The Unpaid Deposit and the Cancelled Sale
On 3 March, Sophie (a private seller) and Marc sign a written agreement for the sale of Sophie's apartment in Liège for €245,000. The contract states: "The buyer pays a deposit of €12,000 into the seller's account within ten days of signing; failing this, the seller may treat the sale as cancelled and retain the deposit." Marc pays nothing. On 20 March Sophie sends a registered letter informing Marc that she considers the sale cancelled and that she will resell. She resells on 5 May for €228,000. Marc now claims the cancellation was invalid because the deposit clause was never triggered (no payment made) and, in any event, that forcing him to pay €17,000 in damages is excessive. Sophie counters that she is entitled to the deposit plus the price difference. The parties are both consumers; no notary was involved.
1. Identify the legal nature of the €12,000 clause and assess whether Sophie validly cancelled the sale.
Read the worked answer
Nature of the clause. A clause requiring a sum to be paid on signing and forfeited on default is, in Belgian law, analysed as a clause pénale (penalty clause, art. 5.89 et seq. new Civil Code / ancien art. 1226 C. civ.) rather than as a compromis deposit, because the sum is not actually paid at signing. The label used by the parties is not decisive; the court looks at the function: it fixes in advance the damages owed if the buyer fails.
Was there a valid cancellation? The clause makes cancellation conditional on non-payment within ten days. Marc's failure to pay on time is a breach, but the clause says the seller may treat the sale as cancelled - it is a faculty, not automatic. Sophie must exercise it clearly, which her registered letter of 20 March does. The condition (non-payment) is objectively met; the clause is not 'never triggered' merely because no money changed hands. Marc's argument fails.
Caveat on the deposit. Sophie cannot both retain the €12,000 and claim the €17,000 price difference, because the penalty clause replaces the damages for the breach it covers (art. 5.92 new Civil Code). She must choose, subject to judicial moderation.
2. Sophie claims €12,000 (deposit) plus €17,000 (price difference) = €29,000. Marc argues this is manifestly excessive. How should the court reason?
Read the worked answer
Step 1 - Scope of the penalty. The clause covers the buyer's failure to pay the deposit and, by extension, the failure to complete. It does not automatically cover every head of loss. The price difference on resale (€17,000) is a distinct, provable loss caused by Marc's breach.
Step 2 - Cumulation rule. Under the new Civil Code (art. 5.92), the creditor may claim the penalty or specific performance/damages for the loss actually suffered, but not both for the same breach. Sophie must therefore elect one route. Claiming both is a legal error the judge must raise.
Step 3 - Moderation. If Sophie elects the penalty (€12,000), Marc may ask the court to reduce it if it is manifestly excessive (art. 5.93). The court compares the penalty to the foreseeable loss. Here the actual loss is €17,000 plus costs and delay - so a €12,000 penalty is below the proven loss and will not be reduced. Conversely, if Sophie elects damages, she proves €17,000, and the penalty is irrelevant.
Step 4 - Practical outcome. The court should invite Sophie to clarify her election; on the figures, electing damages (€17,000) is more favourable, but she cannot add the deposit on top. Marc's 'excessive' argument only bites if the penalty exceeded the loss, which it does not.