WSG Article: French Law of Obligations Reform: What Impact on Financing Transactions?

French Law of Obligations Reform: What Impact on Financing Transactions?

November, 2016 - Jean-Francois Adelle

The reform of French law of obligations implemented by the French ordinance No 2016-131 of 10 February 2016 (the “Ordinance”), conducted after public consultations and high quality working papers, constitutes the deepest overhaul of French contract law since the Civil Code of 1804. The Ordinance applies to contracts entered into as from 1st October 20162, including amendment agreements, tacit renewals and novated contracts executed or occurring after such date. The reform aims to modernize French contract law, provide more legal certainty, render it more accessible and reinforce its attractiveness in international transactions. It both crystallizes existing case law and adapts the Civil Code to new needs of the economic operators.

The author offers a first analysis of the impact of key changes of the reform on financing agreements governed by French law. Those changes relate to the creation of a duty to disclose material information, new grounds of termination or mandatory renegotiation of the contract: economic imbalance, economic duress, unforeseen circumstances rendering the contract excessively onerous and anticipated non-performance. Other important changes relate to the assignment of receivables and the new regimes of transfer of liabilities and transfer of contract.

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Footnotes:

1 The author would like to thank Rudolf Efremov for his assistance

2 Article 9 of the Ordinance

3 Case No 06-19056, 19th June 2008, French Cour de cassation.

4 Case No 10-25.533, 10-25.731, and 10-25.908, 13th September 2011, Cour de cassation.

5 Article 1162 of the Civil Code.

6 Article 1169 of the Civil Code.

7 Article 1186 of the Civil Code.

8 Article 1112-1 of the Civil Code

9 Case No 07-13.487, dated 28th May 2008 of the Cour de cassation.Cases No 98-15.242, 30 May 2000, and No 00-12.932, 3rd April 2002, of the Cour de cassation.

10 Cases No 98-15.242, 30 May 2000, and No 00-12.932, 3 April 2002, of the Cour de cassation.

11 Article L. 650-1 of the Commercial Code.

12 Article 1195 of the Civil Code.Article 1321 of the Civil Code.

13 Article 1321 of the Civil Code

14 Article 1322 of the Civil Code.

15 Article 1321 of the Civil Code

16 Articles 1323 and 1324 of the Civil Code.

17 Articles 1327 et seq. of the Civil Code.

18 Concerning the requirement for the transferred party to consent, see case No 90-14.831, dated 7th January 1992, suggesting a transfer without his/her consent when the contract is not intuitu personae, followed by case No 08-11.093 of 30th April 2009, requiring the consent of the third party for the transfer, but considering that a transaction without the consent of the third party remains valid, yet unenforceable.

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French Law of Obligations Reform: What Impact on Financing Transactions?

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