Business Contracts

Although Article 1591 of the Civil Code establishing the principle that the parties are free to determine the price of a sale has remained unchanged since the Civil Code was first enacted in 1804, contractual freedom was limited in the 20th century by the economic interventionism that followed the two world wars. Ordinance No 45-1443 of 30 June 1945 on price controls, which instituted a general sy …

Lawful price

Although Article 1591 of the Civil Code establishing the principle that the parties are free to determine the price of a sale has remained unchanged since the Civil Code was first enacted in 1804, contractual freedom was limited in the 20th century by the economic interventionism that followed the two world wars. Ordinance No 45-1443 of 30 June 1945 on price controls, which instituted a general system of price freezes and taxation under threat of criminal penalties, reflected this interventionist approach before it was repealed by Ordinance No 86-1243 of 1 December 1986 on freedom of pricing and competition, codified in Articles L. 410-1 et seq. of the Commercial Code. Article L. 410-2, paragraph 1, of the Commercial Code now states: “Except in cases where the law provides otherwise, the prices of goods, products and services covered by Ordinance No 45-1483 of 30 June 1945 prior to 1 June 1987 are subject to the free play of competition” .

Apart from regulating anticompetitive practices, certain provisions of the Commercial Code, such as those prohibiting the imposition of a minimum resale price or resale at a loss, have a direct influence on price-setting, subject to fines. Article L. 442-6 of the Commercial Code thus punishes with a fine of EUR 15,000 “the act by any person of imposing, directly or indirectly, a minimum level on the resale price of a product or good, on the price of a service or on a commercial margin”, while Article L. 442-5 imposes a EUR 75,000 fine on “any trader who resells or advertises the resale of a product in its unaltered state at a price lower than its actual purchase price”.

Furthermore, sales contracts containing an indexation clause must comply with the provisions of Articles L. 112-1 and L. 112-2 of the French Monetary and Financial Code. The first of these prohibits the automatic indexation of prices for goods and services, and declares void (unwritten) “any clause in any continuing agreement, in particular leases and rentals of any kind, providing for the inclusion of a period of variation in the index greater than the period elapsing between each revision”. According to the Court of Cassation , Article L. 112-1 of the Monetary and Financial Code, while not prohibiting the use of a fixed base index, prohibits any contractual arrangement involving a disparity between the index variation period and the time elapsing between two revisions. Article L. 112-2 also prohibits “any clause in statutory or contractual provisions providing for indexation based on the minimum wage (SMIC), on the general level of prices or wages, or on the prices of goods not directly related to the purpose of the agreement or to the activity of one of the parties” . According to the Court of Cassation , fixing the receivable in a foreign currency constitutes disguised indexation, within the meaning of this provision, which allows indexation only if it is directly related to the subject matter of the agreement or to the activity of one of the parties.

However, the law provides for two exceptions, allowing for unlimited price regulation by decree issued by the Conseil d'Etat, after consultation with the Competition Authority, “in sectors or areas where price competition is limited due either to monopoly situations or lasting supply difficulties, or to legislative or regulatory provisions” (Art. L. 410-2, paragraph 2 of the Commercial Code), as well as “temporary measures in response to crisis situations, exceptional circumstances, public disasters or manifestly abnormal market conditions in a given sector”, ordered by the government by decree issued by the Conseil d'Etat, after consultation with the Conseil national de la consommation, in response to excessive price rises or decreases (Art. L. 410-2, paragraph 3 of the Commercial Code).

Cass, 3e civ, 25 February 2016, LawLex202100004790JBJ, for a case handed down in relation to commercial leases, but which can be applied to sales.

Cass., 3e civ, 17 juillet 1972, LawLex202200000105JBJ, for an indexation clause applying to the balance of the sale price of a rural estate.

Cass. 1st civ. 11 October 1989, LawLex202200001998JBJ. Cf. Cass. 1re civ. 15 June 1983, LawLex202200000930JBJ, a promise by the purchasers of an immovable property located in France to pay part of the price in the national currency, but at the rate of a foreign currency, is not unlawful where the purpose of the payments in question is to repatriate abroad funds which have been withdrawn to finance the real estate transaction in France.

Business Contracts

21. Lawful price

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21. Lawful price

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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