REALWorld Law

What insurances need to be put in place by law or under a typical construction contract?

Construction

Contracts for the delivery of work, including the delivery of building works, are, together with the rules of general contract law (as governed by articles 1101 – 1369 of the old Belgian Civil Code for contracts entered into before 1 January 2023 and by book 5 of the new Belgian Civil Code for contracts entered into after 1 January 2023) primarily governed by Articles 1787 and the subsequent articles of the Belgian Civil Code. For example, the latter article governs the liability of the contractor or developer and the architect, and also deals with the event of a unilateral termination of a contract.

The mandatory Law of 9 July 1971, relating to house construction and the sale of houses to be or being built (and on execution of that piece of legislation, the Royal decree of 21 October 1971), plays a dominant role in regulating contracts relating to residential construction activities. This legislation implements a number of measures to assist purchasers. In relation to consumers, some of the mandatory provisions of Book VI – Market Practices and Consumer Protection of the Belgian Code on Economic Law must also be taken into account.

Government contracts are mainly governed by the Law of 17 June 2016 on public procurements, but also by a (distinct) law of 17 June 2016 (on government concessions), the Law of 17 June 2013 (on the procedure) and the Law of 13 August 2011 (defence contracts), as well as a number of royal decrees. Considering the law on government contracts is for a large part an implementation of European Directives, the main principles of European Law (eg non-discrimination; free movement of persons, goods, services and capital) apply as well, as do the directives themselves in case they differ from the Belgian implementation.

The above laws and regulations are supported by additional sources of law, such as customs of the building industry, as well as relevant case law.

Design

Belgian legislation does not separately deal with contracts for the design of work and therefore generally, the rules of general contract law are applicable to design work. Nonetheless, the Belgian Civil Code contains a number of articles which regulate the relationship between the architect and his principal.

Since the profession of an architect is, according to Belgian law, a regulated profession, an architect will principally also need to comply with a number of deontological or ethical rules, characteristic to the profession of an architect. An architect must be a member of the Belgian association of architects. Architects are not allowed to have any contractual relationship with contractors and must remain independent in their relationships they have with the owner / developer and with the contractors.

However, if a contracting authority aims to appoint an architect for a public contract of (design) services, it should comply with the rules set out in the aforementioned Law of 17 June 2016 on Public Procurement, together with its respective implementing royal decrees.

Last modified 22 Mar 2024

What insurances need to be put in place by law or under a typical construction contract?

Construction works require a planning permit, which integrates the formerly separate building permit, environmental permit and socio-economic permit as of 1 January 2018. A planning permit is required for:

• all types of construction works and also for some modifications to the designated use of buildings. The commencement of building works without such a permit is subject to criminal sanctions in each region;
• certain types of installations with a ‘significant environmental effect’;
• some commercial developments (mostly retail businesses), for example, for developments with a gross surface of more than 400 m².

The legislation governing the planning permit might contravene European law, and particularly the EU Directive 2006/123/EC (the Services Directive), to the extent that it gives the awarding administration the power to withhold a permission for the aforementioned commercial developments, unless the conditions of necessity, non-discrimination and proportionality have been met) (ECJ 30 January 2018, nrs. C-360/15 en C-31/16).

Professional requirements

Until recently, all builders working in Belgium had to comply with a number of professional requirements, mainly certifying professional competence. This requirement has been lifted for builders working in Flanders, but still apply for both Brussels and Wallonia.

Non-compliance can lead to the nullification of the building contract, so these requirements are of the utmost importance in practice.

For some construction projects, the employer must register the builders present on-site on a daily basis to Social Security, via the online registration process “Checkinatwork”.

When engaging foreign builders on a Belgian project, there is moreover the general obligation to file a preliminary LIMOSA-declaration to Social Security. This general obligation also applies when engaging foreign builders on a self-employed basis, as the construction sector was identified as an “at-risk sector” to which these declarations continue to apply.

Further, the employer has the obligation to verify that all foreign builders are in possession of a valid residence / work permit for Belgium during the entire duration of their assignment in Belgium.

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What insurances need to be put in place by law or under a typical construction contract?

The main body of Belgian health and safety law is comprised in the Law of 4 August 1996 regarding the well-being of employees in the execution of the works and its executive decrees, primarily the Code of Well-Being at Work. The Code of Well-Being at Work is a consolidation of numerous royal decrees adopted in execution of the Law of 4 August 1996, including the Royal Decree of 25 January 2001 relating to the temporary or mobile construction sites.

