Belgian Civil Code

Need for innovation

NECESSITY OF MODIFICATION OF RULES ON CONTRACTUAL DAMAGES – The Belgian Civil Code can still be used by creative case law, but is somewhat out of date. This seems to be particularly the case as regards the measure of damages for breach of contract. In a recent comparative study on contractual remedies, however, an Australian professor praised French contract law as it stood in 1804: “Whereas French contract law was extremely well developed by 1804 when the Code civil was first published, English contract law in contrast was still astonishingly undeveloped.” Would this again be valid as of 1 October 2016, with the entry into force of the new French contract law as regards the rules on the quantification of damages for breach of contract? Should the Belgian legislator draw inspiration from the new French legal framework on damages for breach of contract?

CURRENT PROVISIONS ON THE MEASURE OF DAMAGES FOR BREACH OF CONTRACT (ARTICLES 1149–1153 CC) – In Belgium the ordinary measure of damages for breach of contract is still governed by the Articles 1149–1153 of the Code civil. Article 1149 CC only provides a vague guideline for the basic measure of compensation: the aggrieved party is entitled to compensation for the loss suffered, including loss of profit. In addition, the Civil Code recognises some limits on that liability. However, those limits of unforeseeability (Article 1150 CC) and indirectness (Article 1151 CC) of harm caused by a breach of contract have been hollowed out in practice. Do these articles still serve any purpose? In this context the subsequent question arises as to why the duty to mitigate and the recoverability of non-pecuniary loss and lost chances are not yet enshrined in Belgian provisions on the measure of damages for breach of contract? With Belgium swiftly moving closer to a new Belgian Civil Code, the French reform should be considered in detail from the perspective of contractual damages.

INTRODUCTION

This book is the result of the Contract Law Workshop of the 20th Ius Commune Conference held 26–27 November 2015. The theme of this Workshop was: ‘The French Contract Law Reform: a Source of Inspiration?’ This theme was carefully chosen after the French projet d'ordonnance about contract law, the general regime of obligations and the proof of obligations appeared in February 2015. A few months after our workshop, in February 2016, the fi nal version of the ordonnance was published. The contributions in this book are the proceedings of the presentations of this conference. Since the conference in November 2015, all authors have incorporated comments on the fi nal version of the ordonnance. Whereas Van Loock briefly sketches the antecedents and the outcome of the reform, the other authors tackle each specific topics of the reform that surprised and/or excited the legal community. In what follows, we will introduce the contributions of Van Loock, Pannebakker, Peeraer, Leone, Lutzi, Oosterhuis, Jansen, Verkempinck, Storme, and Mahé to the reader.

As already mentioned, the contribution of Van Loock gives a broad overview of the pathway of the French reform. Firstly, it scrutinises the historical antecedents of the reform, the incentives for reform and the first reform projects (the Catala project, the Terré project and a governmental reform proposal). Furthermore, the author discusses and questions the legitimacy and the practicability of the choice to carry out the reform by way of an ordonnance (which involved a significant delegation of the legislative competences to the government) instead of going through the ordinary parliamentary procedure. The contribution also gives a short overview and appreciation of various innovations of the (projet d’) ordonnance. Moreover, he points out the differences between the draft and the final version of the articles, showing that the drafters of the final ordonnance have taken into account propositions received during the public consultation period. He concludes with lessons for a possible Belgian reform of the law of obligations. Indeed, the lessons learnt from the French reform will probably have to be taken into account soon.

Introduction

The reform of the law of obligations recently approved by the French government introduces a general remedy against “significantly imbalanced” terms in non-negotiated contracts. According to proposed Article 1171 CC “in a contract of adhesion, any term which creates a significant imbalance between the parties’ rights and obligations is considered as never written”. By virtue of its position, among the general rules on contractual content, the provision would apply to all non-negotiated contracts, including those which are not specifically regulated within the civil code.

This chapter explores the new rule's potential impact on one specific domain, namely the judicial control of employment (and, potentially, employment-like) contracts. The rule echoes two existing provisions belonging to the specialised domains of consumer and competition law, but the application to labour law that comes with its scope is unprecedented, and the option that the proposal embraces has not been discussed thoroughly in the French literature – although some authors, occasionally, had invoked or foreshadowed the possibility. At the same time, the paper will show, on occasion French courts already engage in activities that might resemble unfair terms control- be it by applying general contract law or labour law-specific tools.

