27 rue du Pont Neuf 75001 Paris
+33(0)1 40 20 91 26

Newsletter of Cazeau & Associés Law firm – June, July, August 2018

The law n°2018-287 of April 20, 2018: another significant modification of French contract law?
The law of April 20, 2018 is the last stage regarding the reform of the French law of obligations: it ratifies the February 10, 2016 “ordonnance”. The “ordonnance” is already in effect since October 1, 2016. Consequently, modifications of the 2018 law are not quantitatively significant (6%) so as to preserve legal certainty and foreseeability.
The delayed adoption mechanism of the final project puts the issue of transitional law at the core of the issues that practitioners will encounter. There are three distinct applicable laws, and two principles. The first principle is the application to the contract of the law in force at the time of its conclusion. On this point the French Parliament has decided that contracts formed before October 1, 2016 will be governed by the ancient French Contract law, “including their legal effects and the public policy provisions “. The second principle is about the “interpretative” dispositions: their application is retroactive (from October 1, 2016).
So :
• Contracts formed before October 1, 2016 :
o Principle: Ancient law is applicable
o Exception : « les actions interrogatoires »
• Contracts formed from October 1, 2016 to October 1, 2018:
o Principle: the 2016 « ordonnance » is applicable
o Exception: interpretative provisions of the 2018 law
• Contracts formed after October 1, 2018 :
o Principle: the 2016 « ordonnance », as modified by the 2018 law is applicable

I. Modifications of the 2018 law on: contracts formation, defects of consent, “adhésion” contracts, price fixing 

First of all, the definition as well as the legal regime of the “adhésion” contract will be modified (articles 1110 and 1171 of the Civil Code). The definition is now “the contract that includes a set of non-negotiable clauses, determined in advance by one of the parties”. The “General Terms and Conditions” have been replaced by “a set of clauses” and a criterion of non-negotiability has been added. “Adhésion” contracts are therefore no longer limited to mass contracts.
Symmetrically, the legal regime of unfair terms in the “adhésion” contracts is modified: the new wording of article 1171 of the Civil Code provides that only the non-negotiable clauses determined in advance by one of the parties (and no longer “any clause”) creating “a significant imbalance between the rights and obligations of the parties” may be subject to review by the judicial judge. The control of unfair terms is thus restricted.
Then the new Article 1112 provides that, in the event of misconduct in the negotiations, compensation for the damage resulting therefrom will neither be the “loss of the expected benefits of the contract not concluded” nor the “loss of opportunity to get these benefits ” This addition certainly provides for greater predictability in the compensation for the harm suffered during negotiations. This provision is interpretative and therefore applies from October 1, 2016.
Article 1117 (2), which deals with the invalidity (obsolescence) of the offer in the event of its author’s incapacity or death, is completed by the words: “or the death of its addressee”
Article 1137 (on the fraud) is added a paragraph as follows: “Nevertheless, does not constitute a fraud by one party not to reveal to his co-contractor his estimate of the value of the service”. The 2018 law thus puts an end to a great incoherence with article 1112-1 (on the obligation of information) which disposes in its paragraph 2: “Nevertheless, this duty of information does not relate to the estimation the value of the service”. The obligation to inform oneself, at least on the value of the service, is thus established since the person who is not obliged to inform the other party about the estimate of the value of the service will not be found liable anymore on the basis of Article 1137 of the Civil Code.
Article 1143, which deals with economic violence, also has an addition: “There is also violence when a party, abusing the state of dependence in which his co-contractor finds himself in relation to him, obtains from him a commitment that he would not have subscribed in the absence of such a constraint and derives a manifestly excessive advantage from it”. Thus, only the dependent condition of the contractor towards his co-contractor will henceforth be taken into account. This provision is interpretative and therefore applies from October 1, 2016.
Article 1145 paragraph 2 will now provide that: “The capacity of legal persons is limited by the rules applicable to each of them”. Article 1161 is also amended and will provide that: “In matters of representation of natural persons, a representative cannot act on behalf of several parties to the contract in opposition to interests or contract on his own account with the represented. ”
On price fixing, the new wording of Article 1165, on service contracts, will be:
“In the service contracts, in the absence of agreement of the parties before their execution, the price may be fixed by the creditor, for him to justify the amount in case of dispute.
In the event of an abuse of the price, the judge may be seized of a claim for damages and, where appropriate, the termination of the contract. ”
This provision is interpretative and therefore applies from October 1, 2016.
II. The modifications of the 2018 law on contract performance and termination of the contract
Once the control of validity of the contract has been done, the creditor seems, under the new French contract law, to benefit from a protection that has no equivalent abroad.
Thus article 1217, which enumerates remedies for breach of contract available to the creditor, replaces the word “solicit” with the word “obtain”:
“The party to whom the undertaking has not been executed, or has been imperfectly executed, may:

– Obtain a price reduction
While the verb “to solicit” suggested a compulsory recourse to the judge to obtain the reduction of the price in case of an improper performance by the debtor, the word “to obtain” clearly establishes a sanction which is exerted without intervention of the judge. This is a clear privatization of sanctions. This provision is interpretative and therefore applies from October 1, 2016.
The 2018 law then amended Article 1221, which relates to forced execution. If, in the event of non-performance of the debtor, forced execution in kind is now the principle, two exceptions are foreseen: the impossibility of enforcement and a manifest disproportion between the cost to the debtor and the interest in the creditor. However, the 2018 law now specifies that only the debtor in good faith can avail himself of this second exception. As a result, the debtor in bad faith may be exposed to irrational forced execution. In this way, the 2018 law increases, even more, the protection of the creditor. This provision is interpretative and therefore applies from October 1, 2016.
In addition, Article 1223 on the proportional reduction of the price has been entirely rewritten:
“In the event of imperfect performance of the service, the creditor may, after giving formal notice and if he has not yet paid all or part of the service, notify the debtor as soon as possible of his decision to proportionately reduce the price. The debtor’s acceptance of the creditor’s price reduction decision must be in writing.
If the creditor has already paid, in the absence of agreement between the parties, he can ask the judge to reduce the price. ”
The reason for this rewriting is that the version of the 2016 order raised two doubts: Could the creditor decide, alone, the reduction, or did he need the consent of the debtor or the support of the judge? And was there room for a judicial reduction of the price anyway? The law of ratification has more or less solved these uncertainties. First, paragraph 1 of new Article 1223 contains the words “his decision”, which would imply that the creditor alone decides on the reduction. However, the second sentence of the same paragraph provides: ” The debtor’s acceptance of the creditor’s price reduction decision must be in writing.” Doubt about the possibility of a conventional reduction then seems to reappear. However, the analysis of the “travaux préparatoires” shows that the legislator wished to put in place a right to unilateral reduction, the second sentence of the first paragraph meaning that if the debtor accepts the price reduction, he will no longer be able to dispute it in courts.
The second paragraph of new Article 1223 allows for judicial intervention if the creditor has already paid and the parties cannot agree.