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News January 2025: What remedies are available for breach of contract? Some useful takeaways on performance in kind and unilateral price reduction

News January 2025: What remedies are available for breach of contract?   Some useful takeaways on performance in kind and unilateral price reduction
  • Reminder:

 On 18 December 2024, in connection with the exceptional drought in Mayotte and its impact on drinking water supply contracts, the Cour de cassation (ie. French Supreme Court) handed down a very interesting ruling on how some provisions of the new French contract law –  the scope of which is still uncertain –  should be interpreted.

Let's quickly review the facts giving rise to this decision:

  • The plaintiffs, having signed a water supply contract with Société Mahoraise des eaux (SMAE), suffered water cuts from June 2023 due to an exceptional drought that led the Prefect of Mayotte to restrict access to water though administrative decrees.
  • The plaintiffs, who blamed the SMAE for failing to ensure continuity of service and the supply of clean water, initiated a legal action against this company, claiming for in particular: 
    • the restoration of uninterrupted supply from the tap or, failing that, the provision of bottled water or fountains (in other words, ‘performance (forced) in kind’ within the meaning of article 1221 of the French Civil Code) 
    • a 90% reduction in the price of the subscription until the effective service goes back to normal (in other words, ‘reduction in price within the meaning of article 1223 of the French Civil Code). 

Under its decision dated 18 December 2024, the Cour de cassation states and acknwoledges: 

(i) the inapplicability of specific ‘performance in kind’ under proven material impossibility (in this case, ie. Force Majeure)

(ii) the legitimate judge’s refusal to replace a contractual obligation by another, which was not provided for in the contract in the first place; and 

(iii)  the possibility for the part (benefiting from a clause) to obtain, in the event of poor or unsatisfactory performance, a price reduction, even if the full price has not been paid beforehand. 

  • Interest of this decision:

(i)  The inapplicability of ‘performance in kind’ while facing Force Majeure

 In this specific case, the plaintiffs required that access to drinking water should be restored, despite the administrative restrictions imposed by the exceptional drought of 2023.

  • The Cour of Cassation upheld the Court of Appeal's which ruled that, in this case, it was materially impossible to enforce the obligation to supply drinking water to the tap, due to the insurmountable constraint imposed by the prefectural decree. 

--> Consequently, SMAE was exempt from all liability and relieved of its obligation to provide a service that had become clearly impossible. 

(ii) The judge's refusal to provide another obligation not initially set forth in the contract

Faced with a breakdown in the supply of tap water, and should the compulsory performance claim be rejected, the plaintiffs alternatively required that SAME should be compelled to deliver bottled water or water from fountains, to meet its contractual obligations. 

  • The Cour de cassation categorically rejected this request, reaffirming that compulsory performance can only relate to the obligation provided for in the contract, given that, if the main obligation becomes impossible to perform, there is no rule allowing its replacement by a different obligation without this possibility being expressly provided for in the contract.

--> Consequently, the Supreme Court - and this is a very good thing for all the fervent supporters of free will in contract law – rejects any interference into the ‘reserved domain’ of the parties, which is the contract.

 

(iii) the possibility for the part (benefiting from a clause) to obtain, in the event of poor or unsatisfactory performance, a price reduction, even if the full price has not been paid beforehand. 

The plaintiffs finally claimed for a 90% reduction in the subscription price until the service would go back to normal. 

Undoubtedly, in order not to leave the applicants without a single remedy (after rejecting their previous requests), the Cour de cassation states for:

  • for the sake of right of access to the courts, the admissibility of a claim for price reduction (based on article 1223 of the French Civil Code) even if the claimant has not yet paid the full price due. This interpretation contradicts, in a way, a certain strict reading of paragraph 2 of article 1223, which may imply that only payment in full opens the door for a legal action under the aforementioned article. 
  • the unilateral nature of price reduction, which nevertheless remains under the control of the judge. The beneficiary of such right may automatically notify a price reduction (and may then apply to the court to have it enforced) but runs the risk (in this case) of being sentenced for unjustified refusal to pay if the judge subsequently rejects the unilateral reduction for being abusive. 

Even if the plaintiff's right for a price reduction has been acknowledged here by the Cour de Cassation, it is nonetheless difficult to expect for a substantial price reduction under such specific circumstances, and given that SMAE is exempt from any liability for contractual non-performance, due to Force Majeure acknowledged at the same time. It will therefore be the complex task of the referring court pf appeal to arbitrate between the interests of the parties, considering the exceptional circumstances at stake.

 

  • Practical tips:  

This highly instructive decision highlights the importance of contractual technicity when it comes to anticipating risks and including clauses dealing with: 

  • Force Majeure in relation to article 1218 of the French Civil Code. A Force Majeure clause must be customised and finely tuned to the sector in question, in particular by the party bearing the burden of the obligations to be performed (supplier/service provider)
  • substitution or alternative obligations, on the customer's side, if performance of the main obligation is rendered impossible
  • unilateral price reduction - as article 1223 is not, in principle, a matter of public policy. It may be useful, on a case-by-case basis (depending on the contractual status), to exclude it by taking the usual precautions or, at the very least, to provide for specific contractual conditions
  • as a general rule and as always, negotiation and amicable dispute resolution ways should be used to avoid any drift towards litigation. 

 

Sarah Temple-Boyer                                                                       Aude Denis

Lawyer & certified Mediator                                                         Internship/Lawyer Student

(France & CEDR)                                   

Publié le 28/01/2025