If some form of control of specific terms in employment contracts under open norms is already in place in France, in order to assess the likely impact of the reform on this field, it is important to investigate the similarities and differences between the mechanisms in place and the one to come. Since, as said above, the proposed rule appears to resemble very strongly existing rules targeting unfair terms (clauses abusives) in consumer and commercial contracts, there may be reasons to believe that some commonality is to be expected between all these mechanisms – the one formally in place in the special codes, the one to come with the reform, and the one(s) to be found in the law in practice as developed by French labour courts.

Introduction

This paper addresses the new rules on the pre-contractual phase and reflects upon the following question. To what extent do these rules contribute to the attractiveness of the French law for parties to international commercial transactions?

The ordonnance for the reform of the law of contract, the general regime of obligations, and proof of obligations (the ordonnance) modernises French law. The reform aims inter alia to make the French legal system more influential and attractive at international level. Recent empirical findings on the choice of law applicable to contract have contended, indeed, that French law is not the regime most favoured by parties to international commercial transactions.

The regulation of contractual negotiations, namely Articles 1112, 1112–1, 1112–2, 1123 and 1124 of the ordonnance, is one of the areas subject to modernisation. The provisions established by the Code Napoleon of 1804 were underpinned by the model of simple, discrete transactions and, therefore, did not expressly deal with the contractual negotiations. By contrast, the ordonnance establishes a more sophisticated system of regulation.

This sophistication reflects firstly, the evolution of French case law. Since the adoption of the Napoleonic Code two centuries ago, French courts have come some distance in interpreting its provisions in the context of practical changes. Over the years of application and interpretation of the Code civil, French courts have developed standards of conduct to be respected by the parties during negotiations. The second point underpinning the ordonnance is the complexity of contract formation in practice. Legal scholars, pioneered by the US relational contract theorists at the end of the last century, have described the increasing gap between legal theory and practice. Their arguments have not gone unheard in France. However, many of these legal writings have been criticised for offering few sufficiently pragmatic legislative solutions. Thirdly, the ordonnance draws some inspiration from the existing international soft law instruments.

Introduction

For the past two centuries, French legal doctrine has tried to elaborate a comprehensive theory of nullity to remedy the absence of such a framework in the Code civil. Due to the variety of sources in the Ancien Regime, the rules regarding nullity formed an intricate whole prior to the enactment of the Code civil. Still largely inspired by those rules, the Code civil did not attempt to clarify the situation. Up until now, both in France and in Belgium, the doctrine of nullity is regarded as one of the most obscure and impenetrable theories in private law. Notwithstanding an unremitting interest in the matter, scholarship has not sufficiently demystified the concept of nullity and the way it operates in private law. The announced revision of large parts of the Code civil offers a unique chance to elucidate the matter at hand and to boldly go where the Code civil has not gone before.

This paper will scrutinise whether the ordonnance has indeed seized the opportunity. First, this paper will give a brief overview of the ordonnance's approach to nullity (2). Since the different aspects of nullity are too multifarious to deal with in a single paper, the scope of the research will be limited to the concept of nullity (3), its use (4), and its enforcement (5) in the ordonnance. As a consequence, the grounds of invalidity and the consequences of nullity (such as restitutions and potential liability connected to avoidance) will not be examined. Since the Draft Common Frame of Reference (DCFR) and the Dutch Burgerlijk Wetboek of 1992 have reconsidered the analysis of nullity, the ordonnance's propositions will be compared to those solutions in order to see whether the ordonnance offers state-of-the-art solutions. The results of those comparisons will demonstrate to what extent the ordonnance can be a source of inspiration for the further development of the Belgian and Dutch law regarding nullity.

Introduction

‘Agreements lawfully entered into have the force of law for those who have made them.’ The principle of pacta sunt servanda so famously enshrined in Article 1134, al 1, of the Code civil is regularly considered a cornerstone of French contract law – which has been repeatedly upheld by the Cour de cassation in the most uncompromising terms. Its decision to refuse any judicial intervention for imprevision to account for supervening circumstances, however severely they may have disturbed the contractual balance, is a particularly well-known example, which has made the Canal de Craponne by far the best-known waterway amongst French law students.

