We get it. In an ideal world, your business’ Terms & Conditions prevail, with no opposition from the other party. One T&Cs to rule them all. A dream, often confronted with the reality of a relentless battle of back-and-forth emails, where your legal department is on a mission to protect your business. But this scenario might be different now. How?
On January 1st, 2023, the long-awaited Book V of the new Belgian Civil Code entered into force introducing some novelties, namely the “battle of forms.”
The battle of forms:
It is a situation that arises when each party wants its own general terms and conditions to apply in a contractual relation. The question then arises which general terms and conditions prevail.
It was never clear how to approach this situation, which has led to legal uncertainty, but most jurisdictions recommend the “knock-out” rule.
The “knock out rule” is described in Article 5.23 and means that the general terms and conditions of both contracting Parties apply, with the exception of the incompatible clauses, which can be set aside on either side and therefore should not be taken into account.
The legislator relies on the presumed common intention of the parties to conclude a contract, where general terms and conditions do not in principle constitute an essential or substantial component of the contract.
For the knocked-out clauses, the Parties will have to rely on Belgian Law. This is not always to the advantage of the Parties.
For example, in case of an incompatible liability clause, Article 5.86 provides for an unlimited liability regime, putting the debtor in an aggrieved position. In the same way, it is possible that clauses relating to delivery terms, termination of contracts, intellectual property, etc., could be dropped, with common law rules to be applied to replace these clauses.
This could be a nightmare for many contracting parties. Therefore, it is always advisable to negotiate and agree on terms and conditions, as negotiated terms and conditions always take precedence according to the law.
There is an important exception on the “knock out” rule, namely a Party could inform the other Party explicitly in advance or without undue delay after receipt of the acceptance that they do not wish to be bound by the general terms and conditions of the other Party.
In that case, the knock-out rule will no longer apply, and no contract will be formed in case of incompatible general terms and conditions.
It should be clear that this exception is not valid if only the general terms and conditions stipulate that a Party does not want to be bound by the other Party’s general terms and conditions.
Let’s Conclude !
So, there are two sides to the knockout rule.
- On the one hand, the rule provides certainty that a deal can be concluded despite conflicting general terms and conditions.
- But on the other hand, important clauses can be excluded due to inconsistency, leading to a fallback to the common law, which can have major consequences.
Therefore, it is important to negotiate and draft terms and conditions by mutual agreement so that there are no surprises for either party.