Business Contracts

New Article 1195 of the Civil Code, resulting from Ordinance No 2016-131 of February 10, 2016 on the reform of the law of contracts, the general system and proof of obligations, enshrines into substantive law the theory of unforeseeability (imprévision), which allows agreed terms, in particular the price, to be revised in the event of a change in unforeseeable circumstances. 

This provision states: “If a change in circumstances which were unforeseeable at the time of conclusion of the agreement renders performance excessively onerous for one party who had not agreed to assume the risk, that party may request renegotiation of the agreement from its co-contractor. During the renegotiation, the contracting party continues to perform its obligations. If renegotiation fails or is refused, the parties may agree to terminate the agreement, on a date and subject to conditions to be determined by them, or ask the court, by mutual agreement, to adapt the agreement. Failing mutual agreement within a reasonable time-limit, the court may, at the request of one of the parties, revise the agreement or terminate it, on the date and subject to the conditions set by it”.

However, it was not a matter of course that unforeseeable events should be included in French civil law. At the end of the 19th century, in the famous Canal de Craponne ruling , the Court of Cassation opposed the application of the theory of unforeseeability in contract law, giving precedence to the binding force of the agreement and its inviolability , over the intervention of the court, when, on the contrary, the Council of State recognized it some time later under administrative law . 

In application of former Article 1134, paragraph 1, now Article 1103 of the Civil Code, which stipulates that “legally formed agreements are binding on those who have made them”, the civil courts maintained this position for a long time before gradually adapting it to the concept of good faith in the performance of the agreement. The Commercial Chamber of the Court of Cassation thus held that a supplier who, in the absence of any event of force majeure, deprives the debtor of the exclusive supply obligation of any possibility of charging competitive prices, is not performing the agreement in good faith . In the same spirit, the Court has held that the principal of a sales agent must enable the agent to perform his mandate by taking concrete measures to enable the agent to charge competitive prices . In addition, fairness requires the franchisor to negotiate with the franchisee and propose acceptable conditions, should the anticipated development plan prove difficult to achieve . The Commercial Chamber has also relied on the provisions of former Article 1131 relating to cause  to censure a Court of Appeal for failing to take unforeseen circumstances into account, by not investigating whether the changing economic circumstances, and in particular the rising cost of raw materials and metals and their impact on the cost of spare parts, could be such as to destabilize the general balance of the agreement intended by the parties at the time it was signed, and deprive the commitment undertaken of any real consideration .

Prior to its adoption by the legislature, unforeseeability was assessed so strictly that it was rarely upheld, with courts requiring, for example, proof of a situation that would have fundamentally altered the balance of obligations  or dismissing unforeseeability on the grounds of imprudent or negligent assessment of the financial imbalance existing at the time the contract was concluded .

Since its incorporation into new Article 1195 of the Civil Code , the legal concept of unforeseeability has enjoyed some success in the wake of the coronavirus pandemic, particularly in the area of commercial leases. Major conflicts and legal showdowns involving this concept have also pitted alternative electricity suppliers against EDF, broadcasters against sports rights holders or, on a more general level, buyers against service providers or suppliers against customers, whether consumers or professionals.

Cass. civ., 6 March 1876: “In no case is it for the courts, however equitable their judgment may appear, to take into consideration time and circumstances in order to amend the parties' agreements and substitute new terms for those which have been freely accepted by the contracting parties”.

In application of the adage “Pacta sunt servanda” (Agreements must be kept).

For an application of Article 1195 of the Civil Code, See T. com. Évry, 3eme ch., 17 January 2018, LawLex202000001910JBJ, which held that the vacating of the premises provided for in the agreement for the transfer of a business, which occurred more than one month late following a summons for interim measures and a judgment, constituted a change not provided for in the agreement which made its performance excessively onerous for the transferee, so that the stipulations should be revised, by shifting the start of payment by one month.

Cons. d'Et., 30 March 1916, Gaz de CA Bordeaux.

Cass., com., November 3, 1992, LawLex200200005951JBJ; conversely, See CA Paris, Pôle 5 ch. 4, 26 November 2017, LawLex201700000826JBJ: in the absence of bad faith on the part of the franchisor, a change in the economic and regulatory conditions under which the franchised activity is carried out does not trigger any obligation to renegotiate.

Cass. com., 24 November 1998, LawLex200200005154JBJ.

Cass. com., 15 March 2017, LawLex201700000539JB.

The concept of cause, considered too vague, was removed from the Civil Code by the reform of contract law. Current Article 1128 of the Civil Code now makes the validity of an agreement conditional on the parties' consent, capacity to contract, and henceforth on “a lawful and specific content” (contenu licite et certain).

Cass. com., 29 June 2010, LawLex202200001230JBJ.

Cass. com., 17 February 2015, LawLex202200001229JBJ, holding that an undertaking cannot refuse to deliver appliances it has undertaken to supply at the agreed prices by claiming an increase in the cost of raw materials and the correlative need to increase the price of the goods invoiced if it does not provide proof of an increase in the cost of performing its obligations under the agreement, nor of a situation which would have fundamentally altered the equilibrium of the performances and would constitute a case of unforeseeability or hardship.

Cass. 1re civ, 16 mars 2004, LawLex202200001248JBJ, holding that a party cannot base its sudden and unilateral withdrawal on the structural imbalance of the contract which, due to its negligence or recklessness, it was unable to perceive.

25. Revision for unforeseeability