In the dynamic world of business, the unexpected can often lead to significant challenges. A recent ruling by the Paris Commercial Court on November 15, 2023 (Case No. 2022026332, Le Figaro Company vs. South-West Press and Publishing Corporation), provides a pivotal learning opportunity for companies operating in France, particularly regarding the legal principle of “unforeseeability” as outlined in Article 1195 of the French Civil Code.
In a ruling dated November 15, 2023, the Paris Commercial Court addressed a dispute involving Le Figaro Company and the South-West Press and Publishing Corporation, under case number 2022026332. The core issue revolved around the dramatic increase in paper and energy prices, which significantly escalated the cost of fulfilling a periodical supply contract. Despite the financial burden, the court determined that the party experiencing the excessive cost could not seek a contract revision without proving that it had not agreed to assume such a risk.
This decision brings to light the conditions under which Article 1195 of the Civil Code can be invoked. Article 1195 allows for a contract renegotiation if unforeseeable circumstances at the time of contract conclusion make execution excessively burdensome for a party that did not agree to bear the risk. However, if no agreement is reached within a reasonable timeframe, any party can request a judge to either adjust the contract or terminate it.
The case specifically dealt with several regional daily press (PQR) groups terminating their contracts in December 2022 with a national press company that had been supplying them with a television magazine since 2019. The national press company sought a retroactive price revision effective from January 1, 2022, citing the aforementioned legal provision.
The Paris Commercial Court rejected the request, finding that the prerequisites for unforeseeability were not collectively met. The court’s reasoning was as follows:
- The claim was deemed admissible as the company had shown a genuine intention to negotiate a revision, despite initially attempting to impose new rates on its clients. Furthermore, since the claim pertained to billing for the year 2022, during which the contracts were active, their termination was irrelevant.
- Significant increases in paper prices (from 505 euros in December 2021 to 830 euros in July 2022), energy prices due to the war in Ukraine, and shifts in consumer behavior towards print media were unforeseeable at the time the contracts were signed in 2019. However, the simultaneous departure of the regional press groups could not be considered unforeseeable since the contracts allowed for early termination, and this collective exit was a direct consequence of aligning the expiration dates of the contracts.
- The cost increase had indeed made contract fulfillment excessively burdensome for the press company, as confirmed by its auditor, who noted a price rise of over 80% compared to 2021. Despite the company’s strong financial performance in 2022, this fact remained pertinent to the contract execution.
- Nevertheless, it was not established that the press company had not agreed to bear the risks associated with changed circumstances. The contracts included a carefully adjusted indexing clause (with equal parts paper and energy) that had functioned as intended. The inability to pass on the price increases was due to the departure of the groups, and the press company had failed to include a clause that would allow for the retroactive application of these increases to clients who terminated their contracts, thereby bearing the consequences.
This judgment is noteworthy as it highlights the three main conditions for applying Article 1195 of the Civil Code, which is applicable only to contracts signed after October 1, 2016, as per the Order 2016-131 of February 10, 2016, Article 9. It marks the first known instance specifying that its application can be requested post-contract termination for a previous period.
Implications for Your Business
The court’s decision highlights several key considerations for businesses operating in France:
Proactive Risk Management: Companies should diligently assess potential risks in their contractual agreements and consider clauses that provide flexibility in response to unforeseen events.
The Importance of Detailed Agreements: Contracts should be drafted to clearly define the terms and conditions, including any mechanisms for adjustment based on unforeseeable changes in circumstances.
Engagement in Good Faith Negotiations: Before resorting to legal action, parties are encouraged to seek renegotiation with their counterparts in the spirit of good faith, as evidenced by the court’s consideration of the company’s initial negotiation attempts.
How We Can Help
At Alaris Avocats, we specialize in providing expert legal advice to companies navigating the complexities of the French legal system. Our team is well-versed in contract law, including the application of Article 1195, and is committed to helping our clients achieve fair and equitable solutions in their business dealings.
Whether you’re currently facing a contract dispute or seeking to proactively manage your contractual risk, our attorneys are here to offer comprehensive support. We believe in empowering our clients with the knowledge and legal strategies needed to thrive in an unpredictable business environment.
Reach Out for Expert Legal Guidance
If your business operations in France are facing legal challenges, or if you seek to understand better how to protect your interests under French law, we invite you to contact us at Alaris Avocats. Let us help you navigate your legal issues with confidence and strategic insight.
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This article has been prepared for informational purposes only. It is not a substitute for legal advice addressed to particular circumstances. You should not take or refrain from taking any legal action based upon the information contained herein without first seeking professional, individualized counsel based upon your own circumstances. The hiring of a lawyer is an important decision that should not be based solely upon advertisements.
Information by ALARIS AVOCATS, English speaking lawyers in France (Paris)