In the construction sector, a client often works with a main contractor, who in turn engages one or more subcontractors. These subcontractors may also outsource certain activities, for example to a self-employed bricklayer.
When the main contractor can no longer pay its invoices, the subcontractors and subsequent parties in the chain risk being left unpaid.
The law provides subcontractors with an important protection mechanism. If they exercise a direct claim in time, they can claim payment directly from the client for the amounts the client still owes to the main contractor. This effectively bypasses the main contractor and increases the likelihood of receiving payment, for example in the event of the main contractor's bankruptcy.
Importantly, a direct claim can only be exercised against the debtor of your own debtor. A bricklayer engaged by a subcontractor cannot therefore approach the client directly. The bricklayer can only exercise a direct claim against the main contractor, since the main contractor is the debtor of the subcontractor.
How do you exercise a direct claim?
A direct claim can be exercised in several ways, for example through formal service by a bailiff or by written notification sent by registered mail, accompanied by an email with delivery and read receipts. It is important that you can always demonstrate that you exercised the direct claim and when you did so. Your rights are only established at the moment you exercise the direct claim. If the main contractor is declared bankrupt before that moment, the direct claim can no longer be exercised.
Multiple subcontractors: how are the amounts distributed?
It is entirely possible for several subcontractors to exercise a direct claim on the same construction project. If the amounts still owed by the client are insufficient to settle all claims in full, the subcontractor who exercised their direct claim first does not automatically receive priority.
In that case, the client distributes the available funds proportionally among all subcontractors who have exercised a valid direct claim in time.
Each subcontractor therefore receives a proportional share of the available amount, based on their outstanding claim.
The new Book 7 of the Civil Code: an end to the debate on its scope
On 1 September 2027, the new Book 7 of the Belgian Civil Code, entitled 'Special Contracts', will enter into force. This reform introduces a comprehensive update of the rules governing, among other things, sales, leases, contracts for work and services. Direct claims are also being reviewed.
The scope of direct claims has long been a subject of debate. Under Article 1798, first paragraph, of the former Civil Code, there was uncertainty as to whether direct claims applied exclusively to the construction sector or could also apply to other service contracts. Article 7.4.31 of the Civil Code puts an end to this debate. The legislator introduces a general framework for service contracts, allowing any auxiliary service provider to claim payment directly from the client.
This means that direct claims will also play an important role beyond the traditional construction sector. For service providers, they offer an additional means of exerting pressure when their own contracting party fails to pay. In sectors where businesses frequently work with intermediaries and subcontractors, clients must also take into account the possibility of being approached directly by parties with whom they have never had a contractual relationship.
Here are some practical examples:
- An IT company engages an independent service provider for a software project but fails to pay them. The service provider will now be able to claim payment directly from the end client for the amount the end client still owes to the IT company.
- A consultancy firm engages an independent consultant for a project with a client but fails to pay the consultant. The consultant can then approach the end client directly for the amounts still owed to the consultancy firm.
- A marketing agency engages a freelance photographer or copywriter for a campaign but fails to meet its payment obligations. The freelancer can approach the company for which the campaign was carried out directly.
- An event agency organises a corporate event and engages external suppliers, such as a caterer. If the event agency fails to pay these suppliers, they can approach the company for which the event was organised directly.
- A security company engages a self-employed security guard for an assignment at a client's premises but fails to pay them. The security guard can then approach the client for whom the security services were provided directly.
Direct claims versus assignment of claims
In addition to direct claims, there is another legal mechanism that can protect you against your debtor's insolvency: the assignment of claims.
While a direct claim arises directly from the law, an assignment of claims is established by agreement. Parties can also agree in their general terms and conditions that claims held by one party are transferred to another. Once this assignment has been notified to the third-party debtor, you can claim payment directly from that party. Here too, an intermediary in the chain is effectively bypassed.
Another difference is the broader scope of an assignment of claims. A direct claim is limited to services whose performance the contractor has entrusted, in whole or in part, to an auxiliary service provider. It must therefore concern the same project or construction site. An assignment of claims is not subject to this restriction: it can cover any claim your debtor holds against a third party, even if it is unrelated to the original agreement.
For example, you know that your debtor rents out a property and receives rental income. Through an assignment of claims clause, you can approach the tenant directly for the rent they still owe to your debtor. This is therefore entirely separate from your own agreement with that debtor.
Unpaid invoices? We are here to help
Is your client failing to pay your invoices? The Commercial Law team at Moore Law is happy to assist you with debt recovery and the exercise of direct claims. We also have extensive experience in drafting general terms and conditions, in which it is advisable to include an assignment of claims clause.
