Third-party clause beneficiaries: statute of limitation regime violates principle of equality

Third-party clause beneficiaries: statute of limitation regime violates principle of equality

On 6 November 2014, the Constitutional Court ruled that article 2262bis §1, first paragraph of the Civil Code (CC) violates articles 10 and 11 of the Constitution in so far as it can have as a consequence that the period of statute of limitation for legal claims deriving from third-party clauses expires before the beneficiary of the third-party clause has (or reasonably should have had) knowledge thereof.

The specific dispute on the merits revolved around a third-party clause that was contained in a notarial settlement deed on the occasion of a divorce by mutual consent. With this third-party clause, the ex-husband waived his undivided half in the usufruct of the earlier family residence to the benefit of the ex-wife, and also gave his undivided half in the bare ownership to their two common children.

A third-party clause is defined as a contractual clause under which one of the contracting parties (the stipulator), acting in his own name, has the other party (the promisor) promise to perform a service in favour of a third party (the beneficiary), who thus becomes creditor of the promised service, and this pursuant to an agreement in which he did not participate (E. , Obligatoire verhoudingen tussen contractanten en derden [Obligatory relations between contractors and third parties], Antwerp, Kluwer, 1984, no. 106; W. , Verbintenissenrecht [Law of obligations], Leuven, Acco, 2006, 233).

Article 2262 bis §1, first paragraph CC, provides that all personal legal claims lapse after expiry of a ten years period of statute of limitation. The period of statute of limitation commences at the time when the legal claim becomes due and demandable, even if the beneficiary has no knowledge of the right, such as the beneficiary in this case had no knowledge of the third-party clause. Things are different, however, for claims based on third party liability. Article 2262 bis §1, second paragraph CC namely provides that all legal claims for compensation of damage on the basis of third party liability have a period of statute of limitation of five years as of the day following the day on which the disadvantaged third party gained knowledge of the damage or of the aggravation thereof and of the identity of the liable person, with a maximum of twenty years.

The Constitutional Court had to address the distinction between the two regimes of statute of limitation. In its decision of 6 November 2014, the Court refers to its previous case-law and to the Parliamentary minutes and preparatory works, wherein it is stated that an absolute statute of limitation must be provided for and that an application of the criterion “knowledge of the damage and of the identity of the liable person ” makes no sense for most contractual claims. After all, normally the parties who conclude an agreement naturally know both (their rights pursuant to) this agreement and one another´s identity. Hence the Civil Code opted for a double period of statute of limitation of five and (at present) twenty years for third party liability claims to obtain damages, and an absolute period of ten years for all other personal claims.

However, the legislature’s reasoning does not hold up for the beneficiary of a third-party clause, since the beneficiary will only gain knowledge of the legal claim if the promisor or the stipulator informs him thereof, given that he is foreign to the agreement concluding the third-party clause. Therefore the rights of the beneficiaries are disproportionately limited since, absent notice from the stipulator or promisor of the existence of the third-party clause, the beneficiary does not possess the de facto possibility of exercising his (unknown) claim against the promisor.

If this distinction has the consequence that the beneficiary of a third-party clause cannot claim his right because the corresponding right of action is prescribed before he has (or should have had) knowledge of that very clause, this distinction is incompatible with the principle of equality and non-discrimination (consideration B.11). The Court concluded that this violated the Constitution.

The direct consequence of this decision is limited to the case involved. Both subsections of art. 2262bis, §1 CC continue to exist. However, other judges no longer have to request a preliminary ruling when confronted with the same issue (art. 26, §2, second paragraph, 2° Bijz.W. GwH [Special Act of 6 January 1989 on the Constitutional Court]). With this decision, a new period of six months has also begun for an appeal to annul the provision in question by the government or any other interested party.

Link to decision: http://www.const-court.be/public/n/2014/2014-164n.pdf

For more information on this specific subject, please contact Eva Zaman and Siegfried Busscher (the authors) and Chantal De Smedt (head of department).