Not everything is unforeseeable or force majeure: the new regime for unknown circumstances in construction contracts

Book 7 of the Belgian Civil Code is now a done deal. Together with the rest of the new law on specific contracts, construction law will soon change as well. For contractors and developers, this is more than a purely legal development: the new rules may determine who bears which risk when a project unfolds differently from what was expected.

In this newsletter, we briefly focus on one distinction with clear practical relevance: unknown circumstances, changed circumstances and force majeure. That distinction matters in contract negotiations, risk management and disputes arising during the works.

Article 7.4.8 of the Belgian Civil Code introduces the possibility of adapting or terminating a contract because of unknown circumstances. This ties in with Article 5.74 of the Civil Code, which allows for a similar intervention where circumstances have changed after the contract was concluded. There is also an overlap with force majeure. The three concepts are nevertheless fundamentally different:

• An unknown circumstance is a fact or condition that already existed when the contract was concluded but was unknown to the parties. A classic example is a substantial obstruction in the ground that could not be detected during the investigations carried out before the works. It was obviously already present in the ground; the parties simply did not know about it.
• A change of circumstances concerns a new or changed circumstance arising after the contract has been concluded and which was unforeseeable at the time of contracting. Even with perfect knowledge of the circumstances then existing, the parties could not have taken it into account. Typical examples include disputes concerning the consequences of the COVID-19 pandemic or the closure of the Strait of Hormuz, although, depending on their impact, such events may also constitute force majeure. The distinction from an unknown circumstance lies in the nature of the event that triggers the dispute.
• Force majeure is assessed primarily by reference to its impact on contractual performance rather than by the nature of the triggering event. Unknown circumstances and changed circumstances make performance more onerous or difficult. In a force majeure situation, by contrast, performance becomes impossible as a result of the event. The examples above may therefore also amount to force majeure, but only where continuation of the works has actually become impossible.

The legal consequences also differ:

• In the case of unknown circumstances or a change of circumstances, one party may request the other party to renegotiate the contract. If those negotiations do not result in an agreement, a party may ask the court to adapt or terminate the contract.
• In the case of force majeure, the parties’ obligations are suspended for as long as the impediment is temporary. If performance becomes permanently impossible, this may lead to termination of the contract.

All three concepts can be shaped contractually. The parties may determine their consequences in advance, impose stricter or more lenient conditions, establish a negotiation procedure or provide for a notice period subject to forfeiture of rights. They may also exclude or modify the application of Articles 5.74 and 7.4.8 of the Civil Code. Where those provisions are excluded entirely, the question may nevertheless arise whether, in extreme circumstances, relying on such an exclusion could constitute an abuse of rights.

These mechanisms also do not apply where a party has assumed the relevant risk or where the situation is attributable to that party. A predetermined contractual allocation of risk may therefore exclude their application (although, depending on the circumstances, such a provision may itself be unlawful or unfair).

Parties that anticipate these situations correctly can prevent disputes or resolve them more quickly. When problems arise, invoking the correct legal mechanism from the outset strengthens a party’s position in negotiations or proceedings. Choosing the wrong mechanism, by contrast, can have significant consequences. For example, a contractor relying on force majeure may also cause the employer’s payment obligation to be suspended.

Feyaerts Law assists contractors and developers with construction contracts, contract negotiations and disputes arising during the works. Please feel free to get in touch when you want to make the right choice at the right time.