look more broadly at \u201call circumstances,\u201d including actual damages and the legitimate interests of the creditor (e.g., the deterrent effect to prevent default). This confirms the trend that excessive lump sums, detached from any reality, will not be tolerated.<\/p>\n\n\n\nB2B vs. consumer law<\/h3>\n\n\n\n
Importantly, the dentist in this case was considered a business because the website served his practice. Thus, he could not invoke consumer law (and the right of withdrawal). Nevertheless, general contract law (via the mitigation power) also provides a safety net for entrepreneurs against abusive clauses.<\/p>\n\n\n\n
What this specifically means<\/h2>\n\n\n\n
This case law and the new legislation have direct implications for your contract strategy.<\/p>\n\n\n\n
\n- For the buyer (entrepreneur\/free profession):<\/strong> Are you facing a claim for a high severance fee for breaking a contract? Don't pay blindly. Even if the contract speaks of a \u201cseverance\u201d or \u201ctermination fee,\u201d a judge may intervene if the amount is \u201cmanifestly unreasonable.\u201d A fee that serves only to punish you financially without commensurate damages stands a good chance of being mitigated.<\/li>\n\n\n\n
- For the supplier:<\/strong> Merely renaming a clause to \u201cseverance pay\u201d is not enough. If you include liquidated damages, make sure they are defensible as a reasonable estimate of your damages (including lost profits and administration, but excluding unincurred expenses). Under the new law, if you include a \u201cmanifestly unreasonable\u201d clause, you risk the court reducing it to a reasonable amount (but never lower than that). A percentage of 30% to 40% is more likely to hold up in the courts than 60% or more.<\/li>\n<\/ul>\n\n\n\n
FAQ: Frequently Asked Questions<\/h2>\n\n\n\n
What is the difference between a damages clause and a termination clause?<\/strong>
A notice clause is an amount you pay to buy the right to end the contract early. A damages clause is compensation for breach of contract. The main difference is that a judge can reduce a damages clause if it is too high, whereas with a pure notice clause, he usually cannot.<\/p>\n\n\n\nWhat is the difference between the old and new rules for damages clauses?<\/strong>
Since January 1, 2023 (Art. 5.88 CC), the court tests a damages clause against the criterion \u201cmanifestly unreasonable.\u201d He looks not only at the damage, but at all the circumstances and the interests of the creditor. For older contracts, the test of \u201cpotential damage\u201d (Art. 1231 old Civil Code) still applies, although in practice the outcome is often similar.<\/p>\n\n\n\nAs a business owner (B2B), can I also be protected from high fines?<\/strong>
Yes. Although consumer law (which is very strict) does not apply, general contract law (both old and new) provides protection. Judges have the mandatory power to mitigate damages, regardless of whether you are a consumer or a business owner.<\/p>\n\n\n\nWhat should be the maximum amount of a severance payment?<\/strong>
There is no fixed legal percentage. The judge makes a specific assessment. In the case discussed, the judge found 60% too high and 30% reasonable. For new contracts, the King can theoretically set maxima for certain sectors through a Royal Decree (Art. 5.88 \u00a74 CC), but the customary judicial test remains the norm.<\/p>\n\n\n\nConclusion<\/h2>\n\n\n\n
The label placed on a contract clause is not sacrosanct. A supplier cannot camouflage an excessive penalty as a \u201ctermination fee\u201d to sideline the courts. With the introduction of Article 5.88 in the new Civil Code, the gate is wide open for the courts to correct \u201cmanifestly unreasonable\u201d clauses.<\/p>\n\n\n\n
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