The new French Consumer Protection Law (“Loi Hamon”) was adopted by the French National Assembly on February 13, 2014 and was promulgated on March 17, 2014. This law has many implications for businesses, notably for the stricter rules on the payment terms.
In France, any producer, service provider, wholesaler or importer must communicate its terms and conditions to any purchaser of goods or services acting as a professional. They may of course also agree to special conditions of sale.
This rule is governed by Article L. 441-6 of the French Commercial Code, which was modified by the new French Consumer Protection Law, called the “Loi Hamon”.
Previously, the deadline for payment agreed between the parties cannot exceed 45 days “end of month” or 60 days from the date of issue of the invoice. The new Law clarifies the situation of periodic invoices.
The “Loi Hamon” introduces a new legal maximum of 45 days from the date of issue of the invoice for periodic invoices, i.e. when a supplier carries out deliveries to its client several times a month and issues a summary invoice at the end of the month.
On the other hand, the legal payment term of 30 days following the date of receipt of the goods or performance of the service, which is applicable if no contractual payment term is agreed, remains unchanged.
The law imposes a new administrative fine of € 75,000 for a natural person acting as a professional and € 375,000 for a legal person, doubled in case of repeat offence, imposed by the French Department for Competition, Consumption and Repression of Fraud (Direction générale de la concurrence, de la consummation et de la repression des frauds - DGCCRF) under the conditions laid down by the new Article L. 465-2 of the Commercial Code. Thus, before any decision, the DGCCRF must write to the person, stating that he may inspect the documents and seek assistance of the counsel of his choice. This person has 60 days to submit his observations. After this period, the authority may impose the fine.
The “Loi Hamon” also prohibits all clauses or practice which aims to delay the starting point of payment deadlines mentioned in this Article L. 441-6 of the French Commercial Code.
This new offense for non-compliance with methods for computing payment terms creates an obligation for business partners to set out precisely in their contract a method for calculating “end of month” payment periods (45 days from invoice date plus end of month or end of month of the invoice plus 45 days) and to apply that method.
The previous applicable civil and criminal sanctions were repealed by the new law. Therefore, imposing on a business partner payment deadlines infringing legal maximums or, in any case, manifestly unfair deadlines, is no longer specifically sanctioned as an offence under Article L. 442-6 I of the Commercial Code.
The new law facilitates the detection of the offense: companies whose financial statements are certified by an auditor must now published information on payment terms of their suppliers and their customers. Moreover, auditors must submit a certificate to the Minister of Economy if they find significant and repeated failures of the company to respect the requirements for payment deadlines.
The new law also modifies the provisions of Article L. 111-3-1 of the French Construction and Housing Code with regards to instalments payable during implementation of private markets and subcontracts governed by Law n° 75-1334 dated December 31, 1975. The new rules provide for the issuing of down-payment requests at the end of each month of an amount corresponding to the value of the work performed. The deadlines for payment of these monthly instalments and of the balance due cannot exceed the legal maximum of 45 days from the date of issue of the invoice as stated in Article L.441-6 of the French Commercial Code. The delay of intervention of the main contractor or of any provider upon which payment of the instalments is conditional is, moreover, included in the deadline for payment of monthly instalments.