On 10 February 2016, the French government enacted an Ordinance reforming the provisions of the French Civil Code relating to contracts (Ordinance n° 2016-131 published in the Official Journal n° 0035 of 11 February 2016). This part of the French Civil Code had remained unchanged since 1804 and it no longer reflected the actual contents of French contract law as it resulted from several decades of case law.

The aim of this reform is to make French contract law “more accessible” and “more foreseeable” in order to strengthen its attractiveness, said the Minister of Justice. To that purpose major rules established by case law are consecrated in the Civil Code.

Among others, the following new provisions are particularly important:

  • The principle of good faith is reinforced: it is now a principle of public policy which applies both to the formation and to the performance of the contract.
  • If a “change of circumstances” that was not predictable at the time of the conclusion of the contract arises and renders its performance “excessively onerous for one party”, this party may ask the judge to amend the contract or to put an end to it (Article 1195).
  • Any clause (such as a limitation of liability clause) which contradicts the “essential obligation” of the contract is deemed unwritten (Article 1170).
  • In contracts whose general conditions were not negotiated, any clause which creates a “significant imbalance in the parties’ rights and obligations” may be deemed unwritten (Article 1171).

The new provisions will enter into force on 1 October 2016 and a great part of them will only apply to contracts concluded after this date.

The reform of French contract law is of interest to insurers and brokers because it will impact insurance policies, but also because it will have consequences on the insureds’ business and the way the new provisions are applied by French courts in the coming years will need to be monitored carefully.