Just released Ordinance No.2016-131 of February 10, 2016 reforming the French contractual obligations

Just released Ordinance No.2016-131 of February 10, 2016 reforming the French contractual obligations.

This reform modifies the provisions of Articles 1110 – 1386-1 of French Civil Code and will be applicable as of October 1, 2016 (except for the immediately applicable provisions of the 3rd and 4th paragraphs of section 1123 and sections 1158 and 1183). When proceedings were instituted before the entry into force of this ordinance, the action is subject to previous rules. This law also applies in appeal and cassation. 

Highlights:

Article 1112 et seq. of new Civil Code introduce rules specific to the negotiations resuming the case law principles related to the sudden termination of talks and require pre-contractual information, when either party who knows information whose importance is decisive for the consent of the other must inform since, legitimately, it ignores this information or trusted his contracting partner with the exception of the estimate of the value of the benefit.

Article 1112-2 of Civil Code requires confidentiality of the negotiations. The reform includes the principles governing the offer and acceptance and the terms of their withdrawal or their binding (Art. 1113 to 1122). Silence still means non-acceptation, but… unless otherwise resulting from or provided by the law, customs, business relationships or special circumstances.

The preference agreement and the unilateral promise are definid in the same section of the code. Article 1123 of the Civil Code rules that the preference agreement is a contract by which one party undertakes to first offer the recipient to deal with it in case it decides to contract. Any party who violates such commitment but also any third party willingfully breaching it, will be held liable, in line with previous case law.

The notion of cause of a contract disappears; the notion of the object of the contract also in favor of lawful and effective content (Art. 1128 et seq.). According to Article 1163, the obligation shall relate to a present or future action which has to be possible and determinate or determinable.

Adopting the precedent principles since 1995, price change in framework agreement without any abuse is established but the party fixing the price unilaterally should motivate the new price if challenged by the other party (Art 1164.): this is a new field of claims unfolding.

The reform also creates new rules: under Article 1168, in bilateral contracts, the different benefits from mutual obligations, is not a cause of cancellation of the agreement, unless the law provides otherwise. In other words, the consideration to an obligation has not necessarily to be equal, except under Article L442-6 I 5° of the Commercial Code which holds liable any party terminating without prior written notice with a reasonable notice-period with regard to the duration of whole commercial relations.

However, the cancellation of the agreement is incurred under section 1169 if the consideration to a specific granted right is « illusory or derisory. »

Echoing Faurecia well-known case law, Article 1170 deems non written any clause that deprives of its substance an essential contractual obligation.

And, sequel of the abusive clause known under consumers law and the significant imbalance prohibition imposed by Article L442-6 I 2° of French commercial code, the new civil code provide in Article 1171 that in an impose agreement with no place for negotiation, any clause which generates a significant imbalance between the rights and obligations of the contracting parties shall be deemed non written. This being said, the appreciation of such significant imbalance does not relate to the main purpose of the agreement, nor to the adequacy of the price to the service or goods.

Frédéric Fournier
Partner

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