One of the reasons for the decision's notoriety stems from the fact that its rigour is almost unheard of in other European legal systems (arguably with the exception of Belgium). It is therefore hardly surprising that it has not only instigated a seemingly endless stream of scholarly publications and academic discussion – while also leaving room for the occasional decision to cast doubts on the court's otherwise strict adherence to the principle – but has also been addressed in all recent reform projects as well as in loi n° 2015–177 du 16 fevrier 2015, the respective projet d'ordonnance, and ordonnance n° 2016–131 du 10 fevrier 2016.

Reforming this area of law required the French legislator (who, in this case, was actually the French government) to strike a new balance between, on the one hand, the principle of pacta sunt servanda and the legal certainty that is usually ascribed to it and, on the other hand, the idea of contractual solidarity and fairness that lies at the foundation of every exception for imprevision admitted elsewhere. The controversial comments to which the proposed provision has given raise bear testimony to the difficulty of that task.

Yet, many other European systems have faced this challenge before, coming to a variety of different solutions, which has been described as ‘revealing all the difficulties of the construction of a ius commune of contract’. But the diversity of approaches does not only make imprevision one of the most interesting aspects of the French reform, especially for the present conference, the viable balance that has been found in many legal systems also seems to have provided useful guidance during the French reform process and will continue to enrich its academic discussion.

Introduction

Exiled to the desolate island of Saint Helena, Napoleon Bonaparte pondered on one September evening in 1816: “Waterloo will wipe out the memory of my forty victories; but that which nothing can wipe out is my Civil Code. That will live forever.” These thoughts have proven to be visionary. His Civil Code is not only still applicable in France, Belgium and Luxembourg, it has also influenced codifications all over the world. Now, 200 years after his dramatic defeat in the Battle of Waterloo, the law of obligations as reflected in the French Civil Code will be modernised. This modernization is necessary as the law of obligations in the Civil Code has been left virtually unchanged since its adoption in 1804. The reform will not, however, put the Code's vocation to eternity to rest. On the contrary, its purpose is rather to re-establish the prestige of the French Civil Code as the cornerstone of French private law and a model for other jurisdictions.

On 11 February 2016, just a few days before the constitutional deadline, ordonnance n° 2016–131 portant reforme du droit des contrats, du regime general et de la preuve des obligations was published. With this ordinance, the French government modified the law of obligations in the French Civil Code. The authority to modify the Civil Code was awarded by Parliament through the Loi nr. 2015–177 relative a la modernisation et a la simplification du droit et des procedures dans les domaines de la justice et des affaires interieures, which was published on 17 February 2015. This act was adopted after a long procedural stand-off between the French government and the National Assembly on the one hand, and the Senate on the other hand. Pursuant to Article 8 of that act, the French government could by ordinance change the law in book III of the Civil Code in order to “moderniser, de simplifi er, d'ameliorer la lisibilite, de renforcer l'accessibilite du droit commun des contrats, du regime des obligations et du droit de la preuve, de garantir la securite juridique et l'efficacite de la norme.”

3. Although a reform had been discussed before (Chapter 2), it would take until the turn of the millennium until the call for reform finally gained momentum.

Introduction

On 10 February 2016, the French Government's ordonnance (hereafter: the 2016 ordonnance), leading to a comprehensive revision of Book III of the 1804 Civil Code on general contract law, was published in the Journal Officiel. The new statutory rules should come into force on 1 October 2016, without the First and the Second Chambers having either amended or adopted each single provision of the revised Book III, following lengthy and stormy debates. In February 2015, the Chambers entrusted the Government with the overall reform of French general contract law. With this reform project, the French Government, more precisely the Ministry of Justice, pursued two major objectives, namely the strengthening of legal security and accessibility (respectively readability) of French contract law. General contract law is currently overwhelmingly case law based. As even the Government itself has observed, French general contract law is on many issues rather unsystematic and unclear, at least for French laymen and foreign legal observers. Regarding legal security, governmental drafters opted for a codification a droit constant, which, besides continuity of the law, secures the French legal community's agreement to the revision of Book III of the Civil Code.

The final version of Book III as enacted by the 2016 ordonnance was preceded by several governmental drafts, the latest being the 2013 draft ordonnance. The 2013 draft ordonnance was published and later submitted to public consultation by the Ministry of Justice, and was also translated into English. The 2013 draft version of Book III and the 2016 ordonnance diff er from each other. Some early comments already refer to the more conservative nature of the 2016 ordonnance. One of the changes between the 2013 draft and the 2016 ordonnance is worth singling out, since it concerns the general principles of contract law, specifically the freedom of contract and one of its opposites, fundamental rights and liberties (hereafter: FR).

