EARN News
The reform of the law of obligations in France
Lyon, 2016-10-15
With its regulation dated 10th February 2016 the French legislature made major changes within the code civil. For the first time in 200 years, the law of obligations was fundamentally revised and modernised.
The intended innovations came into force on 1st October 2016 and apply to contract and legal proceedings concluded only after this date. Besides new definitions there are some essential innovations which are described hereinafter in summarized form.
I. Essential innovations in the French law of obligations
1) On pre-contractual relations
a) Information obligation
By means of the new Article 1112 the pre-contractual breach of duty is basically recorded in the code civil. Here, the information obligation of the contracting parties it is to be emphasized. Although this was already legally recognized as well as regulated by law for certain contract types, it is now generally applicable.
By Article 1112-1 the obligation to brief one’s future contracting party on all known and for the conclusion of contract essential information already in the course of the negotiations was incorporated into law for the first time. However, the evaluation of the corresponding performance’s value is not included. Moreover, this information obligation cannot be omitted. A breach of this new regulation can range from possible liability for damages to cancellation of contract. The evidence that such information was not communicated must be given by the party invoking the breach.
b) Restricted revocation of an offer
If an offer is revoked before the other party has accepted and before expiry of the acceptance period, due to Article 116 of the code civil's new version, unlike in Germany, no contract will be concluded. If necessary, the recipient of the offer is entitled to a tortious claim for damages.
c) Unilateral promise as binding offer
Contrary to the predominant jurisdiction so far, a “unilateral promise” („promesse unilatérale“) must not be revoked in the future before expiry of the acceptance period. In the case of withdrawal by the promising person he still remains bound by his promise so the beneficiary can request the conclusion of the contract under the promised conditions. Where applicable, a contract concluded between the promising person and a third party is void, if the latter was aware of the promise (Article 1124 of the new code civil).
d) Increased protection of good faith
Within the new Article 1104 and in terms of the jurisdiction the principle of good faith shall apply not only when the contract is fulfilled but also in case of precontractual negotiations.
2) On existing contractual relations
a) Frustration of contract
If the contract’s circumstances have subsequently changed, Article 1195 of the new civil code states an obligation to renegotiate the contract for the first time. However, this requires that the performance owed is only possible by expenditure of considerable, not reasonable costs. In the event that the negotiations should fail, a judicial termination of the contract can finally be demanded. This regulation is not only a departure from the previous French jurisdiction, but at the same time a significant convergence with German law where this option has been well established for a long time.
b) Monitoring contract clauses in standard contracts
By means of Article 1171 of the new code civil a prohibition of misused clauses in standard contracts/form agreements was introduced. Form agreements are contracts including general conditions which are given by one party and are accepted by the other party without further negotiations. Here clauses representing a clear imbalance („déséquilibre significatif“) between rights and obligations of the contracting parties are forbidden. Moreover, the control is, comparable with German law, neither extended to the contractual object nor to the price-performance ratio. Consumer protection regulations continue to apply.
c) Strengthening the creditor position in the event of defaults
Whereas a price reduction was only intended for the law of sales contracts, this option is now extended to all types of contract. Henceforth, in the event of defective performance („exécution imparfaite“) by the debtor the creditor shall be allowed to demand a proportional price reduction (Article 1223 of the new code civil). If no payment of the creditor has been made so far, he must inform the debtor about the reduction within a reasonable period of time. With that, the French law goes significantly further than the German regulation, which does not grant the creditor such general entitlement to a price reduction.
Another change related to defective performance concerns the right to withdrawal, regulated by Article 1224 of the new code civil. According to that, the creditor can withdraw from a contract in the event of a debtor’s sufficient serious breach of duty („inéxecution suffisamment grave“) as well as after a reasonable period by unilateral notification to the other party. Here, a judicial assessment of the withdrawal is no longer absolutely necessary.
II. Conclusion
Overall, more than 300 Articles of the new code civil were modified or newly added whereby many of them were about establishing in writing standard jurisdiction and legal practice. It seems relevant to have reviewed existing contracts in international legal relations. Especially temporary contracts already include the consideration that a continuation of the contract leads to applicability of the new code civil’s regulations. Although the contract was originally concluded under the conditions of the old civil law, those are no longer valid for a contract continuing after 1st October 2016. This is then a new conclusion of contract.
How some of the new regulations can be restricted or even excluded by an individual agreement between parties will become clear by future jurisdiction.
It now remains to be seen how the jurisdiction will interpret scope and content of some uncertain terms and provisions. These are in particular designations for terms such as „déséquilibre significatif“ (see 2b) as well as „inéxecution suffisamment grave“ (see 2c). In this context it is also questionable how the interpretation of „déséquilibre significatif“ will follow French commercial and corporate law.
Author: Petra Kuhn, Avocat à la Cour, diploma judicial officer
ZGS Avocats Associés