Contracting






Principles

It is important to bear in mind the below principles before entering into any contract with a third party:

Freedom of contract: co-contracting parties can be chosen freely and parties can freely draft the content of their contract.

Good faith: any contract must be negotiated, constituted and executed in good faith.


Certainty of terms: the terms of the contract have to be complete and should not be vague or ambiguous. Otherwise, in case of a litigation, the courts will have to interpret them to give effect to the true intention of the parties.

Authority: the absence of authority of a co-contracting party may render the contract unenforceable.

Capacity: the person or entity’s capacity to enter into a contract may be limited by law, statute, internal policies or constitutional documents.

Formation: a contract can be written or oral. However, certain contracts are required to be written or by deed.

Main features

Implied terms: terms may be implied into a contract by provisions of the Civil Code, Commercial Code, other codes or statutes. For instance, article 1194 of the French Civil Code provides that "contracts create obligations not merely in relation to what they expressly provide, but also to all the consequences which are given to them by equity, usage or legislation".

Penalty clauses: a penalty clause is a contractual clause which provides for a fixed or predetermined amount to be payable by a party in case of breach of contractual obligations or delays in the performance of contractual obligations.

Limitations of liability: liability may be limited (ie: the time for bringing a claim, the amount of liability, restrictions on the loss recoverable for a breach of contract). It is not possible under French law to exclude liability for gross negligence, wilful misconduct or breach of an essential contractual obligation. Limitations of liability will rarely be enforceable in contracts that are concluded with consumers or non-professional parties.


Unfair contract terms:  unfair contract terms are provisions whose effect or purpose is to cause a significant imbalance in the parties rights and obligations arising under a contract.

The rules apply to any kind of contract entered into between a business/professional and a consumer or 'nonprofessional" (Article L.212-1 of the French Consumer Code). Article R.212-1 of the French Consumer Code provides a non-exhaustive list of  terms that are deemed automatically unfair (i.e: terms hindering the pursuit of legal remedies). Article L.212-2 of the same Code provides a "grey list" containing ten terms which are deemed unfair unless proved otherwise.

Article L.442-1-2° of the French Commercial Code prohibits a party from subjecting the other party to obligations that create a significant imbalance in their rights and obligations, at any time during the commercial relationship.

Termination: there are 3 different ways to terminate a contract: via a termination clause (which must mention which non-performance will lead to termination of the contract), a unilateral termination or through a judicial termination.

Under the French Commercial Code, sufficient prior notice is required to unilaterally terminate an established commercial relationship. Otherwise, the recipient of the notice is entitled to claim damages.



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