This newsletter summarizes the main recent legal developments in the following practice areas:
- Projects (Finance & Infrastructure)
- Challenging administrative contracts
- Local government reform
- Morocco adopts a PPP Law
- Mergers & Acquisitions
- Extension of the scope of foreign investment control in France
- OHADA corporate law reform
- Foreign investment in Algeria five years on from the introduction of the “49/51%” rule
- The fonds professionnels de capital investissement can now invest in debt instruments
- The impact of a negative Euribor on financing contracts
- Financial Disputes & Banking Regulation
- International economic sanctions
- Prevention and resolution of banking crisis
- Enactment of the Consumer Law (“Hamon Law”) - Class action and contract termination issues in insurance law
- Alternative Dispute Resolution
- Energy & State Aid
- Restructuring of aid in the energy sector
- Real Estate
- The “Pinel Law” definitively adopted
- Adjustment on the part of the tax authorities as regards the VAT regime for rent-free periods
- Intellectual Property / Telecommunications, Media & Technology
- Personal Data: Ever greater protection
- Individual and Collective Work Relations
- New timeframes for the consultation of staff representative bodies
- Judicial cancellation of employment contracts: Innovative rivalry between the legislator and the courts
Editorial by Louis Thibierge, Consultant, member of Gide Scientific Council and Maître de conférences à l’Université Paris Ouest
Our Contract Law is at war!
Case law and doctrine appear to have joined forces in an attempt to disrupt our contractual habits. While the Court of Cassation (French Supreme Court) annuls limitation of liability clauses and reshuffles breach of contract, the Chancellery plans to sanction modification for frustration.
Limitation of liability clauses: watch out for the backlash. There was a time when incorporating a limitation of liability clause was the safest way of avoiding the risk of non-performance. That time is a bygone age. Since the precedent established in Faurecia 2 , the Court of Cassation has considered limitation of liability clauses which render the contractual duty meaningless as un-written. Thus, although it is lawful to limit one’s liability in case of breach of the essential contractual duty, the ceiling for damages must not be valueless. If a party insists on a ceiling which is too low, the judge could consider the clause as un-written, which would put the party at risk of having to pay full compensation.
Is it still necessary to include cancellation clauses? The inclusion of a cancellation clause in a contract avoids the need to apply to the courts, by allowing the creditor of an unfulfilled obligation to terminate the contract. Nevertheless, such a clause may be redundant considering the decision in Tocqueville , which established the “unilateral termination at one’s own risk” principle. The Court of Cassation has recently held that in the presence of this kind of clause ‒ providing for the payment of compensation for termination in the case considered ‒ the creditor could no longer opt for unilateral termination.
However, this answer is not final; it is likely that a decision emanating from the “chambre mixte” of the Court of Cassation will be necessary in order to harmonize the case law. As things stand, caution should prevail: inserting a cancellation clause could end up being counterproductive.
Is the precedent established in Canal de Craponne about to be overturned? For 150 years, the courts have refrained from revising a contract when the economic circumstances have evolved. Article 104 of the draft reform of the law of contracts, drawn up by the Chancellery, allows for this revision. If an unpredictable change of circumstances has made the execution of a contract too burdensome for a party, both parties will have to renegotiate the contract. In case of failure or refusal, the parties could, by common agreement, ask the courts to adapt the contract. In the event of lack of agreement, either party could apply to the courts for termination of the contract.
These changes in the law of contracts constitute a powerful stimulus for the practitioner, inviting him to find ever new solutions.
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