Commercial contracts

Drafting and negotiating commercial contracts

Framework agreement, order form, confidentiality agreement, settlement agreement: we write the document, or we take up your partner's draft to identify what can still be negotiated. The negotiation is itself governed by rules — article 1112 of the French Civil Code lays down the freedom to break off negotiations, article 1112-1 the duty to disclose what is decisive for the other party, and article 1104 imposes good faith, a provision of public policy.

Litigation always turns on the same clauses: price and price review, duration and renewal, limitation of liability, the clause pénale — the French liquidated damages clause, which the court may reduce (art. 1231-5 of the Civil Code) — applicable law and jurisdiction.

Terms and conditions of sale and of use, and online selling

Terms and conditions of sale are the sole basis of commercial negotiationbetween businesses (art. L. 441-1 of the French Commercial Code): the discussion starts from your terms, not from your customer's purchasing conditions. They also carry your payment periods, which the law caps, and your late-payment penalties.

In online selling, two bodies of rules overlap: the French Consumer Code where you face a consumer — pre-contractual information, a fourteen-day right of withdrawal (art. L. 221-18), unfair terms — and the Commercial Code where you face a business. To these are added data processing agreements as soon as a technical supplier processes your customer files. Terms copied from elsewhere bind you to someone else's choices: their payment period, their limitation of liability, their court.

Distribution, services, partnership

Selective or exclusive distribution, franchising, business introduction, industrial subcontracting, recurring services: these contracts organise a relationship that will last, and it is their ending that costs money. So we write the duration, the notice period, the exclusivity and the fate of the stock or of the customer base at the same time as everything else.

Worth knowing while reading this page, though it is not dealt with here: complying with the contractual notice period is not always enough to protect the party terminating. That is the separate subject we deal with when the relationship stops overnight.

The audit of your existing contracts

It is the piece of work businesses ask for least, and the one that changes the most. We take your contracts in force — terms and conditions, framework agreements, leases, services renewed year after year — to answer four questions:

1. What binds you for longer than you thought? Tacit renewals, forgotten six-month notice periods, exclusivities with no end date.
2. Which clauses would not hold up today? Significant imbalance, an over-broad limitation of liability, a manifestly excessive clause pénale.
3. What is missing? Retention of title, security, price indexation, choice of court.
4. What protects you badly if you are not paid? Retention of title and security are won in the drafting, not in the litigation — that is the direct link with what happens when the invoice is not paid.

The audit produces a table of contracts, an order of priority and model amendments. It is carried out once, then kept up to date: that is the purpose of the retainer described below.

The bail commercial, the French commercial lease, is the contract most company directors sign fastest and regret longest. It has a regime of its own, articles L. 145-1 et seq. of the French Commercial Code, largely a matter of public policy: what the lease provides does not always prevail over what the law requires.

Three figures give the rest its shape. Nine years minimum duration. A right for the tenant to terminate at each three-year point, with six months' notice (art. L. 145-4). And a right to renewal whose refusal opens up, in principle, an eviction indemnity (art. L. 145-14).

What is really negotiated at signature

The discussion rarely concerns the rent alone. It concerns:

• the permitted use of the premises— drafted too narrowly, it prevents you from changing your business without the landlord's consent;
• the allocation of charges, taxes and works, which must appear in the lease as a precise and exhaustive inventory (art. L. 145-40-2), Decree no. 2014-1317 of 3 November 2014 prohibiting certain costs from being charged to the tenant, including the major repairs referred to in article 606 of the Civil Code;
• the schedule of condition on entry, whose absence is paid for on the way out;
• the three-year break right, which some leases exclude in the cases where the law allows it;
• the assignment of the lease and of the fonds de commerce, decisive on the day you sell up;
• the index used for rent reviews — the commercial rents index or the tertiary activities index, depending on the business.

The choice of regime is itself open to discussion: a bail dérogatoire, a short-term lease limited to three years (art. L. 145-5), gives no right to renewal, and turns into a bail commercial if the tenant stays on at its end.

