Business Contracts

Abandoning the traditional view that the foundation of contract law lies in the - subjective - obligation of the parties to keep their promises, the revised text now emphasizes that a contract is first and foremost based on an - objective - exchange of goods or services, which results in a more efficient allocation of resources.
In this effects-oriented approach, the search for economic efficiency …

Towards an economic analysis of contract law

Article 1101 of the Civil Code defines a contract as an agreement between two or more persons to create, amend, transmit or extinguish obligations. 

The first classification proposed by the Code contrasts the bilateral contract (contrat synallagmatique) with the unilateral contract (contrat unilatéral). The concept of contract is inseparable from that of voluntary agreement. It derives from the Latin terms contractus and contrahere, meaning to bring together. Thus, in its simplest sense, a contract is an exchange based on the consent of the parties. 

Consensualism - as opposed to formalism - is expressly mentioned in Article 1583 of the Civil Code, which deems a sale to be “perfect” (parfait) i.e. complete once the parties have agreed on the object and the price. Contract law is also governed by the principle of freedom of contract, which gives the parties free rein to determine the obligations that bind them . This freedom leads to a multiplicity of contractual forms. To set the framework for these diverse forms, the legislator has established a classification in Articles 1105 et seq. of the Civil Code, inspired by the doctrine that defined different types of contract even before they were enshrined in law. Generally speaking, this classification distinguishes between contracts according to their type, content or purpose, conditions of formation, duration or the status of the contracting parties.

Article 1102 of the Civil Code enshrines the principle of freedom of contract, specifying that everyone is free to contract or not, to choose their co-contractor and the form and content of the agreement, within the limits, however, of the mandatary rules pertaining to public policy (ordre public).

Diversity of contractual forms

1) Nominate contracts/Innominate contracts

Article 1105 specifies that contracts, whether named or not, are subject to general rules. However, certain specific contracts may be governed by their own rules. Nominate contracts are those which have been specifically defined by the legislator and are subject to a special regime. These include leases, contracts for services ("contrat d'entreprise") and subcontracting. These contracts are governed in part by derogations from ordinary law, insofar as Article 1105 provides that general rules apply subject to special rules. In contrast, an innominate contract is one that is not legally defined and does not benefit from a specific regime. The distinction seems artificial, however, given that the principle of contractual freedom allows parties to create from scratch a form of agreement that suits their relationship. Moreover, contracts can change category. Certain initially unregulated contractual forms, such as leasing or the sale of a building to be constructed, which were initially innominate contracts, became nominate contracts once they had been regulated by the legislator. Moreover, although current Article 1105 refers to the existence or non-existence of a name, it emphasizes that contracts are subject to general rules which may be applied even in the case of a specific regime, if the latter is silent.

2) Synallagmatic (bilateral) contracts/unilateral contracts

Article 1106 defines a synallagmatic contract as one in which the contracting parties bind themselves reciprocally to each other . It is distinguished from a unilateral contract by the nature of the commitment. The absence of reciprocity in the parties' commitment is a condition of unilaterality . Indeed, Article 1106 considers that an agreement is unilateral when one person makes a commitment to another without any reciprocal undertaking. Reciprocity does not imply equivalence of benefits, unless required by law ( Art. 1168). Synallagmatic contracts based on reciprocity include sales, leases, exchanges and contracts for services. Unilateral contracts include loans, deposits and agency agreements. However, while the reciprocal or non-reciprocal nature of the commitment is the main criterion for distinguishing between synallagmatic and unilateral contracts, there are cases where this criterion is not sufficient . For example, legal scholars describe an “imperfect synallagmatic contract” as one which, although initially unilateral, changes its nature during performance, with the creditor of the principal obligation ultimately being bound by ancillary obligations. 

