Reform Of The French Civil Code And The New French Contract Law: What Are The Main Impacts On French M&A And Private Equity Practices?

Author:Mr Marc Pierre Stehlin, Armelle Kwiatkowski-Maitre, Cyrille Boillot and Svetlana Tokoucheva
Profession:Stehlin & Associés
 
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This long-awaited reform changed our French Napoleonic code. Its main purpose is to increase the attractiveness of French contract law compared especially to common law countries.

It brings simplification, clarification and predictability throughout the life of a contract (from its formation, to its performance until its termination). In most cases, it has resulted in a codification of a certain number of recognized case-law, sometimes with little changes. However, in other cases, it has introduced in French law new concepts, some of them which are well-known in common law systems.

Date of application of the new law - Transitional Law

The new law (the "New Law") applies to contracts entered into on or after October 1st, 2016. The contracts entered into before this date shall remain governed by the former law.

This raises the following comments:

First of all, the New Law and the former law will coexist until termination or expiry of the contracts existing before October 1st 2016. Therefore from a practical standpoint, you will have to be careful if you need to review the validity of a contract or of one of its provision: the New Law in force and accessible through specialized internet websites will not automatically apply to the contract under review. The applicable law will depend on the date of its signature. Under French law, a contract tacitly renewed is considered as a new contract. Therefore the New Law will automatically apply to existing contracts tacitly renewed after October 1st 2016. M&A and Private Equity transactions require many weeks of negotiations. There will be situations where the discussions between the parties have begun before October 2016 and the transaction documentation has been or will be signed after October 2016. In such cases, as long as the contract is entered into after October 1st 2016, the duty of pre-contractual information (see § 2 below) introduced by the New Law shall apply to the whole period of negotiations even with respect to the period prior to October 2016. Lastly the three new interrogatory actions (so called actions interrogatoires in French, see § 8 below) are immediately applicable, even to contracts entered into before October 2016. In addition it should be noticed that the French Supreme Court (Cour de Cassation) has already changed by recent decisions, or may change in the future, its interpretation of the provisions of the former law in light of the provisions of the New Law. This will...

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