While practitioners have requested it for years, the Civil Code reform, meant to modernize the Napoleonic code, was finally passed. Ordonnance n°2016-131 of February 10, 2016, introducing the reform of the law of contract, the general regime of obligations and proof of obligations (“the Ordonnance”) has been published in the official journal of February 11, 2016.
It had become necessary to modernize the law of contract, to adapt its content to new economic realities and to make its provisions more readable and accessible. The stated goal of the government, at the time of the adoption of the Ordonnance, was to strengthen the legal security, to make contract law more legible, to address certain contractual imbalances and to reinforce the attractiveness of French law at the political, cultural and economic level.
This significant reform modifies numerous provisions of the Civil Code, particularly by codifying existing jurisprudential principles.
The new measures will come into force on October 1st, 2016 and will apply to contracts concluded from this date (except for some measures relating to new interrogative actions established by the Ordonnance, which are applicable immediately).
Among the principles enshrined, the following in particular are to be noted:
- The recognition of the duty of good faith in pre-contractual stages.
The Ordonnance enshrines the principle of good faith at the stage of negotiations. This duty is particularly translated in article 1112-1, under which any party who holds information of decisive importance to their co-contractor has a duty to inform them thereof, where the latter is either legitimately unaware of such information or trusts the first-mentioned party. Information is of decisive importance if it has a direct and necessary connection with the content of the contract or the status of the parties. It should be noted, however, that this duty of information does not cover the service value estimation. Failure to comply with this duty may result in contract nullity on the grounds of defect of consent.
- The guarantee of balance in the reciprocal obligations of the parties
The Ordonnance reinforces the idea of balanced contractual services. It codifies the Chronopost jurisprudence which deemed unwritten any clause depriving one of the parties’ essential obligations of its substance. In addition, concerning standard form contracts (or contracts of adhesion), article 1171 deems unwritten any clause that creates a significant imbalance between the rights and obligations of the parties. The assessment of the imbalance relates neither to the main subject matter nor to the adequacy of the price. Lastly, article 1169 states that any contract concluded for pecuniary interest will be deemed unwritten where the agreed upon consideration in favor of the debtor is illusory or derisory at the moment of its conclusion.
Contractual balance seems to be a main focal point of the reform and translates an increased interventionism of the State in contractual relationships.
- The recognition of the contractual unpredictability doctrine
The introduction of the notion of unpredictability to the Civil Code (art.1195) is among the most significant changes brought forth by the reform. This notion, which contravenes the sacrosanct principle of the binding force of contracts, is traditionally limited to administrative jurisprudence. It allows a co-contractor to request a renegotiation of the contract in the event of a change in circumstances which are unpredictable at the moment of the conclusion of the contract and which would make the execution of the obligation by a party excessively onerous. This notion will allow parties to renegotiate their contracts when affected by a hazard which makes the execution of their obligation disproportionately onerous. The affected party will be entitled to petition a judge for termination or revision of the contract. This measure will therefore allow judges to occasionally interfere in the contractual relationship of the parties. However, such rights can be waived by parties who choose to assume the related risk.
- Recognition of jurisprudence relating to breach-based defense(or defense of non-performance)
The new article 1219 of the Civil Code recognizes the abundant jurisprudence concerning breach-based defenses. It states that in the event of a serious breach of contract, the non-breaching party may refuse to execute their own obligation, even where it is due and as long as the breaching party does not perform the obligations outlined by the contract. Likewise, when there is no doubt that a party will not execute their obligation, the other party may notify the former that they will “suspend” the execution of their own obligation (art. 1220).
- The introduction of various definitions
For the sake of clarity and with the goal to strengthen the legal security of the law, the Ordonnance introduces certain definitions, including a definition of the economic violence notion, of the debt transfer agreement and a modern definition of the force majeure notion, which is defined as : any event escaping the debtor’s control, which could not have been reasonably expected at the moment of the conclusion of the contract and of which the impacts cannot be avoided with appropriate measures, preventing the debtor from executing their obligation (art. 1218). In the same vein of simplification and clarification, an entire section is dedicated to the methods of calculation of contract durations. Article 1210 and following lead to a clear explanation of the positive law rules.
- The disappearance of the notions of cause and object
With the intent of simplifying the law, the new Civil Code overlooks the “cause”, a notion which has given rise to innumerable debates. The “licit cause” and the “certain object” give way to a “licit and certain content”. The formation conditions of the contract are thus limited to three conditions: the consent of the parties, their capacity, and a licit and certain content of the contract.
Feb 15, 2016, Business law, contract law