 This is the case with a bailment contract ("dépôt"), where the depositor, who does not enter into any commitment when the bailment is free of charge, may be obliged to reimburse the costs of preserving the thing deposited or losses caused by the safekeeping of the thing deposited (Art. 1947 Civil Code). Whether a contract is synallagmatic or unilateral has an impact on the rules of evidence and the penalties for non-performance of obligations. Proof of a synallagmatic contract requires compliance with the duplicate original rule laid down in article 1375 of the Civil Code. The text requires that the private document evidencing the contract must be drawn up in as many originals as there are parties to it. On the other hand, when a single party undertakes to pay another a sum of money or deliver a fungible good, it is sufficient for the private deed to include his or her signature and the written indication of the sum or quantity in words and figures. In addition, certain penalties for non-compliance with contractual stipulations, such as the right to withold performance defense (exception d’inexécution) or automatic rescission (résolution de plein droit), seem to be reserved for reciprocal commitments. Anticipatory breach presupposes that one of the parties has refused to perform its obligation in retaliation for the other's failure to do so, which is inconceivable in a unilateral contract. Similarly, recission (résolution), which may result either from the application of a resolutory clause or, in the event of sufficiently serious default, from notification by the creditor to the debtor, does not seem to apply to unreciprocated commitments, except in the case of judicial rescission (résolution judiciaire).

3) Contracts for valuable consideration/Contracts for no consideration

Article 1107 distinguishes between onerous and gratuitous contracts. A contract is onerous when each party receives a benefit from the other in return for the benefit it provides . It is gratuitous when the benefit is provided without consideration. Previously, the Civil Code defined a contract for valuable consideration as one in which one party obliges another to give or do something. At the time of formation of the contract, the consideration must be neither illusory nor derisory, on pain of being declared invalid (Art. 1169). This condition replaces the requirement for a lawful cause, which the Ordinance of 2016  abandoned in favor of that of consideration, closer to an economic vision of the contract. In principle, the requirement that a contract be onerous or gratuitous applies equally to synallagmatic and unilateral contracts . However, since the legislator has taken care to specify that a commitment is gratuitous when the party conferring the advantage neither expects nor receives any consideration, it is difficult to see in this case how he could be bound by a reciprocal commitment.

When each party undertakes to provide the other with a benefit equivalent to that received, the contract is commutative (contrat commutatif). As a general rule, commutative contracts are contracts for pecuniary interest, where the parties know the consideration for the benefit at the time of formation. Strict equivalence is not required. In effect, it is sufficient for the benefit to be considered equivalent. When the parties agree to make the effects of the contract, in terms of benefits and losses, dependent on an uncertain event, the contract becomes aleatory (contrat aléatoire). Aleatory contracts are generally of a more uncertain nature, as in the case of insurance contracts or life annuities, but they can also be aleatory as a result of the intention of the parties. In this way, a commutative contract can become aleatory. The classic example is that of a contract of sale entered into by the parties at their own risk, notably by stipulating a warranty disclaimer . An aleatory contract is also a contract for consideration, since even if the benefit depends on a contingency, there is a consideration, even if it is uncertain. The absence of contingencies can be likened to the absence of consideration, and leads to the invalidity of the contract, since Article 1169 requires consideration that is neither illusory nor derisory. On the other hand, the parties to an uncertain contract cannot invoke either mistake or inequality(lésion), since they have accepted the risk concealed by the uncertainty.

5) Consensual contracts/Solemn (formal) contracts/In rem contracts

In principle, contracts are consensual (Art. 1172, para. 1). They are formed by the mere exchange of the parties' consents, however expressed (Art. 1109, para. 1). The same applies to a sale or lease, which is formed by the parties' agreement on the thing and the price. There are, however, two exceptions to this principle. The validity of a contract may be subject to certain formal requirements laid down by law (Art. 1109, para. 2). In this case, the contract is solemn, and failure to comply with the required formalities renders it invalid, unless it can be rectified (Art. 1172, para. 2). As a general rule, contracts take the form of a written instrument , either an authenticated deed or a private signed agreement considered as the written document required by law . The “solemn” or formal nature of a contract can only result from the law, and not from the will of the parties. This formal protection is particularly well illustrated in business law, notably in the case of assignment of a contract . The second exception concerns in rem agreements, the formation of which is subject to the delivery of a thing (Art. 1109, para. 3 and 1172, para. 3). The existence of the contract, in addition to consent, is in this case subordinated by law to the delivery of the thing, which constitutes a condition of validity for its formation. A loan between private individuals constitutes a contract in rem , unlike a loan granted by a credit provider .

