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Your contact person for this topic:
Marco Wirtz
Lawyer
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Contact:
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- m.wirtz@euregio.law
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Further publications on this topic:
- E-commerce in Belgium: VAT regulations
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More on this topic:
- Distributions, contracts & GTC
- Commercial law
End products (e.g. a machine) are often manufactured from parts supplied by a foreign supplier. These suppliers usually reserve ownership in their general terms and conditions in order to protect themselves against payment defaults. The retention of title postpones the transfer of ownership until the purchase price has been paid in full. This ensures that the supplier can dispose of the delivered goods if the customer does not pay. Retention of title is therefore an important protection mechanism in trade.
But what happens to the retention of title if you deliver goods across borders to Belgium? Does the retention of title remain in place?
1. General information
On 1 January 2018, the rules on retention of title in Belgium changed fundamentally with the entry into force of the law on the right of pledge. Under Belgian law, retention of title is an agreement between the seller (conditional seller) and the buyer of a movable item, according to which ownership of the item remains with the seller until the purchase price has been paid in full, despite delivery to the buyer. The seller can therefore demand the return of the goods if the buyer does not pay the purchase price.
In addition to the „normal“ retention of title (example: the supplier can reclaim the delivered engine if the customer does not pay for the engine), there are two other forms of retention of title.
- On the one hand, there is the „extended“ retention of title, in which the retention of title is extended to the products (machine) that are manufactured with the delivered item (motor). If the customer does not pay for the motor and the motor is already installed in a machine, the supplier can claim ownership of the machine.
- On the other hand, there is the „expanded“ retention of title, in which the retention of title is not limited to the claims arising from the delivered item (payment of the purchase price for the motor), but also extends to other claims between the parties. Example: Even if the customer does not pay for the separately delivered brakes, the supplier can still claim ownership of the delivered motor.
Whether the retention of title can be enforced in certain situations depends on the law applicable to the relationship between the parties. If you supply goods across borders, it is therefore important to take these differences into account when drafting your contract or general terms and conditions.
It should be noted that under Belgian law, the transfer of ownership takes place upon conclusion of the purchase agreement. All that is required is that an agreement has been reached on the goods and the price of the goods and, in the case of a sale of a generic product, that the goods have been specified. Once the purchase contract has been concluded, the object of purchase no longer belongs to the seller’s assets. However, the transfer of ownership can be made dependent on conditions such as retention of title.
2. Form of agreement
Retention of title must be agreed in writing at the latest upon delivery of the goods. The retention of title can, for example, be included in the general terms and conditions. The buyer’s signature is not required, as tacit consent is sufficient. Only if a retention of title is agreed with a consumer must the consumer’s consent be evident from a written document, e.g. his signature.
The retention of title does not need to be registered to be effective against third parties, except when the goods subject to retention of title are incorporated into a property to form an immovable object. In such cases, registration is required to preserve the retention of title.
3. Scope of application
The Pandwet (Lien Act) has extended the retention of title insofar as it makes the retention of title effective
- irrespective of whether the right of the conditional seller competes with another creditor of the buyer,
- irrespective of the legal nature of the contract in which the retention of title is contained, and
- regardless of whether the goods are available in kind.
3.1 Assertion of retention of title in the event of competition with other creditors
Originally, the retention of title was only contained in Art. 101 of the Faillissementswet (Bankruptcy Act), so that the Court of Cassation assumed that the retention of title could only be asserted in bankruptcy proceedings. However, Article 101 of the Faillissementswet has since been repealed and the provisions on retention of title have been incorporated into the Civil Code. As a result, the retention of title now also has third-party effect and can be asserted in all bankruptcy situations, e.g. if the delivered goods are seized.
3.2 The legal nature of the underlying contract is not relevant
The old regulation was based on the assumption that the retention of title could only be agreed in a purchase contract, which led to considerable legal uncertainty in the case of mixed contracts (service + delivery of goods). This legal uncertainty has now been removed, as Art. 69 of the Pandwet stipulates that the provisions on retention of title apply „regardless of the legal nature of the contract“. Consequently, the retention of title has been extended to all types of reciprocal contracts involving delivery.
3.3 Consequences of processing, resale, mixing or incorporation
With the entry into force of Pandwet, Belgian law now provides for an extended retention of title.
In the event of a resale, the retention of title is transferred to the claim that replaces it, provided that the latter is identifiable (Art. 9 and 70 of the Pandwet). The third party acquirer acting in good faith is protected by Art. 3.28 of the Civil Code, whereby the good faith of the third party acquirer is presumed in accordance with Art. 3.22 of the Civil Code.
Even if goods are mixed, the retention of title remains in force even though the goods are no longer identifiable (Art. 20 and 70 Pandwet).
If the goods (motor) are processed by the purchaser, the retention of title shall be transferred to the resulting product (machine) (Art. 18 and 70 of the Pandwet). In the event of non-payment of the purchase price for the delivered motor, the supplier may then invoke its retention of title to the machine. However, if goods of the buyer or third parties are combined with the goods of the conditional seller, the retention of title to the newly created goods shall only be transferred to the extent that the goods of the conditional seller have the greatest value.
Finally, the retention of title remains in force even if the reserved goods become immovable property through incorporation, provided that the retention of title is entered in the lien register (Art. 70 and 71 of the Pandwet).
3.4. No expanded retention of title
It is not possible under Belgian law to agree an expanded retention of title. The retention of title can therefore only serve as security for the payment of the purchase price for the delivered item to which the retention of title relates (engine), but not for other claims between the parties. Under Belgian law, for example, it is not possible to agree that the ownership of the delivered engine can be reclaimed if another delivery (e.g. brakes) is not paid for.
4. Assertion of the retention of title in insolvency proceedings
The right of the conditional seller to demand the return of the goods in the debtor’s possession is not affected by bankruptcy proceedings. However, if you wish to invoke the retention of title in bankruptcy proceedings, it is important to give notice in good time. Pursuant to Article XX.194 of the Wetboek Economisch Recht (Commercial Code), the action for surrender is subject to a strict deadline and the seller must assert his claim for surrender in bankruptcy proceedings no later than the day before the filing of the first protocol for the verification of claims. Pursuant to Article XX.104 of the Wetboek Economisch Recht, this date is specified in the opening order and is generally between 5 and 30 days after the expiry of the declaration period, which in turn is generally a maximum of 30 days from the opening of bankruptcy proceedings. In addition, the legislator has clarified that it is sufficient for the creditor to expressly notify the insolvency administrator of their intention to invoke the retention of title before the expiry of the aforementioned period in order to assert the claim.
Do you have a question or concern?
Please do not hesitate to contact Marco Wirtz if you have any questions on this topic. Marco Wirtz will be happy to assist you.
