Hardship Under French Law

Andrew Tetley is a French avocat, an English solicitor, and Counsel at Reed Smith LLP.

From 1 October 2016, and in a radical departure from the current legal position, the notion of ‘hardship’ is set to become an integral part of the legal lexicon in French contract law. For the first time, French judges will be given the power by law to terminate or amend contracts in the event of changed circumstances.

In the area of contract, France has recently undertaken a wholesale review of its civil code. The core provisions of the French civil code addressed to contract (and tort) have remained essentially unchanged for over 200 years. That is now set to change with the coming into force of reworked provisions. For the most part, the redrafting is intended to reflect current law. For the first time, the French civil code will effectively become a ‘snapshot’ of the way that the French courts have developed the affected long-standing provisions. However, in certain limited areas, some changes have been introduced. The notion of ‘hardship’ is one such area.

The relevant new provisions of the Civil Code are to be found at Article 1195 of the new civil code. A judge will be able to amend or terminate a contract where the contract, unforeseeably, becomes excessively onerous to perform for one of the parties, and where such risk had not been assumed by that party. There is a requirement that the parties must try and negotiate an outcome before the judge can intervene in this way. However, in the event that negotiations founder, the judge will ultimately have broad discretion to ‘amend the contract or terminate it, at the date and on such conditions as he shall determine.’

Those parties who wish to remain with the French legal status quo in this area can contractually exclude these new judicial powers. However, if the parties do not do this, they will potentially face the uncertainty of outcome that the intervention of a third party with broad discretion can bring.

Further information on the subject, including consideration of how these new provisions may be applied and of some of the questions that may arise, can be found here.