6) Negotiated contracts (contrats de gré à gré)/Standard form contracts (contrats d'adhésion)

A contract where the terms are negotiable between the parties is “de gré à gré”, whereas a contract whose clauses, determined in advance by one of the parties, are not negotiable by the other, is “d'adhésion” (standard form) (Art. 1110 Civil Code). This distinction, which originated in German law and was originally purely theoretical was incorporated into the Civil Code by the Ordinance of 2016. The “contrat de gré à gré” is a perfect illustration of the principle of freedom of contract that underpins contract law, and of the presumed equilibrium between parties who are free to negotiate the terms that bind them and take the place of law. Even before they were enshrined in law, standard form contracts existed in a variety of forms. These included insurance and certain distribution contracts. They were often viewed from the perspective of unfair terms or abuse of dependence, and consequently subject to specific provisions. Article L. 442-1, I, 2° of the Commercial Code makes it an offense to subject or attempt to subject the other party to obligations creating a significant imbalance in the rights and obligations of the parties, the main criterion for finding “subjection to” being the absence of any effective negotiation . Article L. 212-1 of the Consumer Code declares unfair any clause whose purpose or effect is to create a significant imbalance between the rights and obligations of the parties to the contract, to the detriment of the consumer. In 2016, the legislator drew on these rules to provide, in Article 1171, that in a standard form contract, any non-negotiable terms, determined in advance by one of the parties, which create a significant imbalance between the rights and obligations of the parties to the contract are deemed not to have been written. The question arises as to the relationship between these three provisions. While the coexistence of virtually identical provisions in the Civil Code and the Consumer Code may not seem problematic from the outset, insofar as the Consumer Code concerns only contracts concluded between professionals and consumers or non-professionals, the coexistence of Articles L. 442-1, I, 2° and 1171 is likely to raise issues of interpretation.  In effect, despite their different conditions for application, Articles L. 442-1, I, 2° and 1171 have the same objective: to sanction imbalanced contractual terms. There is therefore nothing to prevent the two provisions from being used alternatively, or cumulatively, in particular to claim damages for harm caused by the inclusion of voided (unwritten) clause in a contract. The first judgments handed down on the question of the interplay of the two sets of rules confirm that one can be applied when the conditions for the application of the other are not met. Thus, the inapplicability of Article L. 442-1, I, 2° to financial leases does not exclude the application of Article 1171, simply because the former is considered a special provision . 

Finally, Article 1190 of the Civil Code stipulates that, in case of doubt, the interpretation of a negotiated contract is to be made in favor of the debtor, against the creditor, and, in the case of a standard form contract, against the party offering it.

7) Framework agreements/Implementation agreements

A framework agreement defines the general characteristics of future contractual relations, the terms and conditions of which are set out in implementing contracts (Art. 1111 Civil Code). This type of contract, conceptualized by legal scholars and enshrined in the 2016 ordinance is particularly well illustrated in distribution law. An exclusive distribution contract is a framework agreement in which the parties are free to determine the content. They agree on the essential obligations, which will be embodied in a series of implementing contracts, such as contracts for sale or for the provision of services. The content of the agreement may be defined only in very general terms. Only implementation agreements set out a firm and precise offer, and thus progressively implement the overall objective set by the framework agreement.  Article 1164, which partially enshrines case law in this area, stipulates that in framework agreements, the parties may agree that the price is to be determined by one of them, with the onus on that party to justify the amount in the event of a dispute. This clarification places the burden of proof on the party setting the price, whereas previously it was on the party complaining of abuse. Abusive pricing is still punishable by damages or rescission of the contract.  If the implementing contract is a contract of sale, the price must be determined and designated by the parties, in accordance with Article 1591. If the contract is for the provision of services, the price may, in the absence of agreement between the parties prior to performance, be fixed by the obligee, who must justify the amount in the event of a dispute (Art. 1165).

