France: Legal Revolution In France – Civil Law Reforms (Or Napoleon's Second Coming)

Executive Summary This alert draws attention to the approaching entry into force of the new French civil code. This will be of interest to all parties with French law-governed agreements or that do business in France – especially regarding contracts that are due for renewal after 1 October 2016. Terms and conditions should be reviewed and, where necessary, legal advice taken on some of the innovations under the new law.

Introduction For over 200 years, the core provisions of the French civil code concerning contract and tort have remained essentially unchanged. A French civil lawyer from the immediate post-Napoleonic age, wielding his civil code from that time, would not feel out of place today arguing a claim for breach of contract or advancing a general tort claim.

But from 1 October 2016, the putative Napoleonic lawyer will no longer be able to cite the long-trusted articles in the civil code fashioned by his peers. Even where the articles still exist, they will have a different number. Were he to return in October 2016, the Napoleonic lawyer would first need to return to school.

This is because on 10 February 2016, by executive order, a new civil code was passed into law which contains a complete reworking of the provisions of general contract law. In a second phase, those parts of the civil code addressed to torts will also be reworked.

In principle, the new civil code introduces but few innovations, while at the same time enshrining certain case law principles developed by the courts and otherwise maintaining the legal acquis from the old civil code. In theory, the new code should not overly disturb the legal status quo. But the devil will be in the detail. And account will need to be taken of the innovations introduced by the new code. Some of which are of potentially broad reach.

As a result, those contracting under French law or with French counterparties will be well advised to assess the potential impact of this legislative change in advance of 1 October 2016, when the new civil code comes into force. This will apply in particular for contracts due to be renewed after that date.

Discussion Those following developments in this area have broken down the provisions of the new civil code into three categories – (i) innovations, (ii) enshrining of case law into statute law and (iii) maintaining of the status quo. In this alert, we highlight some examples of the innovations introduced by the new civil code.

(a) Good faith: Under the old civil code, good faith was always an obligation imposed on contracting parties in the performance of their contract. Under article 1104, contracts must now be "negotiated, concluded and performed in good faith". The requirement of good faith in the formation of contracts is new. Article 1104 is also one of the relatively few provisions that is specifically stated to be mandatory ("d'ordre public"). It cannot be contracted out of.

(b) Hardship provisions: French law has long been held up as an example of an exceptional civil law country that adheres to strict application of contracts. No quarter is given for unforeseen events that might render performance of a contract significantly more onerous for one party. Thus, unless contractual provision is made through use of a hardship clause, or performance becomes impossible in circumstances where force majeure applies, the parties are bound to perform, irrespective of any hardship caused.

This feature of French law, some argue, is evidence that 'hardship' is not a general principle of international law, despite it featuring in the UNIDROIT Principles of International Contracts.

That argument will now be weakened. In a complete break with past tradition, the new code introduces the notion of "imprévision" into civil law (article 1195).

Under the new imprévision approach, if circumstances that were unforeseeable at the time of the contract make performance of the contract "excessively onerous" for a party, and that party had not assumed risk for the same, then the judge may revise or terminate the contract at the request of that party.

There was considerable, and at times heated, debate as to whether the notion of imprévision should be allowed into the new civil code and, if so, in what form. The wording which was finally adopted changed from the final draft. In the final draft, the contract could be terminated upon demand of a party, but not revised. Article 1195, as enacted, provides not only for termination but also for judge-ordered revision of the contract, upon demand of a single party, and only after an obligatory (and necessarily failed) negotiation stage.

It should be noted that the new imprévision provisions are not mandatory. Parties can therefore agree to exclude them.

(c) Standard form contract ("contrat d'adhésion"): The new civil code defines the notion of a "standard form" contract (article 1110). It is defined as a contract where the "general conditions, removed from negotiations, are determined in advance by one of the parties". Any clause in such a contract that creates a "significant imbalance" between the rights and obligations of the contractual parties shall be deemed to be of no effect (article 1171).

Thus where a contract is found to be a contrat d'adhésion, individual clauses in that contract are vulnerable to censure by the courts where they are found to create a "significant imbalance".

The power of the court to censure clauses already exists, and continues to exist, for consumer contracts. In the consumer context, the law is derived from EC Directive 93/13/EEC on unfair terms in consumer contracts.

The innovation here is that the court's right to censure individual clauses, where such clauses create a "significant imbalance", will now extend to business-to-business contrats d'adhesion.

Comments The new civil code is a welcome development. It should make French law more accessible and transparent. One of the drivers for reform was international competitiveness. There is little doubt that the significant work put into the new civil code will assist in that regard. The choice of legislative process, via executive order rather than the usual parliamentary legislative process, has given the drafters the very best chance of achieving overall coherence in this wholesale reformulation process.

On the other hand, the enshrining of case law principles perhaps goes too far by introducing inflexibility. It is fair to say that there is much enshrining in the new civil code, and clear choices have been made. When one carries out wholesale reformulation of the civil code every 200 years, is it wise to enshrine case law into statute law in this way? This is a real question, particularly within a legal tradition where stare decisis, in theory, does not apply and where judges are required to apply statute, in theory, without interpretative gloss.

In practical terms, and if only because of the three innovations described in this alert, commercial parties with French affairs should be reviewing their general terms and contracting practices, in anticipation of the 1 October 2016 entry into force of the new civil code.

Should a party be contracting out of the new hardship provisions? Will current contracting practices lead to a party's contracts being classified as contrats d'adhésion? If so, are any clauses in the general terms and conditions vulnerable because they create a "significant imbalance"? These and other questions need to be asked if unpleasant surprises are to be avoided or, at least, foreseen and minimized.

Over the coming years, the courts and users of French law will need to feel their way in this new environment. How French judges react to their new found powers to revise contracts will be an area of special interest, particularly given that the area of remedies under French law is not traditionally one where flexibility abounds. Overseas and arbitral precedent may be useful here to help guide the courts in formulating a hopefully principled approach.

For now, the starter gun is firmly loaded on what will undoubtedly be a new and interesting lease of life for Napoleon's long-lasting legal legacy – the civil code. For those who practice in former French colonies, the French civil code is about to become a less familiar friend and guide. For those who wish to survive and thrive in this new legal landscape, it is time to sharpen the pencils and prepare for the second coming of the Napoleonic Code.

How Reed Smith can assist Reed Smith can assist clients through this transition and, for example, adapt their general conditions of business to accommodate and address the new legal landscape in advance of its entry into force on 1 October 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.