The subcontractor´s direct claim based on article 1798 of the Civil Code: not always a security for the subcontractor

The subcontractor´s direct claim based on article 1798 of the Civil Code: not always a security for the subcontractor

The direct claim that article 1798 of the Civil Code (CC) grants to a subcontractor has - as is well-known - an “imperfect” character, meaning that this right on the part of the subcontractor only actually comes into being at the moment that the claim is submitted.

The collateral for the direct claim, i.e. the contractor’s claim on the principal, must be available amongst the assets of the principal [shouldn’t this be “contractor”?] at the moment that the direct claim is exercised. If this claim is not available, the principal may not do anything which would result in the debt claim being extinguished.

Consequently, the direct claim cannot be submitted in the event of bankruptcy of the contractor (or other cases of concurrence). Also, if a different creditor of the contractor has already imposed protective attachment on assets in the hands of the principal, the subcontractor will no longer be able to invoke article 1798 CC. All of this is well-established Cassation case-law (see e.g. Cass. 20 January 2012, T. Aann. 2012, 49).

The foregoing implies that article 1798 CC sometimes offers the subcontractor inadequate protection. The subcontractor can only use his direct right of action when the general contractor does not pay, which can be a sign that the general contractor is insolvent. This can previously have already led to prior protective attachments or cases of concurrence.

In addition, the direct claim will also have to be set aside if the contractor’s debt claim against the principal was pledged by the contractor for (e.g.) an outstanding debt that he owes to his lender. The Commercial Court of Tongeren also ruled on 24 September 2013 (TBBR 2015, 40) that a rank conflict between the direct claim of the subcontractor and the pledge of a lender must settled to the advantage of the pledge holder, at least if the pledge was brought to the principal´s knowledge before the direct claim was exercised. Consequently, in this situation as well the subcontractor will be unable to invoke the direct claim.       

The foregoing illustrates that article 1798 CC doesn’t always grant a security to the subcontractor. 

Nevertheless, the subcontractor is not entirely without protection.

Along with the direct claim based on article 1798 CC, a subcontractor who performs immovable works also possesses the so-called “unpaid subcontractor’s privilege”, and this "during a period of five years from the date of the invoice" (article 20, 12° Mortgage Act).

Upon settlement of a concurrence situation in the assets of the general contractor, this privilege grants a preferred position to the subcontractor. Moreover the Court of Cassation on 25 March 2005 (RW 2005-06, 62) decided that the subcontractor’s privilege - in contrast to the direct claim - takes precedence over the pledge.

However, it is important to note that this privilege only applies for subcontractors who have performed immovable works, and moreover it remains limited to the assets of the general contractor, so that - in contrast to the direct claim – it cannot be executed against the principal.  

For more information on this particular topic, you can consult Maarten Somers (the author).

The subcontractor´s direct claim based on article 1798 of the Civil Code: not always a security for the subcontractor

The direct claim that article 1798 of the Civil Code (CC) grants to a subcontractor has - as is well-known - an “imperfect” character, meaning that this right on the part of the subcontractor only actually comes into being at the moment that the claim is submitted.

The collateral for the direct claim, i.e. the contractor’s claim on the principal, must be available amongst the assets of the principal [shouldn’t this be “contractor”?] at the moment that the direct claim is exercised. If this claim is not available, the principal may not do anything which would result in the debt claim being extinguished.

Consequently, the direct claim cannot be submitted in the event of bankruptcy of the contractor (or other cases of concurrence). Also, if a different creditor of the contractor has already imposed protective attachment on assets in the hands of the principal, the subcontractor will no longer be able to invoke article 1798 CC. All of this is well-established Cassation case-law (see e.g. Cass. 20 January 2012, T. Aann. 2012, 49).

The foregoing implies that article 1798 CC sometimes offers the subcontractor inadequate protection. The subcontractor can only use his direct right of action when the general contractor does not pay, which can be a sign that the general contractor is insolvent. This can previously have already led to prior protective attachments or cases of concurrence.

In addition, the direct claim will also have to be set aside if the contractor’s debt claim against the principal was pledged by the contractor for (e.g.) an outstanding debt that he owes to his lender. The Commercial Court of Tongeren also ruled on 24 September 2013 (TBBR 2015, 40) that a rank conflict between the direct claim of the subcontractor and the pledge of a lender must settled to the advantage of the pledge holder, at least if the pledge was brought to the principal´s knowledge before the direct claim was exercised. Consequently, in this situation as well the subcontractor will be unable to invoke the direct claim.       

The foregoing illustrates that article 1798 CC doesn’t always grant a security to the subcontractor. 

Nevertheless, the subcontractor is not entirely without protection.

Along with the direct claim based on article 1798 CC, a subcontractor who performs immovable works also possesses the so-called “unpaid subcontractor’s privilege”, and this "during a period of five years from the date of the invoice" (article 20, 12° Mortgage Act).

Upon settlement of a concurrence situation in the assets of the general contractor, this privilege grants a preferred position to the subcontractor. Moreover the Court of Cassation on 25 March 2005 (RW 2005-06, 62) decided that the subcontractor’s privilege - in contrast to the direct claim - takes precedence over the pledge.

However, it is important to note that this privilege only applies for subcontractors who have performed immovable works, and moreover it remains limited to the assets of the general contractor, so that - in contrast to the direct claim – it cannot be executed against the principal.  

For more information on this particular topic, you can consult Maarten Somers (the author).