Contracts and deadlines: Initial analysis of Order No. 2020-306

Purpose of the order regarding time limits

• Ordinance No. 2020-306 of March 25, 2020 relating to the extension of deadlines that expired during the health emergency period and to the adaptation of procedures during this same period deals in particular with "deadlines and measures which have expired or which will expire 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 aforementioned Law of March 22, 2020".

It contains general provisions regarding time limits and sets out specific measures, important even if limited, in contractual matters.

 

Key elements for understanding the measures taken

 

Spirit of the measures

• To neutralize any inaction that may have resulted from the context created by Covid-19 and to allow the holders of the rights concerned to exercise them within a sufficient time after its cessation

 

Reference period

• The measures aim 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 Article 4 of the Law of March 22, 2020"
• This is a period whose end is not yet known

 

Purpose of the measures

• The measures primarily aim to suspend and/or extend the running of deadlines during the reference period
• They establish additional time limits for exercising rights or completing due diligence, to take into account the time that will be needed for a return to normal.

 

Limits of the measures

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

 

 

The principle of general neutralization

• The order provides for a fairly general disregard for 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, preclusion, prescription, unenforceability, inadmissibility, expiry, automatic dismissal, application of a special regime, invalidity, or forfeiture of any right whatsoever, and which should have been carried out during the period mentioned in Article 1, shall be deemed to have been done in time if it was carried out within a period not exceeding, from the end of that period, the legally prescribed time limit for taking action, up to a maximum 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 the neutralization

• The neutralization carried out concerns a number of acts only prescribed by law or regulation.
• Therefore, the neutralization does not appear to apply, subject to the specific neutralizations provided for elsewhere for certain contractual clauses, to acts which should have been carried out under a contract (example: steps to lift suspensive conditions)

Deferral mechanism

• The neutralization process, in principle, tends to postpone the deadline by which the actions should have been carried out during the neutralization period until the end of that period, but with a maximum duration of two months

Implementation criteria

• The neutralization process does not initially consider the starting point of the time limit within which the act should have been performed, but rather the fact that said time limit would have expired during the neutralization period, which can considerably extend the time limit for performing the acts in question

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

• The neutralization also extends to payments that were to be made for the acquisition or preservation of rights, provided, however, that the obligation to make them arose from law or regulation (and not from a contract)

 

 

A specific neutralization of certain contractual clauses

 

The order specifically neutralizes the effects of certain clauses:

• On-call duty
• Penalty clauses
• Termination clauses
• Clauses providing for forfeiture

Its purpose is to penalize the non-performance of an obligation within a specified period.

The clauses are deemed not to have taken effect or produced any effect during the suspension period if the performance period expired during that period

The penalties or clauses are intended to take effect one month after the expiry of the suspension period if the enforcement has not occurred within that month

The accrual of penalty payments and the application of penalty clauses that took effect before March 12th are suspended during the neutralization period

 

 

 

Reflections on the neutralization of certain contractual clauses

 

– A neutralization limited to clauses having a specific purpose

The neutralization in question does not appear to apply to the clauses themselves, since they do not penalize the failure to fulfill an obligation within a certain period

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

The criterion for applying the order is the expiry of the period that was given for the performance of its obligations by a party

– A neutralization that is not easily understood with regard 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 (Article 1223 of the Civil Code), unilateral or judicial termination, or general liability, which could therefore theoretically be implemented

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

Those wishing to invoke the contractual mechanisms in question must therefore take the necessary steps (formal notice, etc.)

 

 

A specific neutralization for the termination or renewal of contracts

 

The order specifically neutralizes deadlines or periods that are currently running:

• For the termination of a contract
• For the tacit renewal of a contract in the absence of termination:
  By extending by two months after the suspension period the deadlines for terminating or denouncing the renewal expiring during that period.

Objective of the measure:

• To prevent a party from becoming trapped in a contract that it was unable to terminate during the neutralization period

Major question:

• The order does not specify the effects on the duration of the contract in question, which could be significantly impacted by such a measure; the failure to terminate or renew is generally associated with a new, fixed term for the contract

 

 

Questions

The measures implemented by the ordinance are intended to be coordinated with general law, from which they partially deviate, as special and exceptional measures prescribed by an exceptional context, while leaving the general law in effect for the remainder.
This coordination is anything but straightforward, starting with the relationship to force majeure, which is intended to apply both to the performance of the contract and to the statute of limitations.

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