A new contract law has been in force in France since October 1, 2016. Many articles in the French Civil Code were amended or even completely repealed as part of the reform. New articles that reflect applicable case law were newly included in the Civil Code.
For all contracts concluded prior to this date, the old Civil Code will essentially continue to apply (with the exception of new articles 1123, 1158 and 1183 of the Civil Code).
The reform of contract law in France has a major impact on all contracts and, consequently, on the General Terms and Conditions in international business transactions. A new article has been included in the Civil Code specifically to deal with this matter.
General Terms and Conditions France
As already mentioned, a new article was introduced into the Civil Code as part of the new contract law reform. Under article 1171 of the Civil Code, in the case of a so-called “Contrat d’ahésion”, clauses that create a significant imbalance between the rights and obligations of the parties to the contract are considered not to have been written. A “contrat d’adhésion” is when, under article 1110 of the Civil Code, the contractual clauses are determined in advance by only one party unilaterally, such as when using General Terms and Conditions. Therefore, in order for this provision to apply, the contractual clauses must not have been negotiated or amended jointly.
It is the jurisdiction of the individual judge to determine whether or not there is a significant imbalance when considering each individual case. It is to be assumed that the judge will follow previous French case law regarding article L. 442 – 6 of the Code de Commerce, at least in the case of contracts between merchants. Consequently, for example, in the case of distribution contracts, excessively long payment terms, unilateral price amendment clauses, unilateral penalty clauses and unilateral termination clauses without notice periods or compensation would be judged by the courts to constitute a significant imbalance (e.g. Cour d’appel de Rouen, 12 décembre 2012 n° 12 01 200 or Cass. Com 3 mars 2015, n° 14 10 907).
In the case of article 1171 of the Civil Code, it is a matter of a so-called “ordre public” provision, and thus mandatory French law, which is not subject to the parties’ discretionary powers. This applies even if the user of the General Terms and Conditions is based abroad, as for example in the case of internet firms whose General Terms and Conditions and their consequences are, however, intended to be applied in France (Tribunal de Commerce de Paris 7 mai 2015, n° 2015000040).
Explicitly excluded from article 1171 of the Civil Code is a possible imbalance in the case of General Terms and Conditions with regard to the primary purpose as well as the price (also see article 1168 of the Civil Code in this respect). As a result, in the case of General Terms and Conditions, these are not subject to judicial control and cannot, therefore, be judged to have not been written. However, in turn, it is not mandatory to apply this in the case of contractual relationships between merchants, where more specific provisions in the Code de Commerce also prohibit any possible imbalance between performance and price (see article L 442 – 6 of the Code de Commerce).
In the case of General Terms and Conditions, difficulties interpreting the contractual clauses are always to the disadvantage of the user (article 1190 of the Civil Code). This rule of interpretation had already been used by French case law prior to the contract law reform (Cass. 3 civ. 29 octobre 2013 n°12 22 498).
This provision does not apply to General Terms and Conditions used between merchants and consumers. In this case, the much more stringent and more specific provisions of French consumer law apply (above all article L. 132-1 et seq of the Code de la consommation).
Another exception can be found when new circumstances arise after the contract has been signed that lead to an imbalance in the contractual relationships and, in Germany, are covered by the concept that the basis of the transaction has ceased to exist. In this case, the more specific provisions of article 1195 of the Civil Code apply.
The provision of article 1171 of the Civil Code also only applies in the case of contractual obligations and not in the case of contractual statements without any further contractual consequences.
The more specific provision of article L. 442 – 6 of the Code du Commerce, which applies to contracts between merchants, does not, however, replace the general provision of article 1171 of the Civil Code, but rather is applied simultaneously.
This article has been prepared for informational purposes only. It is not a substitute for legal advice addressed to particular circumstances. You should not take or refrain from taking any legal action based upon the information contained herein without first seeking professional, individualized counsel based upon your own circumstances. The hiring of a lawyer is an important decision that should not be based solely upon advertisements.
Information by ALARIS AVOCATS