french contract law namsa meeting 3/10/2005 thibault verbiest [email protected] pascal...
TRANSCRIPT
Introduction
• Identify the main clauses• The link between theory and practice• Not exhaustive ! • Sources
– Civil Code on Internet in English:• www.legifrance.gouv.fr
– Books : • Barry Nicholas, The French Law of Contract, 2nd ed, Clarendon
Press Oxford, 2002.• - John Bell, Sophie Boyron and Simon Whittaker, Principles of
French Law, Oxford University Press, 1998, pp. 304-353.• - David Pollard, Sourcebook on French law, Cavendish Publishing
Limited, 1998,
Characteristics of french law
• French law : law of the book and primacy of legislation– Universally valid – Decisions of courts : merely an application of the law
• Common law : created by courts– Provide solutions for individual disputes
• French court system – TGI, Cour d’appel, Cour de cassation– Many other courts : T.I, tribunal de commerce,
prud’homme etc…
Plan
• Part. I - Theory of contract
• Part. II -The formation process
• Part. III- Structure of contract
• Part. IV - Economy of contract
• Part. V - Standard clauses
Part. 1 - Theory of contract
• Freedom of contract : formation and effect– Autonomy of the will
• Formation – Parties are free to enter into a contract and to
determine its contents, subject to the requirements of good faith and fair dealing, and the mandatory rules
Effect of the contract
• Art. 1134: effect towards parties – Agreements lawfully entered into take the place of the law
for those who have made them.– They may be revoked only by mutual consent, or for causes
authorized by law– They must be performed in good faith.
• Art. 1165: effect towards third party– Agreements produce effect only between the contracting
parties; – they do not harm a third party, – and they benefit him only in the case one stipulate for the
benefit of a third party .
Interpretation
Art. 1156
contract is to be interpreted according to the common intention of the parties even if this differs from the literal meaning of the words.
Decline of the free common intention
• Examples• Art. 1244-1 : A judge may, defer or spread out the
payment of sums due, taking into account the debtor's position and in consideration of the creditor's needs
• Art. 1152 :the judge may "even of his own motion" moderate or increase the agreed penalty clause.
• Contract between professionals and consumers : CONSUMER CODE :
http://www.legifrance.gouv.fr
Classifications of the civil code
• Contract “synallagmatic” Art. 1102 – A contract is synallagmatic or bilateral where
the contracting parties bind themselves mutually towards each other.
• Contract unilateral Art. 1103 – It is unilateral where one person is bound
towards one, without any obligation on the part of the latter.
– Gift
Other classifications
• A contract of benevolence Art. 1105 / A contract for value art. 1106
• Contracts with a specific denomination or not art.1107– Contract of sale : art. 1582-1701 / Know-how
• Contract with / without intuitus personae• Contract for an indefinite period / with a fixed-
term / instantaneous • And many others…
Part. 2 - The formation process
• Plan – Offer and acceptance in French law– Offer and acceptance in electronic commerce– Pre contractual obligation to negotiate in
good faith– Example of contractual and not contractual
documents– Nullities in french law
Offer and acceptance in French law
• Offer or invitation to treat ?
• The consent of the parties : art. 1108
• Offer must be :
1. Precise : essentials elements of the contract
2. Firm : without reservations
– Contract of sale : agreement on thing and price
– Otherwise:
– start talks
– parties are not bound
Liability for breaking off negotiations
• Negotiations contrary to good faith : liability (art.1382)– Advanced stage of the negotiations – The legitimate belief of the other party– Brutal and unilateral way– Legitimate reasons
• Breach of confidentiality : information given in the course of the negotiation
Revocation of an offer
• However, a revocation of an offer is ineffective if: – the offer indicates that it is irrevocable; – or it states a fixed time for its acceptance; – or it was reasonable for the offeree to rely on
the offer as being irrevocable and the offeree has acted in reliance on the offer.
