Drafting a liability clause

Drafting a liability clause

A liability clause is the heart of the risk allocation between parties. It determines who bears the (financial) burden when something goes wrong, and how far that burden reaches. Whether you are negotiating a critical services agreement or a standard set of terms and conditions, understanding (and properly drafting) the liability clause is essential.

A. Legal Framework in Belgium

Under Belgian law, contractual freedom allows parties to agree on how liability is allocated. However, this freedom is not unlimited. Key principles stem from the Belgian Civil Code (e.g. Article 5.89) and the Belgian Code of Economic Law, which govern the validity and limits of exoneration clauses.

General principles include:

• Liability for willful misconduct (opzet/dol) cannot be excluded. Any clause attempting to exclude liability for intentional misconduct is deemed null and void.

• Liability cannot be excluded where the fault affects life or physical integrity. Clauses purporting to exclude liability for fault resulting in death or bodily injury are also considered unenforceable.

• Liability for gross negligence (zware fout/faute lourde) may be excluded, but only if clearly agreed. Such an exclusion is not presumed and must be expressly drafted.

• Clauses that deprive the contract of its substance are unenforceable. A liability limitation clause will be disregarded if it effectively “hollows out” the contract by undermining its essential purpose.

• Liability exclusions may extend to persons acting on behalf of the debtor. Where a party relies on auxiliaries (such as subcontractors or agents) to perform the contract, those auxiliaries may invoke the liability exclusion clause agreed between the main parties, provided the clause is drafted accordingly.

• Mandatory statutory obligations may override contractual limitations. In regulated sectors (such as financial services, construction, or data protection), statutory duties may restrict the extent to which liability can be contractually reduced.

• Unfair contract terms legislation remains relevant. Under the Belgian Code of Economic Law, certain clauses may be prohibited if they create a manifest imbalance between the parties.
  

B. Key elements of a liability clause in a B2B contract

When negotiating, consider elements such as (i) the commercial leverage of each party; (ii) the nature of the service or product (standardized or customized); (iii) the potential damage magnitude; and (iv) whether insurance or performance guarantees offer alternative protection.

When drafting or reviewing a liability clause under Belgian law, consider the following elements:

1. Where nothing is stipulated - Belgian law applies its default rules: the breaching party is liable for all foreseeable damages directly caused by non-performance, including consequential losses if proven. This often surprises parties who believed “silence” meant “no liability” whilst in practice, it means full liability under the law.

2. Excluded damages

• Specify whether liability covers only direct damages or also extends to consequential, indirect, or moral damages.

• Common exclusions include loss of profit, revenue, goodwill, data, or anticipated savings.

• Ensure these are expressly listed, as Belgian courts interpret exclusions restrictively.

3. Exceptions to limitations

• Even if general limits apply, specify exceptions (e.g. for gross negligence, willful misconduct, or breaches of confidentiality and IP rights).

• This helps maintain the clause’s validity if challenged.

4. Extended liability

• Clarify if a party remains liable for actions of its employees, agents, or subcontractors.

• In data processing or outsourcing contexts, extending liability may be necessary to ensure compliance with legal or client obligations.

5. Limitation of amount

• Set a financial cap (for example, the total contract price, or a multiple thereof).

• Be precise whether the cap applies per claim, per year, or in aggregate.

6. Insurance requirements

• Where liability is capped, consider aligning caps with insured amounts.

• Reference to professional indemnity or product liability insurance can provide comfort to both sides.

7. Interplay with indemnities

• If the contract includes indemnification obligations, specify whether these are subject to the same limitations.

• In Belgian practice, indemnities are not automatically exempt from general liability caps unless expressly stated.

Leaving liability unaddressed means relying on default rules that may be far more extensive than intended. At act legal Belgium, we assist clients in drafting, reviewing, and negotiating liability clauses that reflect both their commercial interests and the boundaries of Belgian law, helping to ensure that your risk is properly allocated.