Volte Face As Hardship Becomes Part Of French law

Author:Mr Andrew Tetley
Profession:Reed Smith (Worldwide)
 
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We sent out a client alert in April on the approaching entry into force of the new French civil code. We highlighted four innovations arising out of this major legal reform.

This alert focuses on the introduction of the new hardship provisions. French civil law was one of the rare civil systems not to provide for modification of contracts in case of hardship. The new provisions on hardship will be applicable to French law-governed contracts entered into or renewed after 1 October 2016. Legal advice may be necessary to assess the impact of the new hardship provisions or to contract out of or around this new legal regime.

Introduction In February 2015, while authorising the government to reform part of the civil code, the French requested the government to create the possibility for parties to adapt their contract to unforeseeable changes of circumstance.

A draft executive order was presented and put out to public consultation. Hardship was a hot topic: scholars and legal practitioners made many comments on the draft provisions, suggesting alternative drafting.

By executive order of 10 February 2016, the government adopted the final text of the reform. The final provisions on hardship go further than the original drafting.

The requirements and procedural steps to invoke hardship seek to balance the binding force of the contract against the need for contractual flexibility.

Discussion Article 1195 of the new civil code provides:

"Where a change of circumstances, unforeseeable at the time of signing the contract, renders performance excessively onerous for a party that had not accepted to assume the risk, that party may ask its co-contractor for renegotiation of the contract. It shall continue performing its obligations during the renegotiation.

In the event of refusal or failure of the renegotiation, the parties may agree to terminate the contract, at the date and on such conditions as they shall determine, or by mutual agreement ask the judge to proceed to its adjustment. In the absence of agreement within a reasonable time, the judge may, on one party's request, amend the contract or terminate it, at the date and on such conditions as he shall determine."

Thus, the cumulative requirements to invoke hardship are:

A change of circumstance; Not foreseeable at the time of the contract; The risk of which the party seeking relief had not accepted to bear; and Performance of the contract becomes excessively onerous. To avoid parties invoking...

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