The French civil code is dead, long live the French civil code!

_DSC2416 Violaine MOTTEOn 1 October 2016, the 212-year old French civil code adopted in 1804, ceased to exist, and a new French civil code entered into force, in application of an executive Order of 10 February 2016.

For over 200 years, the core provisions of the French civil code concerning contract and tort have remained essentially unchanged.

The reform introduces a complete reshaping of the provisions of general contract law and law of evidence. (The ones ruling torts will also be reshaped later). Such work is a response to the changes in contractual practices and the emergence of new types of contracts, such as distribution contracts or electronic contracts. In practical terms, commercial parties should review their general terms and contracts due to be negotiated or renewed after 1 October 2016.

Should the wording of some articles remain unchanged, the numbering is now different. The reform has codified many decisions of the courts but also, in parallel, innovated on major aspects of French contract law, such as:

  • the soft “removal” of the notion of “cause of the contract” since reference is made to a “lawful and clear content”,
  • the new unilateral powers of creditors in case of non-execution by the debtor,
  • the lapsing of a bid when the bidder deceases before its acceptation,
  • the alignment of the regimes ruling the assignment of receivables and subrogation.

Some of its major innovations are highlighted here below:

  • Hardship provisions: the new French civil code brings a complete revolution to a well-established court-case of the French Supreme court (“Cour de Cassation”), by introducing in its article 1195 the “unforeseeability” (“imprévision”) theory, in case 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. In such situation, this party can ask for a renegotiation of the contract, and should the other party not agree, the judge may not only “terminate”, but also “revise” the contract.

However, such revolution is relative, since parties can agree to derogate these provisions that are not mandatory.

These provisions are to be read together with the new article 1121 of the French civil code that introduces the “economic impossibility to execute an obligation”. The debtor can now run away from its obligation, not only when such execution has become impossible, but also when there is “a clear disproportion between the costs induced for the debtor and the benefit brought to the creditor.” This last criterion is quite imprecise and will certainly be subject to the interpretation of the courts on a case-by-case approach.

  • Good faith: until now, the obligation of “good faith” was only imposed on contracting parties in the “performance” of their contract. Now, according to article 1104 of the new French civil code, this obligation is also extended to the “negotiation” and the “conclusion” of the contract.

It should be noted that parties cannot derogate to such provisions since they are specifically stated to be mandatory (“ordre public”).

  • Significant imbalance between the rights and obligations of the contractual parties: the new French civil code provides in its article 1171 that such imbalance shall be deemed to be of no effect.

Until now, such imbalance was censured only in consumer contracts, applying an EU Directive 93/13/EEC on unfair terms in consumer contracts. Now, the court’s right to censure clauses creating a “significant imbalance”, is now extended to business-to-business relations.

However, such innovation is relative, since it is limited to “standard form contracts” (“contrat d’adhésion”) defined in article 1110 as a contract where the “general conditions, removed from negotiations, are determined in advance by one of the parties”. Such limitation is a response to the criticism generated by the initial project that intended to apply such provisions to all kinds of contracts, invoking the principle of contractual freedom.

The new French civil code profoundly changes several aspects of contract law. It should make French law more accessible and transparent, and allow a better international competitiveness and flexibility for companies in cross-boarder trade relations.

Violaine MOTTE