In addition to a number of general obligations imposed on all employers in Belgium (eg drafting of a global prevention plan and an annual action plan), additional obligations may apply to temporary or mobile construction sites, including the following:

• Appointment of a health and safety coordinator: the building direction (generally the architect or the owner) has the obligation to appoint a health and safety coordinator on the working site during the ‘design phase’ if more than one contractor is present on the working site. The health and safety coordinator is responsible for applying the general principles of prevention in the technical and organizational choices of the project. He must also draw up a health and safety plan, which will specify the health and safety rules applicable on the construction site. The coordinator must also create a file that contains all the useful health and safety data, taking into account the specific characteristics of the construction. The same principle applies in the ‘execution phase’ where the coordinator has to supervise the coordination of works between contractors and other parties.
• Registration of contractors/employees: for development projects with a total cost value threshold of at least €500,000, any person who performs work on the project must be registered through an electronic recording system each day before he / she starts work on the construction site. The construction sites to which this applies must also be declared in the statement of the works.
• Badges: all blue-collar workers in the construction sector must wear a worker badge for visual identification purposes on the construction site. The badge is automatically issued to the worker once they register themselves with the National Social Security Office. The general contractor must file (online) a statement of works with the National Social Security Office before the commencement of the works. This obligation does not apply in certain specific circumstances.

Finally, the aforementioned legislation on public procurement (and in particular, the Royal Decree of 14 January 2013 on the general execution rules of public contracts) also contain specific provisions and obligations towards the contractor with regard to health and safety on the construction site during the execution of a public contract.

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What insurances need to be put in place by law or under a typical construction contract?

In the Flemish, Walloon and Brussels Capital Regions, the European directive regarding ‘Environmental Impact Assessment Directive’ (Directive 85/337/EC, consolidated as Directive 2011/92/EU) and ‘Strategic Environmental Assessment’ (Directive 2001/12/EC) are applicable to regional law. This means that for certain kinds of individual infrastructure projects, an Environmental Impact Assessment (EIA) is required and is integrated into the building and/or environmental permit procedure. For zoning plans (plans that define the public planning prescriptions that apply in a certain area), an EIA is also required, except in certain well-defined circumstances.

In the Flanders Region, the EIA legislation is contained in the Decree of 5 April 1995 containing the general principles of environmental policy (Title IV), together with its executive decrees.

In the Walloon Region, the EIA for projects and plans is integrated by the Environmental Codex of 27 May 2004 and its Executive Decrees.

In the Brussels Capital Region, the EIA for projects is included in the Environmental Permit Decree of 5 June 1997, and the EIA for plans and programmes is included in the Decree of 18 March 2004 regarding EIA for certain plans and programmes.

It is important to note that this legislation has been modified, since the European Court of Justice ruled in a judgement of 24 March 2011 (C-435/09, European Commission/ Belgium), that the EIA legislation in the Regions was not in compliance with EU law. By the Decree of 23 March 2012 the Flemish Region adapted its EIA regulation to comply with the judgement. From then on, smaller-scale projects that previously were excluded from the EIA requirement, will be screened for the need for a full EIA. This means that currently, there are EIA-mandatory projects, EIA-exempt projects and projects requiring screening in the Flemish Region.

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What insurances need to be put in place by law or under a typical construction contract?

Infrastructure and utilities are mostly governed by the public planning law of the Flemish, Walloon and Brussels Capital Regions, and are therefore regulated in:

1. The Code for Territorial Development of 20 July 2016 which came into force on 1 June 2017 (Walloon Region)
2. The Brussels Code regarding Public Planning of 9 April 2004 (Brussels Capital Region)
3. The Flemish Public Planning Codex of 15 May 2009 and the Decree on Integrated Environmental Permits of 25 April 2014 (Flemish Region)

In all three regions, in the case of an application for an allotment permit (which includes the construction of new roads), the Municipal Legislative Body has to decide on the infrastructure and utilities requirements, before the Municipal Council can grant an allotment permit.

Most local building regulations have been created to govern connections to sewage systems. When deciding on individual building permit applications, the municipal council usually refers to this building regulation, or imposes related conditions in the building permit.

In the case of the construction of roads, utilities and infrastructure, a separate permit procedure exists in relation to what is in the ‘public interest’. Related permit applications have to be made at Ministerial level, particularly if the application relates directly or indirectly to private project development.

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What insurances need to be put in place by law or under a typical construction contract?

