Prohibition of abuse of rights

Abuse of right (abus de droit / rechtsmisbruik) is now formally embedded in Book 1 of the new Civil Code. What are the practical consequences for the real estate practice, e.g. when calling upon a bank guarantee in certain circumstances? 

Definition of abuse of rights incorporated in the new civil code

Article 10 of Book 1 of the new Civil Code confirms the prohibition of abuse of rights: “Whoever exercises his
 right in a manner which manifestly exceeds the limits of the normal use of that right by a prudent and reasonable person placed in the same circumstances, commits an abuse of his right”. This way, the principle of the prohibition of abuse of right established by case law is confirmed. 

In addition, Book 5 formalizes the most fundamental pillars of Belgian contract law, namely the binding force of contracts, together with the complementary effect of good faith (bonne foi / goede trouw) and the prohibition of abuse of rights. The judge has discretionary power to rule whether the conditions of abuse of rights are united given the specific circumstances of the case. The sanction mentioned in Book 5 also confirms current case law: the mitigation of the right in question (i.e., the right that was abused) to its normal legal exercise, without prejudice to the repair of the damage which was caused by the abuse. 

The prohibition of abuse of rights has numerous applications, some of which are now explicitly anchored in Book 5 of the new Civil Code, e.g., the article relating to abusive out-of-court dissolution (resolution non-judiciaire/ buitengerechtelijke ontbinding), the article regarding abuse of rights in restitution and the article on abusive performance in kind. 

Practical consequences for the real estate sector

The question arises whether the codification of the principle of abuse of rights, although applied in case law since many years, will lead to more legal proceedings where abuse of rights might be applicable. In principle, the content of the definition has not changed. 

As seen in the Covid-19 lease case law, judges ruled in several cases that the landlord, requiring full payment
 of the rent during the lock-down period imposed by the governmental measures, commits an abuse of his rights since it causes an imbalance in the economics of the contract in the very exceptional circumstances of the coronavirus pandemic. On the basis thereof, judges often decided (on a case-by-case basis) for example on a 50% rent reduction during the months of closure. 

We can also refer to existing case law regarding the exercise of bank guarantees in the context of leases. In principle, a first demand bank guarantee requires the bank to unconditionally and irrevocably pay the landlord upon receipt of his request. Of course, the landlord may not abuse his right. This is for example the case if the bank guarantee is called upon only because of the bankruptcy of the debtor, where, at the time of the declaration of bankruptcy, the contract had been executed and there was only a very small amount of the contract price disputed between the parties. 

In another case, the judge ruled that the call upon the bank guarantee was prima facie abusive because it was called for obligations that were not covered by the guarantee (e.g. in the event of multiple agreements). Such judgement shows that correctly defining the object of a bank guarantee is essential.