Acceptance
• Must be without reservations otherwise it’s an new offer
• Silence is not acceptance except in specials circumstances – Business relationship and same contract as before
• Specials rules for consumers : – Period of time before acceptance
– to withdraw his order to buy
Formation : offer & acceptance
• A contract is concluded if: – the parties intend to be legally bound, and – they reach a sufficient agreement – without any further requirement.
• Time of Conclusion of the Contract : the “remote” contract1. the acceptance has been dispatched by the offereeor 2. the acceptance reaches the offeror – Choice of the first theory by the supreme court (1981)– “Suppletive” rule
Offer in electronic commerce
• Art. 1369-4, 1369-5, 1369-6• Information to be provided
– contract terms and general conditions in a way that allows storage and reproduction
– an offer is not revoked until it is no more accessible – the different technical steps to follow to conclude the contract– the language etc…
• Contract is concluded when :– the acceptor can check his order and can correct errors – the offeror has acknowledge the receipt of the recipient’s– the order and the acknowledgement of receipt are received when
the parties to whom they are addressed are able to access them.• Exceptions for e commerce by e-mail
Example of contractual and not contractual documents
– Agreement in principle and draft agreement • Good faith negotiations
– Preference pact • For a determinate party • A right of pre-emption
– Promise • Unilateral : often compensation for immobilization • Bilateral : A promise of sale is the same as a sale, where there
is reciprocal consent of both parties as to the thing and the price (art. 1589)
Nullities in french law
• Contract can be void for– Error on the substantial (material) quality or on the person (art.
1110)• The other party knew or ought to have known that the mistaken party,
had it known the truth, would not have entered the contract or would have done so only on fundamentally different terms.
• Mistake must be excusable• Mistake as to facts or law • action for annulment : 5 years from the day when it is discovered. Art
1304
– Deception : art.1116– Duress : art. 1111
• Liability in damages
“Recours en garantie”
• Contract of sale• For the seller : duty to warrant against latent
defects• If the buyer had known, he didn’t buy
– Rescision Or– Reduction of the price
• Must be brought in short time
Part. III- Structure of contract
• Plan:
– Content, right and duties
– Non-Performance of Obligations
Content, right and duties
• Who?
• What ?
Who?
• Who? Representation? • Several signatories? • Role of each others ?• Intuitus personae clause?• Subcontracting clause?• Transfer of the contract to an other party?• Binding change of partners in some special
circumstances
What?
• The common intention of the parties : who is doing what?
• What are the contractual engagements ? • In case of invitation to tender : do not be engaged
before checking all the services included…• Main and additional object of the contract• What are the duties of the beneficiary of the
contract ? • The practical details of the operation : delivery …
Examples
• For IT project : – Project specification– Obligations, I.P, maintenance, bankruptcy, security
• Outsourcing and reversibility – Organize the return towards the company
• Material, software , know-how and I.P., cost …
– Length, obligations of the parties
The issue of price
• Contract of enterprise, job contract– Determination of price can be made subsequently and based on
elements unknown at the time of the conclusion (working hours…)
• Contract of sale– Determination by a third person. art. 1592– Determined by reference to a factor independent of the parties :
Market price of the day, etc. …
• Frame contract– the absence of a fixed or ascertainable price in an initial frame
contract does not affect the validity of the frame contract. – But excessive prices may lead to the rescinding of the contract or to
the award of damages ( C. Cass. 1er déc. 1995)
Obligation to inform
• The client must inform the service provider – At the beginning of the process– In case of change of his project specification
• Cassation court, 8.7.2003 • Appeal court, Nîmes : 14.12.2004
• The service provider must inform the client – Internal computer department and obligation to inform
of the provider : Cassation court, 6.5.2003 :– Information at the delivery : Appeal Court Rouen,
13.01.2003
Interpretation of the contract
• Tribunal de commerce 24.3.2004
– In case of doubt, an agreement shall be interpreted against offeror, and in favour of the one who has contracted the obligation
Interpretation of the contract
• Appeal Court, Paris : 2.11.2004
• Standard Comprehensive insurance for office automation (bureautic) does not cover the loss of the data
The Non-Performance of obligations
• Remedies – Liability : conditions of claims damages – Forced performance– Right to Withhold Performance – Right to Terminate the Contract : claim
rescision
Conditions of the liability
• Non-performance of the obligation– reasonable care / achieve the result
• Force majeure Art. 1148A party's non-performance is excused if it proves that it – is due to an impediment beyond its control and that
• Due to an external cause
– it could not reasonably have been expected to take the impediment into account at the time of the conclusion of the contract, or to have avoided or overcome the impediment or its consequences.
