Precontractual liability in light of the new law of obligations

Although contracts are often concluded immediately, in certain cases an agreement may only come into existence after the parties have negotiated extensively on its content and terms.

The new law of obligations, as set out in Book 5 of the new Civil Code (NBW), has brought a breath of fresh air to the rules governing contractual relationships.

These changes not only affect the way parties conclude agreements, but also shed new light on the pre-contractual phase and the liability you may incur in this context.

Where the legislator previously did not provide any statutory provision in this regard, Article 5.17 NBW now enshrines pre-contractual liability.

It is therefore important to act carefully and prudently, including at the negotiating table. Failing to do so may prove costly. After all, you run the risk of being held liable, which may result in damages.

In this blog post, we review the main aspects of the pre-contractual phase and seek to protect you from the possible risks in light of pre-contractual liability.

A. Freedom of contract remains the starting point

1. Freedom of contract

Freedom of contract also remains the starting point under the new law of obligations.

Subject to a few exceptions, everyone is free to decide whether or not to contract and to choose their contracting party or parties freely, without having to justify that choice.

Contracting parties are also free to determine the content of the agreement and the modalities for its performance, provided these comply with the legal validity requirements.

This principle gives parties the scope to shape their contractual relationships according to their own wishes and needs.

2. Freedom to negotiate

In addition to freedom of contract, parties also enjoy freedom to negotiate. This implies that parties are free to initiate, conduct and break off negotiations prior to concluding a contract, provided they act in good faith.

That said, a number of ground rules must be observed.

Even during the negotiation phase, parties have rights and obligations towards one another, which may in certain cases give rise to liability.

B. Pre-contractual liability

1. Duty to provide information

First and foremost, each party is subject to a duty to provide information.

More specifically, the law provides that during pre-contractual negotiations, parties must provide each other with all information required on the one hand by law and on the other hand by good faith and accepted practice.

The status of the parties, their reasonable expectations and the subject matter of the agreement determine the scope of the obligation in question.

For example, the duty to provide information on the part of a business will be assessed differently where it intends to contract with a consumer than where it is negotiating with another business active in the same sector.

In short, you must provide all information that you believe the other party needs.

If you provide incorrect or incomplete information, or deliberately withhold information, you may incur pre-contractual liability, with all the consequences that entails.

Keep in mind that a breach of the duty to provide information may not only give rise to pre-contractual liability, but also — after the agreement has been concluded — to the nullity of the contract.

2. Wrongful termination of negotiations

In addition to the duty to provide information, you must also ensure that you do not wrongfully break off negotiations with the other party.

There is wrongful termination when, in the other party, you have created the legitimate expectation that the agreement would undoubtedly be concluded. 

In that case, the injured party will be restored to the position they would have been in had no negotiations taken place. The injured party may therefore claim compensation for the loss of the expected net benefits that would have resulted from the agreement not concluded.  

C. Conclusion

Precontractual negotiations play a crucial role in the formation of contractual relationships. Freedom of contract remains the starting point, with contractual freedom and freedom to negotiate as guiding principles. 

However, this freedom is not unlimited. Precontractual liability, as enshrined in the new Civil Code since 1 January 2023, places an important responsibility on the shoulders of negotiating parties. 

Be warned, therefore, against reckless and careless conduct at the negotiating table. A breach of the duty to provide information, as well as the unlawful breaking off of the negotiation process, may indeed give rise to precontractual liability and the accompanying obligation to pay damages. 

Do you still have questions regarding precontractual liability? Or do you have other questions relating to the law of obligations? The Business Unit of Reyns Lawyers has extensive expertise in this area and will be pleased to provide you with further advice or assistance. Do not hesitate to contact us.