8) Instantaneous performance contracts/Successive performance contracts

A contract in which the obligations are performed in a single operation is an instantaneous performance contract, whereas a successive performance contract is one in which the multiple operations are staggered over time (Art. 1111-1 Civil Code). A contract of sale is often an instantaneous performance contract, involving a single item paid for and delivered immediately. A lease or telephone subscription contract, on the other hand, is a contract for successive performance, with services rendered over time. The criterion of instantaneous performance - a single service - is contrasted with the quantity - several services - and temporality - staggering over time - of successive performance. However, the distinction is not always so clear-cut. Article 1111-1 specifies that a contract for instantaneous performance may concern a single service. Separate or identical services performed over a period of time may constitute a whole that must be supplied all at once. A contract may, on the other hand, be made up of instantaneous obligations to be performed over time.  Prior to its legal enshrinement in Article 1111-1 of the Civil Code, the Court of Cassation clarified the regime governing contracts of successive performance. It held that a contract in which no term is specified is not null and void, but constitutes an agreement of indefinite duration which either party may terminate unilaterally, provided they give reasonable notice . In this case, rescission applies only to the future, and not to the time during which the agreement was duly performed, unless the failure to perform or inadequate performance occurred from the outset. Article 1229 of the Civil Code now specifies that when the services exchanged could only find their usefulness through the complete performance of the contract that has been rescinded, the parties must return everything that they obtained to the other party. Where the services exchanged have become valuable in the course of the mutual performance of the agreement, there is no right to restitution for the period prior to the last service for which no consideration has been received; in this case, the rescission is considered to be a termination.

9) Fixed-term contracts/Indefinite-term contracts

Contracts may be concluded for a fixed term. In this case, each party undertakes to perform the contract until its term , and renewal cannot be required (Art. 1212 Civil Code). The term may be uncertain, but must depend on an event whose occurrence is certain . If, before expiry, the parties so wish, the fixed-term contract may be extended, provided this does not prejudice the rights of third parties (Art. 1213). In the event of renewal by operation of law or by agreement of the parties, a new contract with identical content is created, but for an indefinite term (Art. 1214). If, on expiry of the term of the fixed-term contract, the parties continue to perform their obligations, the contract continues by tacit renewal, with the same effects as renewal (Art. 1215). The fixed-term nature of the contract does not, de facto, rule out early termination. In effect, such termination may be provided for by law, as in the case of a lease or agency agreement, or be based on a sufficiently serious breach of obligation by the other party, as provided for in Article 1224 of the Civil Code. Contracts may also be entered into without a fixed term. As perpetual commitments are prohibited (Art. 1210), either party may terminate the contract at any time, subject to observing the notice period stipulated in the contract or, failing this, a reasonable amount of time (Art. 1211). In principle, a decision to terminate a contract does not have to state the reasons on which it is based, as long as notice is given . However, the courts do review the reasonableness of the notice period, even if contractually agreed . A provision setting a notice period that is too short in relation to the duration of the relationship will be rejected by the courts .

Certain contracts are entered into on a personal basis. In such cases, the personality of one of the parties is considered essential, due to his or her particular aptitudes or the nature of the service expected of that person. This is the case for gratuitous contracts, but also and above all for agency agreements or distribution contracts such as exclusive or selective distribution  or franchises. Intuitus personae may be based on the objective or subjective qualities of the co-contractor. In the field of distribution, the principle has been established of the freedom to choose one's co-contractor, provided that the criteria used are specific and objective . This right has been expressly enshrined in article 1102 of the Civil Code since the reform introduced by the 2016 ordinance, which states that everyone is free to choose their co-contractor. Nor does contractual good faith require the head of a quantitative selective distribution network to give reasons for refusing approval . However, a breach of intuitus personae may justify termination of the contract. For example, a sales agent who fails to inform the principal of his manager's resignation, even though the agency contract contains an intuitus personae clause which makes such events subject to approval, is engaging in serious misconduct . Similarly, the immediate termination of a dealership agreement during the notice period is justified when the dealer has breached the intuitus personae clause by failing to inform the supplier of its sale to a third party . Finally, under Article 1134 of the Civil Code, a mistake as to the essential qualities of a person constitutes grounds for invalidity of a contract concluded intuitu personae.

Cass. com., 8 November 1972, LawLex202200002087JBJ, which held that a promise relating to the sale of a business whose key terms do not contain, in return for the commitment to sell, a correlative commitment to buy, constitutes not a bilateral promise of sale, but a unilateral promise of sale.

Cass. 1re civ, 12 July 2006, LawLex202400001571JBJ; Cass. 3e civ, 26 March 2003, LawLex202300002646JBJ, which reiterates that a contract is unilateral when one or more persons are obliged to one or more others, without there being any commitment on the part of the latter.

Cass. 1re civ, 7 March 2006, LawLex202200001413JBJ, which considers that a loan which is not granted by a credit institution is a real contract (in rem) which presupposes the delivery of a thing.

Cass. 1re civ, 28 March 2000, LawLex202200001412JBJ, which holds that a loan granted by a credit professional is not a real contract.

