CMS Guide to Consequential Loss in Belgium

No, the term 'consequential loss' is not defined as a legal concept under Belgian law. Claimable damage varies between contractual and extracontractual relationships.

Full compensation in the context of a contractual relationship

Pursuant to Article 5.237 of the Belgian Civil Code, a creditor is entitled to a full compensation in the event of a breach of contract. This means that the liable party must compensate all actual damage suffered, but no more than that. In practice, this typically includes direct damage. An exception is provided in Article 5.238 of the Belgian Civil Code: if the creditor fails to take reasonable measures to mitigate the damage, the court may reduce the compensation proportionally, resulting in a shared liability.

In a contractual relationship only the damage that the parties could reasonably have foreseen at the time of the conclusion of the contract must be compensated, unless the non-performance results from a deliberate fault of the debtor (art. 5.87 of the Civil Code).

Parties may contractually agree to limit the scope of compensable damage. While such clauses are possible, the court may moderate them if the contractual limitation would be manifestly unfair in light of the specific situation.

Extra-contractual liability

Unlike in a contractual claim, compensation in an extracontractual context is not limited to damage that the parties could reasonably have foreseen at the time the contract was concluded. However, Article 6.26 of the Civil Code stipulates that only damage that is sufficiently certain qualifies for compensation. Hypothetical damage is excluded. The damage must be so probable that the court cannot reasonably doubt its occurrence, even if some theoretical uncertainty remains.

Article 6.26 of the Civil Code distinguishes between pecuniary (material) and non-pecuniary (non- material) damage. Pecuniary damage includes all financial consequences of harm and is considered material or financial damage. Non-pecuniary damage, on the other hand, relates to non-economic consequences, such as moral suffering.

The distinction is thus based on whether the damage has economic consequences. Unlike some other legal systems, Belgian law does not limit compensation to pecuniary damage: non-pecuniary damage, such as the violation of physical or mental integrity, is also eligible for compensation.

In conclusion, Belgian law does not provide a statutory definition of ‘consequential loss’, either in the Civil Code or in other specific legislation. In practice, the meaning of ‘consequential loss’ is often context-dependent, making its use in contracts vulnerable to interpretative disputes, which may result in legal uncertainty.

The term ‘consequential loss’ is not frequently encountered in contractual exclusion of liability clauses within the Belgian energy sector. As previously noted, this is due to the fact that Belgian law does not provide a specific definition or statutory framework for this concept. Nevertheless, such clauses may appear, primarily under the influence of the common law system. The term is widely used in international contracting practice, often due to the involvement of legal professionals familiar with that legal tradition. Its presence in Belgian contracts is therefore more a reflection of international practice than of any anchoring in the Belgian legal system.

When such clauses are included in agreements governed by Belgian law, their meaning has to be determined based on the common intention of the parties. This principle is explicitly enshrined in Article 5.93 of the Belgian Civil Code, which provides that, in interpreting contracts, the true intention of the parties shall prevail over the literal wording of the clause. It is therefore recommended to specify in the agreement which damage is considered as ‘consequential’ loss.

Examples of contractual terms include:

Example 1:

‘Neither Party shall be liable to the other for any loss of use of the Works, loss of profit, loss of contract, or for any indirect or consequential loss or damage arising in connection with this Contract, except as expressly provided otherwise herein …’

Example 2:

‘Neither Party shall be liable to the other for any indirect, incidental, or consequential damages, including but not limited to loss of production, loss of profits, anticipated profits, business opportunities, property rights, or mineral rights, arising out of or in connection with this Agreement. This limitation of liability shall not apply in cases of wilful misconduct or fraudulent acts.’

Example 3:

‘The Insurers’ liability shall be limited solely to the cost of repairing, replacing, or reinstating the damaged services, and shall not include any consequential losses arising from the interruption of such services.’

As previously explained, there is no uniform or legally defined meaning of the term ‘consequential loss’. This results in varying interpretations. In practice, the term is often used to refer to heads of damage such as loss of profit, loss of customers or loss of business opportunities. If translated literally, the term ‘gevolgschade’ similarly suggests harm that arises as a consequence of more immediate damage. However, this interpretation is not consistently upheld in Belgian legal practice.

Due to this ambiguity and the absence of a fixed legal definition under Belgian law, it is advisable to avoid using such terms in contracts governed by Belgian law. Instead, preference should be given to referring to legally recognised concepts such as direct and indirect damage, or to including an exhaustive list that clearly specifies which types of damages are covered by the clause. This approach helps to prevent interpretative disputes between the parties, even in cases where there is no disagreement about their mutual intent.

It is possible for a contractual clause to cover not only ‘consequential loss’ but also other types of damage. Under Belgian law, limitation or indemnity clauses can in fact encompass all categories of damage.

These clauses are usually written in broad terms and set a fixed compensation amount, regardless of the actual damage suffered. The underlying principle is that the agreed compensation is not dependent on the real extent of the damage.

Just as it is possible to regulate certain types of damage through a contractual exclusion of liability clauses, it is also possible to exclude ‘consequential loss’ by means of similar contractual provisions.

For the interpretation of the various types of damage, it is first important to determine whether they are defined. In addition, the interpretation of a damages clause must always be assessed within the specific context of the case. As previously discussed, when evaluating a clause that refers to ‘consequential loss’, the common intention of the parties is decisive. The court will seek to ascertain this intention based on the wording of the clause, the contractual context, and the conduct of the parties before, during, and after the conclusion of the agreement.

Furthermore, as mentioned above, the court has the authority to moderate a fixed amount of compensation, particularly where it is manifestly excessive in relation to the actual damage suffered or the circumstances of the case.

Since the concept of ‘consequential loss’ does not have a clearly defined legal meaning under Belgian law, it is difficult to assess with certainty its potential impact on non-damage claims, such as claims for termination or specific performance. This uncertainty is further compounded by the recent reform of the law on damages in the Belgian Civil Code. As legal practitioners are still in the process of adapting to the new statutory provisions, the practical application and interpretation of such clauses remain in transition.