Putting standard form contracts at risk – France is taking over a German legal problem!
The reform of the French Civil Code and the validity regulations for contracts based on general conditions
One major disadvantage of the German civil law system is considered to be the regulations on the use of general conditions or pre-drafted clauses in general. Such clauses will be put under legal evaluation by courts, according to articles 305 et seqq. German Civil Code. An extensive case law has been developed by the German courts over the years, where contractual clauses have been judged void under German law. The most commonly known example is the maximum cap for contractual penalties for delay of the contractor, which is set by the courts at 5% of the contract price. This can only be overcome by application of the principle of extensive negotiation, which has to be proven and documented. The best way to do that (in the opinion of the German courts) is to demonstrate a change in the pre-drafted clause throughout the negotiation. This view by the courts causes significant legal transaction efforts in Germany when applying standard form contracts and is subject to reform discussions – at least for the business sector.
However, with the recent reform of the French Civil Code in 2016, the French government decided to implement the same evaluation principle as applicable in Germany. In Article 1171 it is determined, that any clause creating a significant imbalance among the rights and obligations of the parties to a standard form contract will be declared void. The definition for the standard form contract can be found in Article 1110, which is a contract “whose general conditions are not subject to any negotiation but are determined in advance by one of the parties”. This shall clearly protect the “weaker” party of the contract in negotiations – but will cause the same legal problems as in Germany.
When concluding contracts with general conditions and without negotiation in France nowadays, you cannot be certain, whether all your clauses will be valid or not. You will face the same problem as in Germany, when you contract with a party for who everything is fine and acceptable in your pre-drafted contract – leaving you behind with the burden of proof to demonstrate a negotiation having taken place. In most cases, such party already knows which clauses might be invalid according to the case law. However, for this party, it also requires some guts to tackle such contracts later – but it can often be seen in obstructed projects as a last resort. That is why it cannot be neglected in negotiations.