Construction

Although there are exceptions, in general, construction contracts can be concluded orally as well as in writing (the latter being preferred for the sake of legal certainty).

No mandatory terms and conditions are imposed or implied by law, with the exception of (i) public contracts (see below) and (ii) contracts with respect to certain residential building activities, which impose mandatory requirements to include certain information in the contract to avoid the contract being deemed null and void. Such information includes:

• The identity of the owner of the land and the existing building leases
• The date of issue of the building permit and the conditions of that permit, or the contract with respect to the condition precedent concerning the building permit
• The statement as to whether the contract is concluded under a condition precedent concerning financing
• A detailed description of the private and common parts determining the object of the contract
• By way of annexure, the detailed plans and contract documents of the work mentioned in the contract
• The total amount of the price of the house or apartment or building
• The contributions foreseen by regional regulation and the related conditions
• The start date of the works, the period in which the works must be carried out and the indemnities due in case of delay
• The manner of acceptance of the works
• The acknowledgement by the parties of the receipt of the mentioned documents (which must be issued by the receiving party no later than 15 days from receipt)
• An express condition that the buyer has the right to claim nullity of the whole or part of the contract in the event of breach of the prescribed obligations by another party

It should also be noted that the 10-year liability rule with respect to buildings and major works cannot be contractually excluded by the architects or contractors. It is a rule of public interest as it affects public security. Briefly, this rule applies to claims based on ‘serious latent defects’ as well as defects that concern the (partial) stability of the building. In respect of such potential claims, the Belgian Civil Code provides that contractual claims against a contractor and/or an architect need to be instigated within a period of 10 years from the date of final acceptance of the related works. As this rule is governed by the Belgian Civil Code (article 1792 of the Belgian Civil Code), and is therefore of public interest in nature, it is not possible to contractually exclude the rule.

With regard to the execution of public (works) contracts, reference can be made to the aforementioned Royal Decree of 14 January 2013 on the general execution rules of public contracts. Article 9 of the aforementioned Royal Decree of 14 January 2013 enlists those provisions of the Royal Decree from which the parties cannot deviate in the contract. These mandatory provisions relate in particular to the verification and payment periods. Deviations from other than the aforementioned mandatory provisions are only permitted in duly justified cases, i.e. insofar as the special requirements of the contract so require.

Design

According to the deontological or ethical rules applicable to architects, any contract between an architect and his client must be made in writing. Other than a number of other specified deontological rules applicable to architects (Reglement van de Beroepsplichten van de Architect), there are no other mandatory rules with respect to the content of architect contracts or contracts for the design of building works, although the 10-year liability rule (see above) cannot be set aside or excluded.

Last modified 22 Mar 2024

What insurances need to be put in place by law or under a typical construction contract?

Most contracts determine a payment schedule whereby payment instalments are due in proportion to the progress of the works. Some contracts foresee the circumstance where the contractor is required to submit pro forma statements by way of a payment procedure or structure, which is to be approved by the architect or principal within a set period, after which the contractor can accordingly submit his invoice. In this case the works can be put on hold if payment is withheld.

The Law of 9 July 1971 which governs house construction and the sale of houses to be or being built, contains a number of specific mandatory provisions which deal with payments and which are to the benefit of purchasers.

When specific conditions laid down in articles 35/6/1-5 of the act of 12 April 1965 regarding the protection of remuneration are met, the principal could be held jointly liable for serious breaches of the legal obligations to pay salary to employees committed by its direct contractor, and in some cases even by the subcontractor of its direct contractor. This joint liability could be avoided by making specific, legally defined written arrangements between the principal and its direct contractor, eg by adding a specific clause to this effect in the service agreement with the direct contractor.

Last modified 22 Mar 2024

What insurances need to be put in place by law or under a typical construction contract?

It is common to impose in a contract a time frame for completion of the works. Where a date for completion of the works is agreed between the parties but completion does not occur on that agreed date, this will automatically imply a contractual default by the contractor. If a delay is not contractually agreed upon, a judge will determine a reasonable delay in case of dispute.

In general, a penalty mechanism in case of delay is contractually foreseen and therefore delay is dealt with in the relevant contractual document. Contracts generally foresee penalty payments for delays in the execution of the works, or for intermediary delays to agreed milestones. The contract generally specifies a lump sum damages amount per day of delay. If a “liquidated damages” clause is manifestly unreasonable, a judge may reduce the amount of the penalty, taking into account all circumstances, including actual and potential damage suffered and the legitimate interest of the claimant. The clause may not be mitigated below a minimum level that is to be considered reasonable.

