Contracts and deadlines: First analysis of Ordinance No. 2020-306

Purpose of time limit order

• Ordinance No. 2020-306 of March 25, 2020 relating to the extension of time limits expired during the health emergency period and the adaptation of procedures during this same period deals in particular with "time limits and measures which have expired or which are expiring between March 12, 2020 and the expiry of a period of one month from the date of cessation of the state of health emergency declared under the conditions of article 4 of the law of March 22, 2020 referred to above " .

It includes general provisions on deadlines and sets out specific measures, important even if limited, in contractual matters.

 

Important elements to understand the measures taken

 

spirit of measures

• Neutralize the inaction that may have resulted from the context created by Covid-19 and allow the holders of the rights concerned to exercise them in sufficient time after the cessation of the latter

 

Reference period

• The measures tend to neutralize the effects of the period between "March 12, 2020 and the expiry of a period of one month from the date of cessation of the state of health emergency declared under the conditions of the article 4 of the law of March 22, 2020”
• This is a period whose end is not known to date.

 

Object of the measures

• The measures are mainly aimed at suspending and/or extending the passage of time limits during the reference period
• They establish additional deadlines for the exercise of rights or the completion of due diligence, to take into account the time that will be necessary for a return to normal.

 

Measurement limit

• The measures are not intended to revive deadlines that expired before March 12, 2020

 

 

The principle of a general neutralization

• The ordinance provides for a fairly general neutralization of the period between March 12, 2020 and a period of one month after the date of cessation of the state of health emergency:

« Any act, appeal, legal action, formality, registration, declaration, notification or publication prescribed by law or regulation under penalty of nullity, sanction, lapse, foreclosure, prescription, unenforceability, inadmissibility, expiry, automatic withdrawal, application of a special scheme, void or forfeiture of any right whatsoever and which should have been performed during the period mentioned in Article 1 will be deemed to have been performed on time if it was performed within a period which may not exceed , from the end of this period, the time legally allowed to act, within the limit of two months. The same applies to any payment prescribed by law or regulation for the acquisition or preservation of a right »

 

 

Observations regarding general neutralization

 

Purpose of neutralization

• The neutralization carried out concerns a certain number of acts only prescribed by law or regulation.
• Neutralization therefore does not seem to apply, subject to the specific neutralizations also provided for in certain contractual clauses, to acts which should have been performed under a contract (example: steps for the lifting of conditions precedent)

Deferral mechanism

• The neutralization carried out, tends a priori, to postpone the time within which the acts should have been carried out during the period of neutralization to the end of this period within the limit, however, of a duration of two months.

Implementation criterion

• Neutralization does not a priori take into consideration the starting point of the period within which the act should have been performed, but rather the fact that the said period would have expired during the period of neutralization, which can considerably extend the period for completion. acts in question

Application of neutralization to payments that were to be made during the neutralization period

• Neutralization also extends to payments that had to be made for the acquisition or retention of rights, provided however also that the obligation to make them resulted from the law or the regulation (and not from a contract)

 

 

Specific neutralization of certain contractual clauses

 

The ordinance specifically neutralizes the effects of certain clauses:

• Penalties
• Penalty clauses
• Cancellation clauses
• Clauses providing for forfeiture

Its purpose is to sanction the non-fulfilment of an obligation during a given period.

The clauses are deemed not to have taken or produced effect during the neutralization period if the period for performance has expired during this period.

The penalty payments or clauses are intended to take effect one month after the expiry of the neutralization period if the execution has not taken place in the said month.

The course of penalty payments and the application of penalty clauses having taken effect before March 12 is suspended during the neutralization period

 

 

 

Thoughts on the neutralization of certain contractual clauses

 

– Neutralization limited to clauses having a certain purpose

The neutralization in question does not seem to apply to the clauses even mentioned since they do not come to sanction the absence of fulfillment of an obligation within a certain period.

– A neutralization that does not apply to execution times that expired before March 12, 2020

The criterion for the application of the order is the end of the period which was set for the performance of its obligations by a party.

– A neutralization that is not easily understood when it comes to the “suspension” of penalty clauses

– A neutralization that raises the question of the application of legal mechanisms for non-compliance with obligations

The order does not expressly exclude price reduction (1223 of the Civil Code), unilateral or judicial resolution, common law liability, which could therefore theoretically be implemented

– A neutralization that postpones the implementation of contractual mechanisms without making them automatic when they can play again

Those who would like to use the contractual mechanisms in question must therefore carry out the due diligence provided for (formal notice, etc.)

 

 

A specific neutralization for the termination or renewal of contracts

 

The ordinance specifically neutralizes the delays or periods in the course of flow:

• For the termination of a contract
• For the tacit renewal of a contract in the absence of denunciation
  By extending by two months after the neutralization period the deadlines for terminating or denouncing the renewal expiring during this period

Objective of the measure:

• Prevent a party from finding itself a prisoner of a contract that it was unable to denounce during the neutralization period

Major question:

• The ordinance does not provide for the effects on the duration of the contract concerned, which can be very strongly impacted by such a measure; failure to terminate or renew is generally associated with a new fixed term of the contract

 

 

Questions

The measures put in place by the ordinance are intended to be articulated with common law, from which they derogate in part, as special and derogatory measures prescribed by an exceptional context, while leaving it to remain for the remainder.
This articulation is anything but obvious, starting with that to do with force majeure, which is intended to apply both in the performance of the contract and in terms of prescription.

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