Frustration of purpose and the French Contract Law reform

Date01 June 2018
Published date01 June 2018
DOI10.1177/1023263X18781190
Subject MatterArticles
Article
Frustration of purpose
and the French Contract
Law reform: The challenge
to the international
commercial attractiveness
of English law?
Mitja Kovac*
Abstract
Frustration of purpose remains one of the most ill-defined concepts in the English law of contracts.
The same problem has also recently attracted the attention of the French legislature in its mod-
ernization of the Code Civil. The French reform entitles courts with broad powers to adjust the
contract when unforeseen contingencies have made the bargain unduly costly. This article argues
that the introduction of an economically inspired adjustment rule in English contract law should be
re-considered to maintain its current superior commercial position. If implemented, then the ‘ex
ante division of surplus’ should be the governing principle in adjusting contract price, because such
a remedy will not affect the agreed-upon division of the surplus. Moreover, this paper suggests that
the recent French reform is indeed a long-awaited step toward a more effective regulation of the
notorious ‘unforeseen contingencies’ phenomena, but also suggests that further improvements
might be needed. Furthermore, it offers a set of arguments suggesting that the English law in its
current form might still be the preferred option in the world of international business transactions.
The international commercial attractiveness of English contract law, although being challenged by
the new French Civil Code, remains undisputed.
Keywords
Frustration of purpose, unforeseen contingencies, impre
´vision, commercial attractiveness,
comparative contract law and economics
*Univerza v Ljubljani, Slovenia
Corresponding author:
Mitja Kovac, Univerza v Ljubljani Ekonomska Fakulteta, Kardeljeva Ploscad 17, Ljubljana, Slovenia.
E-mail: mitja.kovac@ef.uni-lj.si
Maastricht Journal of European and
Comparative Law
2018, Vol. 25(3) 288–309
ªThe Author(s) 2018
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/1023263X18781190
maastrichtjournal.sagepub.com
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MJ
1. Introduction
The 11 February 2016 was a historical day that trembled the French and worldwide legal practi-
tioners, judiciary and academia. The French government had on that day launched a comprehen-
sive reform and modified the law of obligations in the French Civil Code that have been unchanged
since its adoption in 1804. This long-awaited modification has several different aims and motives.
1
It seeks to reconcile the current French law of obligations with the Civil Code, it wants to enhance
the competitiveness of the French economy by improving the readability of the law and the
predictability of economic transactions, it seeks to render the French legal tradition internationally
attractive, and finally it wants to make French contract law more attractive to international busi-
nesses as the English common law.
2
To achieve these multiple aims and to encourage traders to choose French contract law as the
governing law in international transactions, French legislators introduced several groundbreaking
changes and innovations. Among them is also the much-debated Article 1195, which introduces
the theory of impre
´vision into French contract law. This new provision enables judges, after a
compulsory renegotiation, to adjust or to discharge the agreement that became excessively onerous
due to unforeseen contingencies. Namely, under English law, the judge can only uphold or termi-
nate the contract, or parties can voluntarily negotiate and agree to amend their contract; whereas
under the new French provision, a judge has a power to adjust or to terminate such a contract.
Moreover, it can be also argued that the modern theory of impre
´vision shows an internalization
of the idea of favor contractus following international texts, such as the Principles of International
Commercial Contracts, the Principles of European Contract Law and the Draft Common Frame of
Reference where, in cases of unforeseen contingencies, the need to maintain the contract is
notoriously prevailing over other considerations. In this respect, the English doctrine of frustration
of purpose under which a contract may be only upheld or discharged may be seen as a completely
old-fashioned and outdated one.
Yet, one may wonder whether this novel Article 1195 will indeed encourage traders to choose
French contract law as the governing law in international transactions. Will this provision really
re-establish the lost prestige and interna tional influence and boost the competitiven ess of the
French economy as initially planned? Does the revision make the Code Civil more attractive for
international contracting than the English law of contracts? Is the recent introduction of ‘impre
´vi-
sion’ provision in Article 1195 indeed such a fair and contractual certainty, increasing enterprise
with overwhelming positive economic effects, which should stop the eclipse of the influence of the
French Civil Code on the global legal stage?
One may say that only time will tell whether business finds the reformed law more attractive
than current law. Yet, there are reasons to be sceptical. This article, although employing inter-
disciplinary dynamic analysis,
3
argues that the recent French law reform is indeed a correct, long-
1. See J. Smits and C. Calomme, ‘The Reform of the French Law of Obligations: Les Jeux Sont Faits’, 23 Maastricht
Journal of European and Comparative Law (2016), p. 1040–1050.
2. See (FR) Loi 2015-177 du 16 fevrier 2015 relative a la modernisation et a la simplification du droit et des procedures
dans les domaines de la justice et des affaires interieurs (1), J.O., 17 February 2015, p. 2961, Article 8. See also S. van
Loock, ‘The reform of the French law of obligation: how long will the Belgians remain Napoleon’s most loyal sub-
jects?’, in S. Stijns and S. Jansen (eds.), The French Contract Law Reform: A Source of Inspiration? (Intersentia, 2016),
p. 17.
3. On the need for an extensive comparative investigation see P. Legrand, ‘How to Compare Now’, 16 Legal Studies
(1996), p. 232–242 and S. Geoffrey, ‘Comparative Law as a Core Subject’, 21 Legal Studies (2001), p. 444–459.
Kovac 289

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