Incoterms_® and Commercial Contracts

1. What rules, if any, govern retention of title (RT) in your country? In the absence of rules, what are the principal mechanisms, if any, on which RT is based in your country?

RT is currently governed by the general principles applicable to contracts. Save in case of bankruptcy proceedings, there are no special rules applicable to RT under Belgian law.

In case of bankruptcy proceedings, Articles 101 et seq. of the bankruptcy law dated 8 August 1997 apply.

From January 2018, RT is to be governed by express provisions in the Belgian Civil Code (Articles 69 et seq., Title XVII, Book III, of the Belgian Civil Code). The law containing those provisions is expected to enter into force on 1 January 2018.

2. Please describe the characteristics and scope of your country’s RT rules

RT is a contractual instrument, which can be used in civil and commercial contracts.

It is a lien which may theoretically apply to every kind of movable goods (material and immaterial, fungible and non-fungible).

Under RT, the transfer of ownership, which is one of the core obligations of any seller under Belgian law, is delayed until full payment is received.

3. If RT is not regulated in your country, are there similar or commercially equivalent forms of security preserving seller’s rights to the goods?

Such forms of security do not currently exist beyond what is described above.

4. What is the relation of RT and passage of risk in your system? How may a seller protect its interest after the passage of risk?

Pursuant to the Belgian Civil Code, the risks are transferred to the buyer simultaneously with the ownership. However, parties may derogate from this rule and, in practice, they frequently do so. Contracts for the sale of goods often provide that risks are transferred to the buyer on the date of delivery but that the seller retains the ownership as long as the price is not paid in full. If the goods perish during transportation, the buyer will still have to pay the price. The fact that the seller remained the owner of the goods does not free the buyer from its obligation to pay the purchase price.

The risk of loss can be addressed by an insurance contract. The risk of default of payment can be
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addressed by documentary credit.

5. What are formal requirements, if any, including timing, to perfect the seller’s right?

RT works as a contractual agreement under Belgian Law. To be effective, it must be expressly agreed in writing. Incorporation by reference (e.g. with a reference to general terms and conditions, on the back of an invoice, etc.) is sometimes accepted by case law but the outcome is less certain. Regarding the timing, RT must be agreed upon at the latest on delivery of the goods.

In case of bankruptcy of the buyer, the conditions are stricter. The seller will only be able to claim the unpaid goods provided that the following conditions are met:

• the unpaid goods are found in kind in the buyer’s premises;
• the unpaid goods are not attached to immovable property;
• the action of the unpaid seller is initiated before the first report of the bankruptcy trustee on the verification of claims is filed (usually 2 to 3 months after the date of the bankruptcy; the exact date is set by the commercial court overseeing the bankruptcy proceedings).

6. Effectiveness
1. Does sale to a third party break RT? What if goods have been transformed or sold?

If a third party acquires the goods under RT and is unaware that the title of the goods has remained with the seller, it breaks RT. The third party is protected by Article 2279 of the Belgian Civil Code, if it can show that it acquired the goods in good faith. In that case, the effectiveness of the RT clause is nullified and the third party becomes the rightful owner of the goods.

To date, in the case of bankruptcy, RT will be lost if the goods were transformed. The unpaid goods must be found in kind for RT to work.

Under the new law (expected to enter into force in 2018), RT will still apply even if the buyer transformed the unpaid goods. RT will be transferred on the new goods produced after the transformation.

If yes, is there a possibility to transform the RT in case of a sale to a third party?

No. RT will not transform but the seller will have other remedies.

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2. Enforcement of RT if delinquent buyer is not insolvent — What is the judicial procedure and what is its likely timeline?

Legal proceedings must be initiated before the commercial court with the aim of obtaining an order to return the goods. In the best case scenario, from the date of the writ of summons to the date of the order, the proceedings shall take 10 to 12 weeks. The duration of the proceedings will be longer if the delinquent buyer disputes the seller’s allegations and raises arguments of law.

In case of urgency, it is possible to request a special order from the enforcement judge to seize the unpaid goods. The proceedings are initiated on ex parte application. The effects of the order are to freeze the goods where they are and to prohibit any move or resale. These proceedings may be used in parallel to the proceedings on the merits.

3. What happens in case of conflict between RT and a buyer’s creditors’ rights, including carrier’s liens?

If the goods under RT are used as security by the buyer towards its creditors, the RT will prevail only if the creditors knew of its existence.

In other words, if the creditors accepted the security in good faith and were not informed about the RT, they will prevail over the unpaid seller.

Pursuant to Article 104 of the bankruptcy law of 8 August 1997, the carrier’s liens have priority over the RT.

4. Bankruptcy — interaction of RT (which is not contract law) and bankruptcy law
1. Goods still with buyer

Article 101 of the bankruptcy law of 8 August 1997 expressly states that bankruptcy does not affect the rights of the real owner of the goods. The goods under RT will be returned to the creditor, if the creditor validly files a claim for ownership over the goods under RT in due time (see (iii)).

2. Goods already sold by buyer

If the purchaser to whom the bankrupt buyer sold the goods under RT bought them in good faith, the RT will not work and the goods may not be claimed.

3. Time limits to declare title to receiver

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Pursuant to Article 101 of the bankruptcy law of 8 August 1997, the creditor must claim ownership over the goods under RT before the receiver files the first statement of verification of claims. The date of the first statement of verification of claims is set by the commercial court. Usually it happens 2 to 3 months after the judgment opening the bankruptcy proceedings.

The bankruptcy law of 8 August 1997 does not specify how ownership must be claimed. It is commonly accepted that the formal initiation of legal proceedings is not mandatory. The purpose of the legal provision is that the receiver will be informed of the RT as soon as possible. The creditor may therefore claim the ownership of the goods by registered letter sent to the receiver.

4. Who pays storage, insurance and transport during discussions with receiver?

The seller must bear storage, insurance, and transport costs.

7. Model clause(s) — Drafting tips

NOTE: The following language is based on contractual provisions commonly seen in this country, but readers should always consult legal counsel before including an RT clause in a contract.

The following paragraph might be added to the clause:

The clauses should be printed in bold type on all contractual documents: commercial offer, order confirmation, general conditions of sale etc., by indicating on the front page: goods sold under RT.

A reference to the seller’s website which contains the Terms & Conditions and the RT clause does not suffice.

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