REALWorld Law

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Various industry bodies, private and public organizations and/or associations supporting the Belgian construction and engineering sector provide standard form contracts to their members, although the use of such forms is not mandatory. International forms of contract, such as some of the FIDIC contracts, are increasingly, although not currently commonly, used in Belgium.

The selection of the form of an engineering and/or construction contract is generally dependent upon a number of factors, which include but are not limited to:

• The timeframe of the project
• The expected costs and margin of unexpected costs
• Whether or not the project is private or public in nature

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

A construction contract is generally concluded between a contractor and the client (or principal). An engineering contract is generally concluded between an engineer and the client (or principal), or the main contractor or architect.

The relationship between the principal and the engineer or contractor is in essence contractual in nature, implying that the parties are free to contractually determine each other’s rights and obligations, subject to applicable mandatory laws.

In principle, the client or principal must enable or authorize his co-contractor (being the engineer or contractor) to carry out the work. Furthermore, the principal must accept or approve the work and will be required to pay the agreed price.

The engineer or the contractor must carry out the work in accordance with:

• The contract
• The applicable law(s) and regulations
• The state of the art

Unless explicitly prohibited by the contract, the engineer or the contractor can work with sub-contractors. In such a situation, the engineer or contractor will bear full responsibility towards the principal for the execution of the work.

An architect will be responsible to the principal and will come under the control of the contractor during the execution of the works. The architect will also have the assistance of the principal at the point of acceptance or approval of the work.

Under Belgian law, the builder and the architect need to be completely independent of one another. Contracts that do not guarantee such independence (e.g. with the builder appointing the architect), are voided. 

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Generally, the risks to be borne in construction or engineering contracts by the contractor or engineer respectively to the principal are subject to negotiation during the pre-contractual phase.

The allocation of risk determined by the construction or engineering contract will generally reflect the strength of the respective parties. Such allocation of risk will also depend upon the possibility and/or obligations by the parties to insure certain risks. Most construction or engineering contracts will expressly foresee a detailed risk allocation with respect to, but not limited to, price variation, timing, security and material.

Force majeure and hardship form part of Belgian general contract law. Parties can however contractually extend, limit or exclude the application of force majeure or hardship. Force majeure relieves a party from performing its obligations when unforeseen circumstances, subsequent to the conclusion of the agreement, which are not attributable to the party relying on it, make it materially impossible to fulfil the agreement. The hardship theory allows the revision of an agreement in the event of the occurrence of new circumstances, subsequent to the conclusion of the agreement, which are not attributable to the party relying on it, and if these circumstances have had a disrupting effect on the economy of the agreement, without making the execution of the agreement impossible.

In addition, the above cited public procurement legislation contains certain specific provisions on so-called unforeseeable circumstances in the execution of a public contract on part of the contractor, on the one hand, and on part of the contracting authority, on the other hand (see in particular articles 38/2, 38/9 and 38/10 of the Royal Decree of 14 January 2013 on the general execution rules of public contracts).

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

It is common in Belgium for significant infrastructure and/or building projects to be established through public-private partnerships (PPPs). Examples include the development of brownfield sites and the building of bridges and new roads, schools and sport infrastructure. The recent decade has seen an increase in PPPs, with the administration often seeking to act as a private party, before resorting to administrative acts (eg buying a plot of land before expropriating it).

In the Flanders Region, this form of co-operation is explicitly encouraged and the Decree dd. 18 July 2003 governs PPPs in Flanders. The decree contains the framework within which these partnerships are to be constructed.

In the Walloon and Brussels Capital Regions, there is no special legislation regarding PPPs, but such partnerships or forms of co-operation are however used in these regions. In the Walloon Region, the ‘Cellule d’Informations Financières (CIF) advises, supports, designs and implements procedures and monitoring tools on PPP projects.

PPPs are often governed by private (contract) law. If it qualifies as a public contract, the regulation regarding government contracts (see supra) is applicable.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Fixed price construction contracts are common. Such contracts determine that a contractor shall carry out construction works as detailed in one or more plans and/or documents, against a fixed price agreed prior to the execution of the works.

A distinction must be made between ‘firm fixed’ contracts (which contain a firm price as a whole that is not to be changed) and ‘variable fixed’ contracts, where the latter foresees a price list (with prior fixed prices for material, working hours) by which means the price of any additional work ordered by the principal will be determined.

The Law of 9 July 1971 which governs house construction and the sale of houses to be or being built, if applicable, imposes a prior fixed price regime on the execution of residential construction works.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

Two typical categories of insurance can be distinguished:

1. Insurance with respect to professional constructing activities (such as civil liability insurance of contractors; professional insurance of architects, experts, engineers).
2. Insurance with respect to the protection of certain goods (such as all risks insurance for the construction site and insurance against the rule which provides that contractors and architects can be liable for their actions up to 10 years following the date of final acceptance of the works).

These forms of insurance are typically obtained for construction sites.

Construction professionals are obliged to take out professional liability insurance, which covers their professional and decennial liability. Civil liability insurance must also be taken out by the safety coordinator.

There are other types of insurances which are not mandatory under Belgian law, eg construction all-risks insurance.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

The use of parent or third-party guarantees (whether bank or otherwise) as a security for the obligations of a contractor is proportionate to the scope of the development project. A guarantee amounting to 10% of the construction price or a right for the principal to withhold 5% to 10% on the invoices to be paid to the contractor is not unusual for high-end projects. This is the so-called retention guarantee under Belgian law. Parties can agree on a 5% or 10% retention on each invoice by the owner / client / principal. Such high-end contracts typically refer to a system of double acceptance, which determines that 50% of such a guarantee will be released on the issue of the procès-verbal of a provisional acceptance, with the remaining 50% on the issue of the procès-verbal of final acceptance.

The procès-verbal is the document prepared following a visit to the construction site by the parties, prior to the provisional or final acceptance by the client of the works. The document contains details of issues relating to the works that need to be resolved prior to the handing over of the works to the client. The provisional or final acceptance by the client is subject to the signing of the procès-verbal. It is then dated and signed by the parties.

With regard to house or residential construction works, mandatory provisions relating to the provision of a guarantee are governed by the Law of 9 July 1971 which regulates house construction and the sale of houses to be or being built. This law provides for what is known as a 100% guarantee, which applies to contractors who do not comply with the requirements of the law of 20 March 1991, which governs the activities of contractors and real estate developers.

In addition, the aforementioned public procurement legislation (see in particular article 27 of the Royal Decree of 14 January 2013 on the general execution rules of public contracts) imposes the duty on a contractor to provide a guarantee for the performance cq in the execution of the contract.  

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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 official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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).

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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).

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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).

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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.

Last modified 22 Mar 2024

What official permissions, licences or consents are required by a building or engineering contractor before it can start work?

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