CA Paris, 20 December 2017, LawLex201700002134JBJ.

Cass. com. 26 January 2022, LawLex202200000629JBJ

Cass. com., 8 February 2017, LawLex202100005806JBJ, which grants each of the parties the possibility of unilaterally terminating the successive performance contract.

Cass. com. 12 November 1996, LawLex200200005615JBJ.

Cass. com. 6 November 2007, LawLex202100004459JBJ, which considers that where the term of a shareholders' agreement is not affected by any term, even an uncertain one, since it provides that the agreement will apply for as long as the undertakings or their substitutes remain together as shareholders, the agreement must be recharacterized as a contract of indefinite duration.

Cass. com. 1 July 2003, LawLex200300002868JBJ.

CA Paris, 16 October 2008, LawLex200800001896JBJ.

CA Lyon, 10 April 2003, LawLex200300002497JBJ.

Cass. com. 8 November 1972, LawLex202200002087JBJ, which considers that although an agreement concerning reciprocal obligations is bilateral in nature, it does not constitute a bilateral promise to sell, insofar as these obligations are not duly symmetrical.

Cass. com, 1 March 2011, LawLex201100000370JBJ.

CA Dijon, 1 April 2004, LawLex200400000738JBJ.

CA Paris, 23 October 2019, LawLex201900001273JBJ.

Cass. com, 29 June 2022, LawLex202200003672JBJ.

CA Paris, 11 May 2022, LawLex202200002496JBJ.

Cass. com., 16 December 2014, LawLex202200006904JBJ, which holds that a deed of partition, which includes a consideration, cannot be characterized as a gratuitous act.

Ordinance No 2016-131 of 10 February 2016.

For an example of a unilateral contract for valuable consideration, See Cass. 1re civ. 5 April 2005, LawLex202200004056JBJ, which presumes that a contract for the storage of a vehicle with a garage owner, ancillary to a contract for uservices, is onerous.

See for an ex. Cass. com, 21 November 2018, LawLex202300008877JBJ.

The same is true of pledges on tangible movable property, which are completed by a written document (Art. 2336 Civil Code). Prior to the Ordinance of 23 March 2006, a pledge belonged to the class of real contracts.

Cass. 1re civ, 11 July 2018, LawLex202200003507JBJ.

An agency agreement for the purchase of advertising space must be in writing. The assignment of corporate rights or intellectual property must be in writing.

Types of contracts

In its report to the President of the Republic  the French government justifies the reform of contract law by the economic necessities associated with globalization, and in particular the World Bank reports which present French law as complex, unpredictable and unattractive. The aim of the reform is therefore to make the law more accessible and easier to understand, while reinforcing consensualism, which is conducive to economic exchanges and the protection of weaker parties.

Conceived at a time when France was dominated by the idea of liberalism, French contract law was governed by fundamental principles common to all Western legal systems, all of which were favorable to economic activity: freedom of contract, the binding force of the contract, neutrality and the role of the courts. Covering some 300 articles, the reform of contract law has now altered this balance.

A synthesis of the theoretical work carried out by Professors Catala (2005) and Terré (2013), the Ordinance of 10 February 2016 is also inspired by the practice of contract law. The reform aims to make the law of obligations clearer, more accessible, more efficient and more attractive, and to strengthen the protection of the weaker party. In addition to codifying case law precedents, the reform rationalizes the structure of Book III of the Civil Code by defining and classifying contracts that have emerged from doctrine and practice (framework agreements/implementation agreements, contracts of successive performance, standard form agreements). It introduces a section dedicated to contract formation, notably pre-contracts (unilateral promise of sale, pre-emption agreement), the concept of caducité (voidance) and the distinction between relative and absolute invalidity (nullité).

The reform has brought in a number of significant innovations. Article 1112 of the Civil Code establishes the principle of freedom of negotiation. This freedom is, however, limited by the obligation for negotiators to conduct them in good faith. Article 1104 stipulates that good faith must govern not only the performance of the contract, but also its negotiation and formation. However, the introduction of the obligation of good faith at the formation of the contract raises the question of its relationship with the issue of vitiated consent.

