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Published on 28 September 2016 by Soulier Avocats

Reform of French contract law to take effect on October 1, 2016: Important changes that caught our attention

The reform, which enshrines two hundred years of court decisions, amends, re-numbers, deletes and creates numerous articles of the Civil Code of the French derived from the Law of 30 ventôse of year XII under the French revolutionary calendar, which later became the Napoleonic Code and then the Civil Code.

While the French Civil Code abandons some concepts deemed obsolete or inappropriate, such as the notion of cause (within the meaning of French law), it codifies a number of essential case-law developments, e.g. contractual negotiations, unilateral promises, economic duress, theory of unforeseeability, fraudulent concealment, defense to non-performance, etc., with a view to modernizing French law and increasing legal certainty.

Ordinance n°2016-131 of February 10, 2016 for the reform of contract law, the general regime of obligations and proof of obligations (the “Ordinance”) will come into force on October 1, 2016.

Except for a few isolated texts, the provisions of the French Civil Code (the “FCC”) on the general law of obligations had not evolved since 1804, thereby leading to an abundant case-law, a true source of law, designed to clarify, supplement and modernize statute law by taking into account the evolution of lifestyles, morals, technologies and practices.

Yet, a law that is essentially based on case-law developments is unpredictable, source of legal uncertainty and, for non-legal practitioners, sometimes difficult to grasp, if not incomprehensible.

As such, the main effect of the reform will be to make statutory law more accessible and predictable in order to guarantee modernity and legal certainty. Some legal writers view the reform as a work of codification of the “well-established case law as it currently stands”.    

While the reform is primarily aimed at codifying established and settled case-law principles, it also introduces new legal concepts, grants new rights to, and imposes new obligations on, parties to a contract, and provides clarification on the criteria laid down by French courts.

This article summarizes key notions that will be abandoned or introduced in the FCC by the reform, effective as from October 1, 2016.

1. The concept of cause is abandoned

The FCC currently sets out four essential conditions for the validity of a contract: The consent of the party who undertakes to perform the obligation, his/her capacity to contract, a certain and determined subject-matter and a lawful cause[1] in the obligation (Article 1108 of the FCC in its version in force until October 1, 2016).

The concept of cause – which does not exist in most other countries – remains abstract and is difficult to grasp.

French legal writers make a distinction between the subjective cause (also called “cause of the contract”) – that refers to the intentions of the party who undertakes to perform an obligation and that is specific to that party – and the objective cause (also called “cause of the obligation”) – that refers to the abstract and intangible consideration that exists for contracts of the same type.

For example, with respect to a purchase transaction, the objective cause for the purchaser will always be the acquisition of ownership and, for the seller, the payment of the price. Conversely, for contracts of the same type, the subjective cause varies from one contractual party to another. For example, with respect to the sale of a real estate property, the subjective cause for one specific purchaser may be the location of the property and for another, its general condition or its surface area.

The Cour de Cassation (French Supreme Court) has sometimes used the concept of subjective cause to restore the balance of the obligations imposed on the parties to a contract.

This subjective conception of the concept of cause – which is a source of legal uncertainty – has triggered criticisms and questions from legal practitioners and writers.

In order to reinforce legal certainty in contractual relationships, the reform eliminates this concept of cause and replaces it by rules that are less abstract and that produce a similar result.

Effective as from October 1, 2016, Article 1128 of the FCC replaces the concept of “lawful cause in the obligation” by the requirement of a “lawful, certain content”.

In addition, the reform introduces in the FCC the concept of “enrichment without cause” that had been clearly established by case-law but that remained so far unaddressed in the FCC. Yet, the Ordinance renamed this concept “unjustified enrichment” to ensure consistency with the abandonment of the concept of cause.

2. Recognition of economic duress

New Article 1140 of the FCC provides that “There is duress where one party contracts under the influence of a constraint which makes him fear that his person or his wealth, or those of his near relatives, might be exposed to significant harm.”

The definition of the concept of duress – which is a ground of nullity for lack of consent – is virtually identical to that set forth in Article 1112 of the FCC and applicable until October 1, 2016.

One of the main innovations brought about by the reform is the introduction of