Having been extended by the best part of two months, the public consultation phase on the draft reform bill on the law of specific contracts drew to a close on 15 January 2023.
The draft bill had been prepared by a Commission chaired by Philippe Stoffel-Munck and represents the latest chapter in the overhaul of French private law. The Henri Capitant Association can be credited with first getting the ball rolling on this particular reform – it put together a working group on the subject back in 2013. That group came up with an initial draft bill in 2017 (presented at the Journée nationale de Grenoble on 17 November 2017). After a consultation phase, they then submitted a revised version to the French Ministry of Justice in March 2020 (Offre de réforme du droit des contrats spéciaux, Ed. Dalloz, June 2020). That second version was widely discussed in the literature (see in particular: L’offre de réforme des contrats spéciaux, Réflextions libres à partir du projet Henri Capitant, Ed. Dalloz, July 2021).
Why do we need a reform of the law of specific contracts?
Because the status quo is no longer tenable.
The civil and commercial agreements that fall under the banner of “specific contracts” form the backbone of our everyday economic transactions: selling, exchanging, leasing, lending, building, providing services, appointing an agent, managing assets, making bailments, etc. They are a vital part of how our society operates. But they suffer from three main issues, which is why the Henri Capitant Association began to consider a possible reform and also largely why the Ministry of Justice has now taken up the baton.
First, the French law of specific contracts has not aged well. There is a widening gulf between the law as written – which for the most part dates back to the time of the 1804 Civil Code – and the law as now applied, based on modern-day contractual innovations and case-law. It has become more of a judge-made law, with the provisions of the Civil Code having been relegated to the background.
Second, certain agreements that used to take the form of a “simple” contract typified by a lack of financial consideration (agency agreements, bailment agreements) now tend to be more professional in nature. Many specific contracts have become central pillars of our economy (in commerce, financing, construction, management, leasing, brokerage and other platform set-ups, etc.). A revamped Civil Code is the only way to dust off the legal foundations for the associated economic transactions and bring them up to date. The governmental order of 15 September 2021 did this for the law on securities. It is time our main civil and commercial contracts (sale, leasing, services, loan, agency and bailment agreements, as well as aleatory contracts) got the same treatment.
And third, in light of the shifting relationship between ordinary contract law and the law of specific contracts, we need to rethink how French contract law hangs together. Back in 1804, ordinary contract law reigned supreme and the law of specific contracts was more of an add-on – a separate branch splitting off from the central body of contract law. But this began to change over the 19th and 20th centuries, as two new currents of thought gained ground. The first championed more radical contractual freedom, inspired by practices observed in English-language parking, management, factoring, franchising and leasing agreements, amongst others. This led to contracts being far less standardised than had previously been the case. The second was prompted by this first development: the legislator stepped in, creating specific contractual statuses in certain types of agreement, designed to protect the weaker party (residential or commercial tenants, consumer borrowers, subcontractors, etc.).
These developments stemmed directly from the law of specific contracts rather than the central body of ordinary contract law. As the law has evolved further, things have come full circle, with these developments now feeding back into ordinary contract law. The contract law reform of 10 February 2016, in which the influence of the specific law on sales contracts is particularly clear, offers a perfect illustration of this. The case-law handed down on Section 1591 of the Civil Code was applied to the notion of illusory or derisory consideration referred to under Section 1169, for example. The law on sales contracts also shaped that reform’s measures on the transfer of title and risk (Section 1196) and penalties for breach of contract (Section 1223).
And so the law of specific contracts now bridges the gap between ordinary contract law and highly specific contractual statuses. Its reform must take into account the challenges that arise from this sometimes rather awkward position.
How exactly should we reform the law of specific contracts?
The authors of the Stoffel-Munck Commission’s draft reform bill have stated that, broadly speaking, “this essential work was undertaken with a view to clarifying where necessary, simplifying where possible and modernising – exploring previously overlooked avenues and identifying the many specific rules that have become obsolete.”
Clarify, simplify and modernise: excellent goals! This is also what the recent reforms of French private contract law and securities law set out to do: both can serve as useful templates in the present case.
The Commission also set itself a number of more specific aims that have been equally well received: promoting the contractual freedom that has long permeated this area of law; ensuring practical reform by getting legal professionals involved in the process; adapting what we already have (retaining existing Code section numbers to ease the transition for legal professionals), rather than ripping up the rule book entirely.
We applaud this approach every bit as much as the goals announced. But will the future provisions live up to these ambitions?
The consultation phase will have provided the Ministry of Justice with useful feedback on how to improve the draft bill and its wording.
The reformed law of specific contracts should be accessible, attractive and economically efficient. In this, it should emulate the recent reforms of civil business law, contract law and securities law.
Properly interpreted, the reformed law should give France a real boost, making it more appealing to foreign operators as a jurisdiction in which to pursue key economic activities such as sales, leasing, agency arrangements, loans and services.
To achieve this, the legislator must take great care with the language used. It must be clear and concise, in keeping with French legislative tradition. Obscure wording, double negatives and overly descriptive definitions should all be carefully avoided.
- definitions of the main types of specific contract should be precise, accessible and usable. More consistent definitions would be helpful – the use of synonyms and similar yet not identical wording in Code sections can be particularly confusing;
- essential obligations should be clearly identified. It is a shame that the Ministry of Justice has, at least for now, chosen not to pursue the Henri Capitant Association’s suggestion of creating a law of specific obligations alongside the law of specific contracts: it was excellent out-of-the-box thinking;
- the changes brought about by digitisation and contracts concerning intangible assets (such as licensing agreements) need to be taken into account;
- the mandatory terms that parties cannot contract out of should be clearly identified;
- the reform should serve as a model, introducing innovative solutions in addition to improving the existing framework: a good example of this is the proposal to bring do ut facias agreements under the umbrella of an exchange (Section 1702, para. 1: “An exchange is a contract by which one party gives another an asset in return for another asset or a service”).
Given that the government lacks a stable parliamentary majority, it might struggle to pass a reform that (perhaps despite appearances) goes beyond surface-level technicalities, no matter how essential its more structural changes may be.
During Macron’s first term, government frequently bypassed parliament, ruling by order, but that is no longer the case. And with a National Assembly torn between extremes, the parliamentary route has become increasingly unpredictable. Those in the opposition might be tempted to seize upon the relative lack of provisions regarding the specific contractual status of residential and commercial tenants and consumer borrowers to block the reform. With the current wrangling over pension reform heightening parliamentary tensions, success is sadly not guaranteed…