Article 1112-1 of the Ordinance of 2016 also introduces a general pre-contractual duty to inform, which, as a matter of public policy, cannot be limited or waived by the parties. The duty to inform covers all information that has a direct and essential connection with the contract. The criteria of legitimate ignorance of the information and trust in the contracting party set out in Article 1112-1, however, render the duty to inform subjective. They require the debtor of the obligation to inform the co-contractor of the information that determines his consent, and to find that information. The generalization of the duty to inform to all contracts therefore raises the question of coordination between ordinary civil law and special laws, while at the same time creating a risk of making the assessment of pre-contractual information obligations imposed by special laws more subjective.

In Articles 1113 to 1122, the text enshrines most of the principles developed by case law at the origin of the rules governing offer and acceptance. The theory of issuance, according to which the issuance of the acceptance renders the contract whole (parfait), is abandoned in favor of the theory of reception. The contract is concluded as soon as acceptance reaches the offeror. The regime governing unilateral promises has been strengthened. While the withdrawal of an offer cannot now give rise to the forced formation of a contract, this is not the case for the revocation of a unilateral promise as defined in Article 1124, paragraph 2 of which stipulates that revocation during the time allowed for opting in does not prevent the formation of the promised contract.

The ordinance also extends duress, which vitiates consent, to the abuse of a situation of dependence in which the co-contractor finds him/herself. In addition to case law equating the abusive exploitation of a situation of dependence with duress, Article 1143 of the Civil Code covers all cases of dependence. As the notion of a state of dependence is not defined, it is now feared that the field of application of  duress could be extended without limit, to the detriment of small undertakings perceived as dependent partners.

The fight against unfair terms is also one of the major innovations of the 2016 ordinance. Under article 1171, any clause determined in advance by one of the parties, which creates a significant imbalance between the rights and obligations of the parties, is deemed unwritten in all standard form contracts. The introduction of the notion of unfair contract terms into the Civil Code raises the question of how this new regime will fit in with existing rules on consumer law and restrictive practices. While the risk is lower under consumer law, which offers greater protection by providing a list of black (prohibited) and grey clauses (not automatically unfair), it is higher for those likely to invoke both ordinary civil law and restrictive practices law. Initial judgments have confirmed that one set of rules can be applied when the conditions for applying the other are not met .

In the final analysis, the reform presents a mixed bag in practice, as the necessary and positive modernization of the law is overshadowed by the ideological choice of legal protectionism and greater judicial intervention. The new law undermines the binding force of the contract at every stage of the contractual process, with, at the formation stage, the generalization of the principle of good faith, the introduction of a pre-contractual duty to inform, the equation of any abuse of dependence with duress, and more generally, the introduction of a genuine option to call the contract into question, with revision for unforeseen circumstances and the deeming unwritten of any clause creating an imbalance between the rights and obligations of the parties in standard form contracts.

Report to the President of the Republic on the Ordinance of 10 February 2016 No. 2016-131 reforming the law of contracts, the general regime and proof of obligations, OJ 11 February 2016.

CA Paris, 17 March 2023, LawLex202300004376JBJ.

Reform of contract law

Abandoning the traditional view that the foundation of contract law lies in the - subjective - obligation of the parties to keep their promises, the revised text now emphasizes that a contract is first and foremost based on an - objective - exchange of goods or services, which results in a more efficient allocation of resources.

In this effects-oriented approach, the search for economic efficiency is the main, if not the only, objective. Thus, what is efficient when a contract is concluded will no longer necessarily be so when it is performed. This reasoning leads to a veritable Copernican revolution: non-performance may be more efficient than performance if both parties gain and no one loses, in which case the parties must be allowed to opt out of the contract.

The enshrinement of the theory of unpredictability in civil law, already accepted in administrative law where it is explained by reasons specific to the field, is a perfect illustration of this reasoning. Article 1195 of the Civil Code now enshrines the possibility of revising agreed terms, in particular price, in the event of a change in unforeseeable circumstances.

 The introduction of economic reasoning is clearly not without consequences in terms of legal certainty for the parties, which many commentators feel is no longer sufficiently guaranteed. Despite the three stages provided for in the new text, ranging from the parties' mutual agreement to the court's intervention to achieve a revision, the conditions of unforeseeability appear to be insufficiently defined. A number of questions remain: what type of circumstances are involved - economic, legal, technical? How should unforeseeability be assessed? Should we refer to force majeure (acts of God) as defined in Article 1218, which is similar to an event beyond the debtor's control, which could not reasonably have been foreseen when the contract was concluded, and whose effects cannot be avoided by appropriate measures, preventing the debtor from performing his obligation? When can performance be considered excessively onerous?