• The fault of aggrieved party excused totally or partly the party's non-performance
Obligation to achieve the result
• Appeal Court, Paris 29.6.2004
• Contract on development, maintenance and delivery of a software
• Obligation to deliver the system in good operating condition
The Non-performance of obligations to do or not to do
• Art. 1142
Any obligation to do or not to do resolves itself into damages, in case of non-performance on the part of the debtor.
• The judge can not forced a party to do the obligation, only to pay “astreinte”
Penalty clauses
Art. 1226 : A penalty is a clause by which a person, in order to ensure performance of an agreement, binds himself to something in case of non-performance.
Art. 1152, al 2 : Nevertheless, the judge may "even of his own motion" moderate or increase the agreed penalty, where it is obviously excessive or ridiculously low. Any stipulation to the contrary shall be deemed unwritten.
Limitation of liability
Art. 1150 :
• A debtor is liable only for damages which were foreseen or which could have been foreseen at the time of the contract, – Unforeseen damages are excluded
• where it is not through his own intentional breach that the obligation is not fulfilled.
Clause limiting liability
• Validity in principle but :
• If the obligation unperformed is an essential one, a clause limiting liability may be held ineffective although the breach itself is not deliberate or gross
Right to Withhold Performance
• A party who is to perform simultaneously with or after the other party may withhold performance until the other has tendered performance or has performed.
• The first party may withhold the whole of its performance or a part of it as may be reasonable in the circumstances.
• A party may similarly withhold performance for as long as it is clear that there will be a non-performance by the other party when the other party's performance becomes due.
Forced performance
• Direct forced performance: obligation to pay the price / seizure
• Indirect forced performance: imposition of a periodic penalty (astreinte)
• (L. 9 juillet. 1991 art. 31 à 37)
Right to Terminate the Contract
• In principle, termination must be applied for in court – Art. 1184 al 3
• Non judicial termination– Fixed-term contract
– Intuitus personae contract
– Resolutory clause with or without notice of termination
– if the other party's non-performance is fundamental.
Part. IV - Economy of contract
• Assignment of claims (art. 1689 et ss. Only for a civil person)
• Simplified mode of assignment in commercial law
• No assignment of debts
Part. V - Standard clauses
• Title, preamble, heading, number of copies• Meaning of terms and interpretation clauses• Divisibility of the contract : partial avoidance ? • Link between contracts • List of contractual documents ?• Prior statement, undertakings or agreements :
part of the contract ?
Other clauses relating to
• Change of circumstances : – performance more onerous or excessively more
onerous– Bound to enter into negotiations for the parties
• Confidentiality of information – given during and after the term of the contract
• Intellectual property and know-how– Licensing ?
Other clauses relating to
• Professional common standard– INternational COmmercial TERMS
• Linguistic Discrepancies – Two or more language versions– Which one is stated to be authoritative ?
• Performance by a third person – Contract require personal performance ?– Assent of the party ?
• Non competition clauses
In case of judiciary procedure
• Choice of the law :– Convention on the law applicable to contractual
obligations : Rome Convention 19 June 1980
• Choice of jurisdiction– Council Regulation n° 44/2001, of 22 December 2000
on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters
• Arbitration
Conclusion
Thank you
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