Introduction

The French Civil Code (hereinafter ‘CC’) does not (yet) recognise price reduction as a general remedy of contract law. Under French contract law the creditor has merely the choice between forced execution (primarily in kind, or subsidiary, by equivalent) and termination of the contract. However, some applications of price reduction are recognised by means of a custom (e.g. the refaction in internal commercial sales contracts) or legislation (for example Article 1644 CC: actio quanti minoris, Articles 1617 and 1619 CC, Articles 1722, 1724 and 1726 CC, price reduction under consumer sales contracts, price reduction under the Vienna Sales Convention …). All these applications can be situated in special contracts (such as sale contracts, tenancy contracts …) but do not imply a general recognition of price reduction. Nevertheless, there is a growing body of opinion that the remedy of price reduction deserves more attention. As a result of some remarkable judgements of the Court of Cassation, the question whether price reduction has to be recognised as a general and autonomous remedy has been the subject of much debate in doctrine., The influential scholar Mestre ended an overview of jurisprudence that price reduction has to be considered as “un mode d'intervention plus general, une veritable technique du droit commun des contrats”. De La Ascuncion Planes undertook in 2006 an extensive research about this topic. She considers ‘la refaction du contrat’ to be an autonomous judicial and an extrajudicial remedy. The aim of the price reduction is, according to her, to correct contractual imbalances and illegalities.

Road-map to price reduction: projet Catala, projet de la Chancellerie and projet Terré

A few years before the thesis of De la Ascuncion Planes appeared, there was a growing awareness about the modernisation of the 200-year-old Civil Code. The first attempts to modernise the Civil Code were mainly academic and prudent. The first (academic) project is called ‘Projet Catala’ of 2005 and treats the law of obligations and the law of prescription.

Introduction

Unforeseen circumstances pose one of the perennial dilemmas of private law: if due to unforseen circumstances performance becomes impracticable or even impossible, is a non-performing party then still liable out of the contract? Or might he be excused? In other words, should precedence be given to rules based on the adage pacta sunt servanda, or rather to excuses based on clausula rebus sic stantibus or other good faith principles? The French legislature clearly struggled with this dilemma in its recent adjustment of the Code civil, as can be seen from the Projet d'ordonnance of 2015 and the ordonnance no 2016–131 of 10 February 2016. Before, a seemingly endless parade of scholars, both within and outside France, discussed the current solution in the Code civil to the problem of unforeseen circumstances, but also the solutions proposed in various draft s, such as the Avant-projet Catala.

In the previous contribution to this volume, Introducing Imprevision into French Contract Law, A Paradigm Shift in Comparative Perspective, Tobias Lutzi not only analysed an impressive amount of French and foreign contemporary scholarship on – the traditional lack of – imprevision in French private law, but also assessed the current, proposed and recently adopted French solutions to commercial impracticability resulting from unforeseen circumstances. For this assessment, he compared the English, German (in particular) and the current, proposed and new French solutions to unforeseen circumstances with each other, thereby highlighting lessons to be learned from the German solution. The focus of Lutzi's comparison is mainly at a conceptual level, namely whether the systems compared offer an adequate exception to rules based on pacta sunt servanda and he argues that the German solution to the problem of unforeseen circumstances – to which the new Article 1195 Code civil will be quite similar – is to be preferred over the English, and the current and previously proposed French solutions.

THE NEED FOR A POLITICAL AS WELL AS A LEGAL APPROACH

The story told in Chapters 3 and 4 is of the practical difficulty in making sharp and effective use of the promise of a limited role for the EU which is made by the principle of conferral contained in Article 5 TEU. Several features militate against the prosecution of a compelling constitutional case that the limits of EU legislative competence have been exceeded. Most of all, the internal market, to which legislative harmonisation adopted pursuant to Article 114 TFEU is dedicated, is in principle a limiting concept but in practice an empowering one. The threshold which must be crossed is low: the Court is reluctant to intervene in legislative choices provided the constitutionally necessary incantation of a contribution to the functioning of the internal market adorns the legislative measure's reasoning. Seen from the opposite standpoint, it is very difficult to make a plausible case against the validity of measures of legislative harmonisation, since it is so easy for a political preference to act to be endowed with the necessary sheen of constitutional respectability. The case law, examined in Chapter 3, duly reveals that most challenged measures survive attack before the Court.