The question also arises as to the desirability of giving the court a discretionary power of revision at the initiative of one of the parties. These uncertainties - inherent in the economic analysis of law - explain why the legislator has chosen to confer only a limited scope to the law: as the text is of a suppletive nature, it can be set aside by an acceptance clause for the risk of unforeseeability, or arranged either by an intangibility or dispossession clause under Article 1195, or by a renegotiation or safeguard clause.

The aim of the new legislation is to create a clear, effective legal framework that is adapted to the challenges of a globalized, ever-changing economy, while at the same time proposing solutions to ensure a balance of rights and obligations between the parties.

However, it turns out that by protecting the supposedly weaker party, notably by treating abuse of dependence as duress, by reinforcing judicial control over price fixing, by introducing a new regime for unfair terms, by recognizing unforeseeability or generalizing the requirement of good faith, the new law of contracts has opted for an administered economy based on contractual solidarity, to the detriment of the market economy and freedom of contract that inspired the 1804 Code, even if the Civil Code still contains liberal provisions, such as Article 1102 on freedom of contract.

It is a reflection of the doctrinal trend that has been developing in France for several years in favor of contractual solidarity. According to its proponents , contractual solidarism consists in a requirement of civic-mindedness, which implies, for each contracting party, taking into accoubtconsideration of the legitimate interests of his co-contracting party, and which is based on the ideas of altruism, decency, coherence and cooperation. The duty imposed on contracting parties to exercise the rights and powers conferred on them by law or contract, with due regard for the legitimate interests of others, is particularly relevant in contractual relationships of dependence, marked by inequality between the parties. Such situations may derive from the power granted to the dominant contractor to unilaterally determine the content of the contract, or from the fact that the relationship between the parties is long-term, gives rise to a community of customers and is based on an exclusivity clause. The obligation to apply the law or the contract while respecting the legitimate interests of others leads them to recommend that the court interpret and apply legal rules and contractual stipulations while systematically protecting the supposedly weaker party, and even further, that the law be amended so that a public policy to protect contracting parties is truly established. Under the guise of solidarity, the aim is actually to increase the protection of the presumed weaker party in the contractual relationship.

The implementation of contractual solidarity actually leads to contractual egoism, and bears the seeds of the very negation of the rule of law. The rights of the presumed stronger party are systematically sacrificed to those of the presumed weaker party. This unequal treatment is all the more unfair in that the situation of dependence and flagrant inequality between the parties in the conclusion and performance of contracts, which is alleged to justify it, does not always reflect reality, and is constantly changing over time.  Above all, the temptation to adopt a collective and solidarity-based approach reflects a reflex of withdrawal and protectionism characteristic of an ageing or declining society, which systematically sacrifices new, younger and more dynamic entrants to incumbents. In the final analysis, contractual solidarity appears to have very little to do with solidarity: the solidarity it advocates is a one-way street.

The risk is that the new law will be a source of legal uncertainty. 

For example, with the entry into force of Article 1171 of the Civil Code, the law on unfair terms, which in practice was mainly confined to relations with large retailers and applied much less severely than in other areas, is likely to be extended and applied with greater rigor . Similarly, the inclusion of unforeseeability in our ordinary civil law has had a major impact on the law of commercial practices. According to the Commission for the examination of commercial practices (Commission d'examen des pratiques commerciales), the refusal to include a contingency clause requested by the partner could constitute a significant imbalance. This broad interpretation has led to the general exclusion of the unpredictability mechanism in all contracts entered into after 1 October 1016.

In Cass. com. 15 January 2002, LawLex200200005004JBJ, the Cour de cassation took a small step towards the theory of contractual solidarity (MAZEAUD, La bataille du solidarisme contractuel : du feu, des cendres, des braises).

