The new pre-contractual information requirement in a nutshell
Are you a franchisor? Do you provide concessions from exclusive selling? Are you in the distribution or retail sector? Chances are you have entered into commercial cooperation agreements in the process. Now, Belgian law requires your company to provide more transparency on some key pre-contractual elements in the commercial collaboration in order to help the contracting party identify any pain points.
For example, at least one month before entering into, say, a distribution agreement, you will have to provide the potential distributor with (1) a draft agreement and (2) a “Precontractual Information Document” also called a PID for short.
Indeed, on Feb. 8, 2024, the new text of Article X.28 of the Economic Law Code was adopted that places additional information obligations on distribution rights providers. You still have time until Sept. 1, 2024, to adjust your contracts to meet these new obligations.
Everything you need to know about this, we explain in this blog.
What’s new?
First, let’s report what is no longer required in such a PID. One will no longer have to give information in a PID the various “commitments” of the parties. Also no longer what the “consequences of not achieving these commitments” would be. Now, however, many more mandatory clauses come in that must inform the contracting party mainly about costs and prices, regulation intellectual property rights and restrictions on rights to use customer data.
As of Sept. 1, 2024, a PID will be required to provide an overview of:
- Costs at startup as well as recurring costs;
- The consequences of non-compliance with non-compete agreements;
- The maximum prices;
- The minimum sales and off-take and the consequences of not achieving them;
- The intellectual rights regime;
- The restrictions on access and usage rights to customer data both during and after the agreement;
- The regulation on online sales and promotion;
- The relationship and dependence between the commercial cooperation agreement and the lease agreement;
- The jurisdiction clause, choice of law and language of proceedings before the courts.
The other existing information requirements continue to be retained.
For whom.
The new expanded disclosure requirements apply to all natural and/or legal persons that the co-contractor …
- Grant the right to use a common trade name or sign;
- Transfer know-how; or
- Provide commercial or technical assistance
… in selling products or providing services. As businesses, you fall under this pretty quickly, for example, for franchisors and concessionaires.
From when?
The new law will enter into force six months after its publication in the Belgian Official Gazette, i.e. Sept. 1, 2024. The new disclosure requirement will then apply to new distribution agreements as well as amendments and renewals of current contracts.
What if I fail to comply with my duty to disclose?
There are quite severe consequences associated with failure to comply with these new transparency obligations. Co-contractors who did not receive the required pre-contractual information can invoke the nullity of the distribution agreement.
Do you still have specific questions about that? Not sure how to practically adjust your PID? We are happy to help you.
Contact us using the contact form below or send an email to info@ifori.be.
