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Contract interpretation

i Law governing contract interpretation

Choice-of-law provisions willingly inserted in a contract are, in principle, upheld by French courts, for parties are free to determine which law will govern the substance of their contract (lex contractus). Said law will also govern its interpretation.

However, parties may not choose a foreign law solely out of convenience, in order to escape imperative provisions of the law that would otherwise have been naturally applicable. In such cases, a court may apply these imperative provisions regardless of the choice-of-law clause. In addition, a court may set aside the lex contractus when the results of its application would manifestly contradict the public order of the forum.

Where parties fail to expressly provide for a choice-of-law clause, courts can either:

  1. discover an implied choice of law in parties' behaviours; or
  2. apply the rules set forth in Regulation (EC) 593/2008 on the law applicable to contractual obligations (Rome I).

For instance, a contract for the sale of goods shall be governed by the law of the country where the seller has his or her habitual residence.

ii Participants to contract interpretation

Agreements lawfully entered into have the force of law for those who have made them. Both the parties to a contract and the courts seized of a dispute related to said contract will be bound by its terms.

Parties may anticipate disputes by inserting in their contract certain provisions circumscribing the court's margin of manoeuvre in its interpretative task. For instance, a clause of entire agreement will prevent the court from interpreting a contract off other exchanges between the parties or their behaviours. Parties may also conclude an interpretative agreement to guide further interpretations of the terms of the main contract.

When deciding a dispute, a court ruling on the merits of a case may sovereignly interpret all the obscure and ambiguous terms of a contract. However, judges cannot interpret provisions that are clear and precise. However, refusing to interpret a contractual clause potentially affecting the outcome of a trial because of its ambiguous character would be tantamount to a denial of justice.

iii Rules of construction

Courts must seek the common intent of the contracting parties rather than stop at the literal meaning of the words. In doing so, they may take into account the behaviours of the parties, both before and after the conclusion of the contract, as well as the context of the operation. If judges cannot detect the intention of the parties, they must interpret the clauses according to the meaning a reasonable person placed in a similar situation would give to these clauses.

All the clauses of an agreement are interpreted with reference to one another by giving to each one the meaning that results from the whole act. When several contracts partake in a given operation, courts may give meaning to a provision in one of these contracts in accordance with the intention of the parties as set out in the other contracts.

In addition, when a clause is susceptible of two meanings, it shall be understood to mean that which may produce some effect, rather than according to the meaning that would produce none.

When none of the aforementioned rules of construction are enough to discover the meaning of a clause, said clause must be interpreted:

  1. in favour of the consumer, when the contract governs the relation between a professional and a consumer;
  2. in favour of the debtor, when the contract was freely negotiated; and
  3. in favour of the party who did not draft the contract, for standard form agreements.

Finally, as a general principle, parties must not only comply with the express provisions of their contract but also with all the terms implied in it by equity, customs or the law. Therefore, judges may discover obligations that were not expressly incorporated in the contract, such as an obligation to ensure the security of the passengers in an agreement related to the provision of transportation services.

iv Hierarchy of evidence regarding contractual meaning

Parties may insert a clause of priority organising the hierarchy within the contractual documents, so as to determine which texts shall prevail in case of contradiction. Otherwise, courts are bound only by the rules set out in Section 3.3 and not by an obligation to follow a given hierarchy of evidence.