A settlement agreement is an agreement whereby the
parties terminate or prevent a dispute by making mutual concessions. Once
concluded, it precludes the commencement or continuation of legal proceedings
in respect of the same dispute.
In practice, many settlement agreements are not
limited to settling past issues. They often contain obligations towards the
future, i.e. payment schedules, conditional waivers of debt, new terms of
cooperation or specific guarantees.
When these future obligations are not respected,
the legal consequences are far from clear. Do the concessions already made
remain in force? Can the agreement be challenged? What legal remedies remain
available?
The answer depends largely on the wording of the
agreement. A well-drafted settlement agreement does more than bring the dispute
to an end. It also anticipates difficulties that may arise at a later stage.
The new Book VII of the Civil Code, adopted by the
Chamber on 16 July 2026, largely preserves the existing rules governing
settlement agreements.
It thus points out that a settlement agreement must
be interpreted strictly. Waivers contained therein are not presumed. This is
why it is essential to define precisely which claims are covered by the
agreement and which rights the parties wish to preserve.
For example, a settlement agreement relating to
specific arrears in payment shall not necessarily dispose of all disputes that
may arise within the context of a broader commercial relationship.
However, it does change the possibilities available
for unilaterally challenging a settlement agreement when it is not complied
with.
Hence the importance of defining precisely what is
being settled and what is not.
An agreement that perfectly resolves yesterday’s
conflict may become the source of tomorrow’s dispute if it does not provide
sufficiently clearly for the consequences of non-compliance.
The key innovation is that extra-judicial penalties are excluded.
This is where the reform introduces its most
significant change. The parties will have fewer levers at their disposal to
undo the balance achieved by the settlement agreement, even when the other
contracting party fails to perform its obligations.
To reinforce the stability of settlement
agreements, Book VII excludes several mechanisms for unilateral withdrawal,
even though they were recently introduced into general contract law:
- a party cannot unilaterally
invalidate a settlement agreement merely by giving written notice: extra-judicial
invalidity is excluded (art. 7.7.13).
- non-performance
of an obligation does not in itself constitute grounds for bringing the
settlement agreement to an end: extra-judicial dissolution is excluded
(art. 7.7.16).
- a
price reduction by notice is also excluded (Article 7.7.16).
- one possibility is expressly
preserved: the application of a resolutory condition. The parties may
therefore specify in their agreement the conditions under which it will be
dissolved for non-compliance without a prior court ruling, subject to possible
subsequent judicial review.
This development highlights the importance of
careful drafting. If the agreement is not complied with, the mechanisms laid
down in the agreement determine the remedies available.
What are
the practical consequences for your settlement agreements?
The reform provides an excellent opportunity to
review your model settlement agreements. An agreement that carefully records
the concessions made but fails to address the consequences of non-compliance
may give rise to new disputes.
Particular attention needs to be paid to:
- the
description of the covered dispute,
- the
scope of any waivers,
- any
conditions governing a waiver of debt,
- the
safeguards accompanying payment by instalments,
- and the
consequences of future non-compliance.
The text provides that Book VII will enter into
force on the first day of the twelfth month following the month in which it is
published in the Belgian Official Gazette.
Settlement agreements concluded before this
entry into force will, in principle, remain subject to the old
rules, unless the parties agree otherwise. The mere fact that the future
consequences of the settlement agreement continue after that date does not
automatically mean it falls under the scope of the new regime.
For settlement agreements concluded after the
entry into force, the models will need to take into account the new
provisions.
OUR EXPERTISE
AT YOUR SERVICE
Our Business
team regularly assists companies with the negotiation and drafting of
settlement agreements with a view to ensuring both the effective termination of
the dispute and the performance of future obligations.
We can promptly review your existing settlement agreements or draft new
agreements tailored to your situation, giving you greater confidence and
certainty for the future.