From contractual freedom to contractual solidarity

The French government has entrusted a working group of academics and practitioners with the task of drawing up a reform of special contracts, including contracts of sale, contracts for services, leases and agency agreements. The aim of the reform is to modernize the rules applicable to these contracts, in particular by enshrining the solutions developed by case law, and to bring them into line with the new law of contracts . The new texts also aim to reinforce contractual freedom. Certain provisions are thus suppletive of intention .  The preliminary draft confirms the liberal approach to pricing. The sale price is freely agreed by the parties, and the court cannot substitute itself for the parties in defining the price or imposing a method of determination other than that provided for in the contract (Art. 1603). The text enshrines the principle that a promise is a binding sale when the parties agree on the thing and the price (Art. 1587) , along with the entire system of bilateral promises developed by case law. The definition of the seller's obligation to deliver has been simplified. New Article 1619 classifies delivery as the act of placing the property sold at the disposal of the buyer , who is obliged to take possession of the property (Art. 1651). The translative effect of the sale is specified in Articles 1609 et seq. Article 1609 reiterates the case law handed down under current article 1583 of the Civil Code. It stipulates that ownership of the property sold vests in the buyer vis-à-vis the seller, as soon as the contract is concluded, even if the property has not yet been delivered or the price paid, and provides that the parties may agree to delay the transfer of ownership until delivery of the property or payment of the price.

One of the major innovations is the unification of the warranty against latent defects and liability for product non-conformity (Art. 1641). 

Moreover, the presumption on the part of the professional should no longer be irrebuttable, contrary to the previous case law . The likening of conformity to contract specifications to a latent defect redefines the seller's obligations, on the one hand, to deliver and, on the other, to guarantee against defects affecting the good. Case law has in effect built up the theory of the obligation of delivery in conformity on the basis of the current Article 1604, non-conformity being understood as a difference between the thing delivered and the characteristics agreed with the buyer in the contract. As the preliminary draft stipulates that the seller, as part of his obligation to deliver, is henceforth obliged to express clearly what relates to the qualities and characteristics of the good being sold (Art. 1617), the question arises as to whether the warranty is to be understood restrictively and aimed primarily at this obligation, or is to be understood broadly and include all the specifications of the contract, in particular the place and time of delivery agreed between the parties.

The new version enshrines the agency agreement/brokerage distinction, accepted in practice, under Article 1986. 

It attempts to settle the question of dual agency by providing that an agent may receive power of attorney from each of the parties to the main contract if they have given their mutual consent (Art. 1989). Article 1996 also specifies that, beyond the performance of his duties, the agent must declare to the principal any direct or indirect conflict of interest of which he cannot legitimately be unaware. Contrary to case law , new Article 2009 stipulates that the principal must be answerable to the contracting third party for the agent's fraud or duress.

Lastly, the draft reformulates the contract for services (contrat d'entreprise), and in particular the conditions governing its formation. It stipulates that the contract is formed as soon as the parties agree on the work to be performed (Art. 1758), even in the absence of any prior agreement on the price (Art. 1760). The draft excludes abuse in the setting of price, by removing from current Article 1165 the rules applicable to the setting of price in contracts for the provision of services, and substituting judicial determination, in the absence of agreement between the parties, on the basis of the quality of the work, the legitimate expectations of the parties, usage and any other relevant factor (Art. 1760, para. 2).

In the definition of contract of sale, the verb “to pay” has been replaced by “in consideration of the price”, the concept of consideration having become central to the new law of contracts.

With regard to leases, new Article 1726 states that, in the absence of a clause to the contrary, the lessor guarantees any apparent defects. Article 1730 lists the lessee's obligations, specifying at the very end “unless otherwise stipulated”. New Article 1767 states that the contractor may subcontract “unless otherwise stipulated”. Article 1994 excludes tacit renewal of a fixed-term agency agreement, “unless otherwise stipulated”.

Cass. 3e civ, 18 February 2009, LawLex202100006408JBJ.

Current Article 1604 states that delivery is the conveyance of the thing into the control and possession of the buyer.

Cass. 1re civ, 16 December 1992, LawLex200500005463JBJ, according to which the professional seller is presumed to be aware of latent defects in the thing sold, even if they are undetectable.

Cass. ch. mixte, 29 October 2021, LawLex202100006463JBJ, which holds that while the principal is contractually liable for losses suffered as a result of the non-performance of commitments entered into by his agent within the limits of the agency agreement conferred, the agent's fraud in the exercise of his agency engages the principal's extra-contractual liability only if he has personally committed a fault, which it is for the victim to establish.

Business Contracts

4. Towards an economic analysis of contract law

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Les notions juridiques connexes

4. Towards an economic analysis of contract law

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Les notions juridiques connexes

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