The delay penalty is generally without prejudice to the principal’s right to claim any other damages on the basis of other contractual clauses.

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What insurances need to be put in place by law or under a typical construction contract?

A modification or alteration of the specification of an engineering or construction contract can only occur by contractual agreement between the parties. A change in the scope of the specification (for example where the extent of the works is increased or decreased) will commonly be contractually determined in engineering and construction contracts relating to major projects.

Where there is no contractual arrangement concerning a variation, and where the specification of an engineering or construction contract is unilaterally and to a major extent varied by the principal, Article 1794 of the Belgian Civil Code may apply. This article places an obligation on the principal in the event of a unilateral termination of a contract for the delivery of work, in order to compensate the contractor (ie the engineer or the contractor) for his expenses, his work and all that he could have earned if the contract had not been terminated.

In the context of a public contract, modifications are only permitted in so far as these are not material. A modification is material if:

• The modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of a tender other than that originally accepted or would have attracted additional participants in the procurement procedure;
• The modification changes the economic balance of the contract in favour of the economic operator in a manner which was not provided for in the initial contract or framework agreement;
• The modification extends the scope of the contract considerably

(see in this regard articles 38/2 et seq. of the Royal Decree of 14 January 2013 on the general execution rules of public contracts).

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What insurances need to be put in place by law or under a typical construction contract?

Belgian law does not provide for what has to be achieved before completion of the building works can be certified. The delivery of the works will be the execution and delivery by the contractor of the contractually defined works. The contractor will meet his contractual delivery obligation by offering the executed works to the principal for certification. The acceptance by the principal is traditionally considered as an acknowledgement that the works have been completed satisfactorily.

Contracts, practice or the law provides for a mechanism known as double acceptance, which encapsulates the provisional acceptance and then final acceptance of the works by the principal. Here, the principal will usually discharge the contractor from all liabilities, except for the liabilities covered by the 10-year liability rule with respect to buildings and major works. This rule provides that after 10 years, architects and contractors are discharged from their responsibility regarding the major works they have executed or have controlled – they are therefore no longer susceptible to claims after a 10-year period.

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What insurances need to be put in place by law or under a typical construction contract?

As a general rule, a claim for breach of contract may be brought before the courts by any of the parties within 10 years after the breach or knowledge of the breach by the party in default.

However, according to Belgian jurisprudence, any claim relating to a light latent defect (for example the swelling of window frames), should in principle be brought before the courts within as short a period of time as possible following discovery of the defect, although the limitation period with respect to light latent defects can be contractually determined by the parties. The acceptance of the works traditionally discharges the contractor from any liabilities with respect to visible light defects known to the principal at the point that the principal provisionally accepts the works. It is however not unusual to contractually determine that the provisional or final acceptance will also discharge the contractor from any liability with respect to light latent defects.

Notwithstanding the above, a contractual discharge or contractually determined limitation period is not valid for any claim with respect to serious latent defects, which compromises the stability of the building or a major part of the building. According to Belgian public order law, any such claim can be brought before the court up to 10 years following the date of final acceptance of the works (this is known as the ‘10-year liability with respect to buildings and major works’ rule).

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What insurances need to be put in place by law or under a typical construction contract?

When the contractor and end user have a contractual relationship, in principle, only the rules relating to contractual liability will apply.

A contract party that does not fulfil its contractual obligations commits a contractual default as that party has not produced the promised result (in case of result engagement or the obligations to achieve a certain result) or has not carried out its obligations in the manner that would normally be expected from a normal person or entity (in case of an effort engagement being the obligation to act as any other contractor or architect or other professional would act in the same circumstances). The compensation here is limited to the damage that was foreseen or that could have been foreseen at the point of conclusion of the contract (this would reasonably include physical damage as well as economic loss), although this rarely poses a problem in practice. There is therefore a direct causal connection with the contractual default and the resulting damage.

Limitation of a contractual liability is in principle possible, except in cases where:

• The act was committed with ill-willed intent or in the case of fraud.
• The limitation deprives the contract from any meaning.
• Such limitation is contrary to mandatory laws (for instance the ‘10-year liability for contractors and architects’ rule – this means that a contractual discharge or contractual determined limitation period is not possible for any claim with respect to serious latent defects, compromising the stability of the building or a major part of the building. According to Belgian public order law, any such claim can be brought before the court up to 10 years following the date of final acceptance of the works).