Renewal, uncapping, notice to terminate

A bail commercial does not come to an end of its own accord: absent a congé, the formal notice to terminate, it continues by tacit extension, which is not a neutral outcome — a lease extended beyond twelve years is one of the cases where the rent of the renewed lease escapes capping (art. L. 145-34).

Capping is the rule: on renewal, the rent varies in principle within the limit of the variation of the index. Uncapping — déplafonnement — is the exception, and it is where the disputes are concentrated: a material change in the local commercial factors, a lease longer than nine years, a change in permitted use. Since Act no. 2014-626 of 18 June 2014, the increase following an uncapping is smoothed over time, which softens the shock without removing what is at stake.

The congéis subject to strict formalities and short deadlines. A badly drawn notice, or a renewal request made out of time, produces effects that cannot be undone: it is the point on which we are most often consulted in a hurry, and the only one on this page where a few weeks' delay is enough to change the outcome.

This is the way we run a file, applied to contract law.

1. Scoping. A first conversation, at the office or by video call, to identify the document, the deadline and what is financially at stake. You come away with a scope and a timescale.
2. Reading and diagnosis. The points of risk are given back to you in order of importance, not in the form of a fifteen-page memorandum.
3. Drafting or negotiation. Contract, amendment, letter setting out a position, congé or renewal request as the case may be — and, if negotiation is needed, in your name or in the background, as you prefer.
4. Follow-through.A contract's deadlines do not remind you of themselves: we keep the diary of notice periods and rent reviews for the files we handle.

Three arrangements, all of them stated before we begin.

• The monthly retainer is the arrangement suited to this field, and the one the firm already uses: it covers day-to-day questions and the routine review of your contracts, for a budget known in advance. It is what makes it possible to have a three-page draft read without wondering whether it is worth the cost of opening a file.
• The fixed fee per item applies to work that recurs: a set of terms and conditions of sale and of use, a framework agreement, a contract audit, a congé or a lease renewal request.
• The fee agreement governs contentious files — setting the renewed rent, a dispute over performance — by setting out the scope and the work to be done.

The amount is stated and accepted before the work begins, and nothing is billed outside that framework.

Me Jérôme Pujol was admitted to the Bar in 2000 and has practised business law ever since, at the Bars of Paris and of the Pyrénées-Orientales. He holds a master's degree from ESSEC and began his career with Gide Loyrette Nouel in Bucharest, before founding the firm, which also supports young companies through its patronage of the UPVD iN CUBE incubator.

Two points matter particularly where contracts are concerned:

• We also argue in court the contracts we write. The firm handles unpaid invoices, insolvency proceedings and competition disputes. You do not draft a retention of title clause the same way once you have seen how it is argued in front of a judge. That is the sense of our approach — anticipate rather than repair.
• The budget is known before you commit, including for a simple review — which is what makes a contract get read before signature rather than after.

We give no undertaking as to the outcome of a negotiation or of court proceedings: our professional rules forbid it.

Commercial lease litigation is as local as it gets: it is heard where the property is situated, and setting the renewed rent falls to the juge des loyers commerciaux, the commercial rent judge, at the tribunal judiciaire covering the premises. A real local presence is not a brochure argument here — it decides who travels, and at what cost.

From our Paris office, a short walk from the Champ-de-Mars, we handle office and retail leases in the capital, where uncapping is argued on rental values that bear no relation to the rest of the country. From our Perpignan office, we act for shops, craft businesses and companies in the Pyrénées-Orientales and in Occitanie, on leases where the permitted use of the premises and the three-year break right often weigh more than the rent.

As soon as a contract is entered into with a business established on the other side of the border, two questions arise before the substance: which law applies, and which court has jurisdiction. They are settled in two clauses at the drafting stage, and argued for months when those clauses are missing. Premises situated in Spain are moreover governed by Spanish urban lease law, which knows neither French capping nor the French eviction indemnity.

We also work remotely throughout France, by video call and electronic signature.