The problem, then, lies in the limited worth of the currently applicable legal rules in giving substance to the corollary of the principle of conferral, which is that competences not conferred on the EU belong with the Member States. This is important enough to be made explicit twice in the common provisions at the beginning of the TEU, in Articles 4(1) and 5(2) TEU, but it is not backed up by operationally useful rules. The Treaty does not make explicit provision to exclude particular areas from the influence of the EU. In fact, by stark contrast, it is structured to grant functionally broad competences to the EU. Article 114 TFEU is the most supple of these, and, as explained in principle in Chapter 3 and explored in legislative practice in Chapter 4, it is a poor guardian of the notion of ‘States’ rights’ which seems to be promised by Articles 4(1) and 5(2).

INTRODUCTION

The question which is addressed in this chapter is simply stated. It asks what is the scope for action at national level in a field in which the EU has adopted legislation. The most acute dimension of this question asks whether Member States may adopt stricter rules than those set as a harmonised norm by the EU. It is simple enough to ask these questions, but providing answers is not simple at all. The Treaty is evasive on the point. Legislative practice varies, policy preferences among the EU's political institutions have fluctuated (and continue to do so) and the Court of Justice has muddied the waters still further by delivering a spray of rulings, examined below, which seem irreconcilable.

The basic choice lies between a model of ‘maximum harmonisation’ and a model of ‘minimum harmonisation’. This chapter is built on the argument that it is open to the EU, in adopting measures of harmonisation, to choose between setting rules that deny Member States room to choose stricter standards – this is the model of maximum harmonisation – and instead setting rules that allow scope for stricter national standards above the harmonised norm – this is minimum harmonisation. But it is admitted at the outset that this argument is made against a contested constitutional and policy background. The chapter begins by examining the governing Treaty superstructure (section 6.2). It then maps legislative practice in the field of harmonisation (section 6.3), before turning to exploration of the Court's unhelpfully ambiguous legacy in the field (section 6.4). It then tracks the Commission's policy-driven crusade against the technique of minimum harmonisation and in favour of maximum harmonisation, which has been animated by a belief that the maximum model is the superior means to deliver a well functioning internal market for the EU (section 6.5). This has clear resonance in the field of contract law. It then shows how politically contested this has – quite properly – become, and explains how the purity of the Commission's vision has met political resistance and how accordingly minimum harmonisation retains a place in the strategies for the construction of the internal market (section 6.6).

INTRODUCTION

The EU's legislative acquis affecting contracts and contract law is constructed in line with the constitutionally generous approach mapped in the previous chapter.

Free movement law opens up the internal market by releasing contractual autonomy from the restrictive effect of regulatory barriers to cross-border trading freedom. Then that contractual autonomy is conditioned by controls in the name of competition law. This was covered in Chapter 2. But the limits of free movement law, represented by the available scope to justify barriers to inter-State trade, are also the limits of the internal market as a project built exclusively on deregulation of national markets. Where barriers to inter- State trade survive testing against the standards set by free movement law, progress to the creation of an internal market depends on their (partial or total) replacement by EU-level rules. This is harmonisation. It is the legislative supplement to the judicially driven process of market-making that is founded on the non-absolute requirements of free movement law. Chapter 3 examined this process, and it showed that harmonisation entails deregulation too, in the sense that a multiplicity of diverse national rules are boiled down to a single common rule, set at EU level. But there is a common rule, so the process is deregulatory but simultaneously re-regulatory, in the sense that the EU takes over the responsibility to regulate the market that was previously the preserve of the Member States, performing that task in divergent fashions. In this sense legislative harmonisation has a dual function – both to secure the integration of the markets (by establishing a common rule) but also to set the terms according to which conduct shall be (re-)regulated within that integrated market (by establishing a common rule). Chapter 3 explained that this dual function is commanded by the Treaty, especially Articles 12, 114(3), 168(1) and 169(1) TFEU, and the Charter of Fundamental Rights, especially Articles 35, 37 and 38, and moreover it has been relied on in a legally significant way by the Court in determining that harmonisation properly possesses this dual function. So the Court in the first Tobacco Advertising case did not deny that public health policy and concern for consumer protection may legitimately inform the shaping of the harmonisation programme – quite the reverse.