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What insurances need to be put in place by law or under a typical construction contract?

Due to lack of a direct contractual relationship between the end user and the architect, designer, contractor and/or sub-contractor, no direct claims can be made by the end user against these parties, except where the conditions for extra-contractual liability would be fulfilled (in accordance with the rules of tort). Parties are extra-contractually liable for any damage suffered by an end user, to the extent the damage is of an extra-contractual character and has been caused by their respective default or negligence, other than the wrongful undertaking of their contractual obligations. In practice, this means that one can only formulate a direct claim against the sub-contractor of one’s contract party, when the sub-contractor commits a crime while executing his obligations under the sub-contract.

As for a contractual relationship, limitation of liability is, in principle, also possible in an extra-contractual context, although in practice problems will usually arise with respect to the (silent) acceptance of a limitation of liability clause for extra-contractual damage between non-contracting parties. In such circumstances, the acceptance of a limitation of a liability clause for extra-contractual damage between non-contracting parties will take place ‘silently’ since no contract actually exists between the parties. The acceptance must be extracted out of the situation and/or the behaviour of the parties. This leads in practice to interpretation and other problems. The proof of the acceptance will not be easy to ascertain.

The only affect of limitation of liability clauses between parties and the architect, designer, contractor or sub-contractor and the principal will be that they are not enforceable against any third party or end users. Furthermore, limitation of liability clauses in favour of a contractor or an architect are not regarded favourably and in particular are opposed where they relate to the quality of buildings.

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What insurances need to be put in place by law or under a typical construction contract?

Due to a lack of a contractual relationship between third parties (such as purchasers, tenants and lending banks) and the contractor, the rules of extra-contractual liability generally apply. The parliamentary committee has recently proposed a draft bill to reform extra-contractual liability and introduce a new book 6 on extra-contractual liability in the Belgian Civil Code. It should be noted that at the timing of writing this article, this legislation has not yet been adopted.

The rules on extra-contractual liability imply that no direct claims can be made by these parties against contracting parties, except where the conditions for extra-contractual liability would be fulfilled (in accordance with the rules of tort). Parties are extra-contractually liable for any damage suffered by a third party, to the extent that (i) there is damage and (ii) it has been caused by their respective (iii) default or negligence.

In addition, related legislation provides for certain additional protection measures. For example, the 10-year liability of contractors and architects with respect to buildings and major works is considered to be a legal protection linked to the ownership rights of the building. This concerns any claim with respect to serious latent defects, which compromise the stability of the building or a major part of the building. According to Belgian public order law, any such claim can be brought before the court up to 10 years following the date of final acceptance of the works. Therefore, a claim under the 10-year liability of contractors and architects rule can be made by any of the right holders of the principal, including purchasers. The same is true for any claim for the guarantee of the principal against the contractor (eg indemnification for (hidden) deficiencies in the works), as that is considered a qualitative right accruing to any owner of the building, or a respective part of the building.

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What insurances need to be put in place by law or under a typical construction contract?

Construction dispute resolution in the courts is governed by Belgian general procedural law. Where a dispute arises between companies (that is to say entities that, on a permanent basis, have an economic object or purpose), the Belgian enterprise courts will have jurisdiction in such a dispute. The Belgian enterprise courts are well positioned to deal with construction disputes between professional parties, partly due to the fact that each enterprise court is headed by a president and two lay judges experienced in commercial affairs. Decisions of the enterprise courts can be appealed before the court of appeal of the district in which the enterprise court is located and this should take place, if an appeal claim is lodged, in principle, within one month after notification of the judgement of the enterprise court, provided the sum involved exceeds € 2,500.

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What insurances need to be put in place by law or under a typical construction contract?

Construction disputes are generally brought before the courts. Although qualities such as speed, confidentiality, expertise and flexibility are often highlighted as advantages of arbitration in construction disputes, in practice, such advantages are often not seen as the primary benefits of arbitration due to the cost of the arbitration procedure in Belgium. Furthermore, Belgian construction contracts commonly contain a jurisdiction clause determining the competent (Belgian) court. Arbitration clauses are used less in construction contracts where the contracting parties are residing in different countries.

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What insurances need to be put in place by law or under a typical construction contract?

Alternative Dispute Resolution is not mandatory by law and is therefore not commonly used in construction disputes, except for matters where the determination by an expert is sought, whether appointed by the parties in agreement or in accordance with a contractual clause or appointed by the court in the context of dispute resolution.

Last modified 22 Mar 2024