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Fears over French contract law rewrite are largely overblown, says expert

A proposed revision of the French civil code is causing concern about the validity of commercial contracts written in the country, but in reality is likely to modernise and fill the gaps in the law, said contract law expert Peter Rosher of Pinsent Masons, the law firm behind Out-Law.com.20 May 2015

The French civil code was first written in 1804 and the principal articles concerning contract law have not changed since its creation. Reform to the dated law was announced by justice minister Christiane Taubira in February, and aims to bring the law into line with international standards.

Most of the proposed changes aim to reflect French case law and the interpretations that have been given by French courts over the years, Rosher said.

"The goal is to adapt the law to current society and business practice, by making the law clearer, more accessible and also more attractive to business, by removing the more obsolete provisions and adding new rights. It also codifies rules that have been created a case law, and intends to reduce the differences between French and other European contract laws," Rosher said.

The changes are driven by a 'trio of principles': freedom of contract; loyalty between parties; and the need for legal certainty, he said.

"Freedom of contract and the binding force of a contract must take into account the need for contractual fairness. For example, new provisions concerning duress recognise that in today's commercial context, duress goes beyond physical or moral pressure but can also encompass taking advantage of a state of grave economic weakness in which one party finds itself," Rosher said.

Other new provisions on fairness give greater significance to 'good faith' than previously. 

"In the code as it is at the moment the obligation of good faith relates to performance of the contract but over the last 50 or so years the French courts have extended its ambit to cover formation of the contract and the pre contract negotiation period," he said. "The reforms proposed will embody these developments at an integral part of the legislative civil code."

Concerns about the suggested changes "relate to the haste with which it is being put through, and what some contend is a lack of proper consultation. Also, some of the reforms are seen as potentially dangerous," Rosher said.

"One that has been criticised relates to the powers that will be given to French judges in situations where unforeseen events arise which lead to a serious imbalance arising in the course of the performance of the contract – the 'révision pour imprévision'," Rosher said.

 "For example, when a change of circumstances has the effect of disturbing the original balance of what is required of the parties under the contract. Some commentators say that the admission of such principle risks opening the door to a doctrine of 'unforeseeability' in private law in France. This, which is already admitted in French public law, could reduce the weight given to the principle of certainty of contracts by allowing the judge to modify the contract."

"From what I can glean, what is actually being proposed is that, where there is no contractual clause for renegotiation included, then if unforeseeable circumstances arise that radically change the equilibrium or very purpose of the contract, the parties would be able to apply to the French court. That court may then order a negotiation aimed at saving the contract. If this negotiation fails, either party would have the right to claim prospective termination of the contract without payment of expenses or damages," Rosher said.

Lawyers have generally approved of a move within the new law to enshrine the principle of contractual freedom, including at the negotiation stage, and to codify previous decisions made by the French courts, he said.

However, other aspects are seen as restraining business and contractual freedom.

"Indeed, in some aspects the reforms are seen as 'ideological', in that they seem to promote the protection of consumers and weak parties. The introduction of a 'defect of consent' under the notion of 'violence économique' – where one party is under a constraint, due to its own weakness compared to the other party – is likely to be invoked in contracts between professionals as well as with consumers. There is also an extension of the principle of 'abusive clauses'. People say this could lead to stronger interference by judges in the formation and execution of contracts," Rosher said.

A public consultation has recently closed, and a revised version of the reformed code will be published in the "not too distant future", Rosher said.