On 16 July 2026, the Belgian Parliament adopted Book 7 of the new Civil Code, introducing a comprehensive overhaul of several key contractual relationships.
In our first article (read it here), we outlined the reform and its entry into force on 1 September 2027.
Following a brief overview, this article examines the new rules on settlement agreements (contrat de transaction / dading).
In this regard, Articles 7.7.13 and 7.7.16 of the new Civil Code deliberately depart from the general law of contracts by restricting the parties’ access to unilateral remedies by notification in relation to nullity, termination for breach and price reduction.
Consequently, a party seeking to have a settlement agreement annulled or terminated will, in principle, need to go to court – somewhat paradoxically for a contract intended to end a dispute. Annulment by mutual agreement nevertheless remains possible, and parties may provide for termination under an express termination clause, which requires particular care in drafting.
Brief reminders
First, let us recall that a settlement is traditionally defined as “a contract by which the parties, through mutual concessions, bring an end to or prevent a dispute”. The drafters of Book 7 chose to retain this traditional definition and, consequently, to preserve a specific regime for settlements alone. The question nevertheless arose as to whether the concept should be construed more broadly by placing it within the general framework of “vaststellingscontracten / contrats déclaratifs”, that is, “contracts by which the parties directly or indirectly put an end to, or prevent the occurrence of, an uncertainty or a dispute”. This latter option was therefore not adopted, essentially for reasons of legal certainty, since this concept, which Belgian law has gradually begun to recognise, has not yet been clearly defined.Article 7.7.13 of the new Civil Code also confirms that a settlement cannot be annulled on the ground of a mistake of law. According to the preparatory works, this covers a mistake as to the existence, content or scope of the legal rule that would have governed the dispute had the parties not settled. This is an essential element of the settlement agreement: as De Page put it, the parties’ legal positions are uncertain or disputed precisely where there is an interest in settling. A party cannot, therefore, reopen the settlement simply because it later realises that its legal analysis was wrong.
No nullity by notification
Under Book 5, nullity may now be invoked by simple written notification by a party entitled to invoke it, at that party’s own risk (Article 5.59(3) of the Civil Code):
“Unless the contract is recorded in an authentic instrument, it may also be annulled by written notice sent, at the sender’s own risk, by any person entitled to rely on its nullity to the parties to the contract. The notice is ineffective if the ground of nullity it specifies does not exist.”
This mechanism, already widely accepted in comparative law and advocated by some legal scholars, has been enshrined in Belgian positive law for several years now.
Article 7.7.13 of the new Civil Code excludes this option for settlement agreements, thereby departing from the general regime. The preparatory works put forward two arguments to justify a departure from the ordinary law of contracts. First, a court may approve a settlement. In that case, it may be set aside only by means of a remedy provided for in the Judicial Code. Moreover, the nature of the agreement justifies excluding nullity by unilateral notification to ensure legal certainty. The preparatory works explain in this regard that ‘[t]his exclusion is justified by the need for stability in relations between the parties and by the importance that settlements generally hold for those same parties. It is necessary to prevent a party from attempting to revive the dispute as soon as it has been concluded, simply by giving extrajudicial notice’. Alongside the judicial annulment referred to above, nullity by mutual consent remains available.
No termination or price reduction by notification
Book 5 of the new Civil Code also provides for more unilateral remedies than the former regime. In case of breach of the contract, it now recognises termination by notification (Article 5.93 of the new Civil Code) and price reduction by notification (Article 5.97(2) of the new Civil Code), as well as, in exceptional circumstances, the creditor’s right to have a third party perform the debtor’s obligations without recourse to the courts (Article 5.85(3) of the new Civil Code).
For settlement agreements, Article 7.7.16 of the new Civil Code applies the same logic discussed above to remedies for non-performance, excluding termination by notification and price reduction by notification. Thus, departing from the general law of contracts, two unilateral remedies are expressly excluded for settlement agreements. In doing so, the drafters of Book 7 do not call into question the principle, recognised by the Court of Cassation in 1977, that settlement agreements may be terminated for non-performance. Rather, they depart from the Court’s 2019 extension of that principle to termination by notification. This distinction once again reflects the specific features and rationale of settlement agreements: a settlement aims to end the dispute definitively; its effects are fundamentally opposed to the dispute resurfacing, and therefore to the risk of error or abuse inherent in a remedy exercised unilaterally, outside any judicial control. Although termination remains possible, it must, in principle, be sought in court.
Space for contractual freedom
Despite these restrictions, parties remain free to include an express termination clause in their settlement and to specify how termination will operate. If circumstances allow, this approach should be encouraged, as it can help avoid delays in the judicial process.
Key takeaway
Articles 7.7.13 and 7.7.16 of the new Civil Code do not make settlements immune from challenge: they exclude nullity, termination for breach and price reduction by notification, rather than unilateral remedies generally. Termination remains available in principle through the courts: the drafters depart from the 2019 extension to termination by notification, without calling into question the principle recognised in 1977. Nullity by mutual consent also remains available. Parties may further provide for termination under a carefully drafted express termination clause.
Insider’s tip
Given the limitations imposed by the drafters in Articles 7.7.13 and 7.7.16 of the new Civil Code, express termination clauses are becoming increasingly important, perhaps more so than in any other contract. In this regard, do not copy standard default and termination clauses into a settlement agreement without adapting them. Instead, we encourage you to map out the obligations under the settlement (payments, releases, withdrawal of proceedings, and confidentiality) and specify in detail which breaches will give rise only to damages and which may trigger an express termination mechanism. Alternatively, the parties may exclude termination for breach altogether. This approach is common in practice and is often justified by the considerable time invested in negotiating the settlement agreement. In that case, only specific performance and/or damages remain available as remedies.
Further insights to come
With this article on settlement agreements, we conclude our Book 7 series. In the coming months, Simont Braun will continue to examine the practical implications of Book 7 for businesses operating in Belgium. Further insights on specific aspects of the reform will be shared via our LinkedIn page.
In parallel, our lawyers Thomas Derval, Rafaël Jafferali and Charles-Edouard Lambert are coordinating a conference dedicated to the reform, as well as a collective publication scheduled for early 2027.
Questions about Book 7 and its implications for settlement agreements? Please feel free to contact the authors of this article, Rafaël Jafferali and Benoît Thomas.
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This newsletter does not constitute legal advice or a legal opinion. Please consult with a legal counsel before taking any action based on the information provided.