Unilateral price setting in service contracts

The new Article 1165 of the Civil Code states: “ In service contracts, in the absence of agreement between the parties before performance, the price may be set by the creditor, who is required to justify the amount in the event of a dispute. In the event of abuse in setting the price, the court may be seized of a claim for damages. ”

It follows implicitly from the rule thus established:

• on the one hand, that so-called service contracts can be formed, unless there is a special provision specific to a type of contract which would fall into such a category, by an agreement between the parties which does not relate to the price;
• on the other hand, that in such a case, in the absence of a legal or contractual provision that would provide for another method of fixing the price, the latter could be determined unilaterally by the creditor.

Such a principle has strong consequences insofar as it gives the creditor the power to impose on the other party the price of the service as soon as the contract has begun to be performed, which does not seem to mean that it is necessary for the creditor's service to have begun to be provided, since the aforementioned power is not attached to this fact.

In view of the fact that it is not at all rare, in practice, and on the contrary even frequent, that the parties can be considered to be bound by a contract in the absence of any written formalizing it and that the execution of the latter may have begun without the issue of price having been finalized, this new provision is likely to apply in such cases to the advantage of the creditor and to the detriment of the debtor.

Such a mechanism is not without relevance insofar as it is intended to play out in situations where it could be considered that the price was not a determining condition of the consent of the two parties, in any case of the debtor, since the latter did not take the trouble to agree on it with the creditor before the execution of the contract.

Moreover, a form of guarantee of compliance with the obligation to act in good faith could be deduced from this provision, since it would tend to prevent the debtor, once the execution of the contract has begun or even been completed, from exercising a power to discuss the price with respect to the creditor who, for his part, would be in a situation where he would no longer have the possibility of not providing the service if the price is not acceptable to him.

But the mechanism also allows for abuse by the creditor, who could begin the execution of the contract and then impose the price on the debtor, or even impose a price on the debtor that the debtor would not have accepted if he had known it before the execution.

However, the limit of the power conferred on the creditor, if it exists, since he must on the one hand be able to justify the price and exposes himself in case of abuse to the payment of damages, does not appear to be able to be implemented outside of a judicial proceeding.

And it would lead to the demonstration of an abuse which, with regard to the determination of the price, would be intended to make the judge play a difficult role since it would amount to assessing what the normal price of a service should be.

Finally, knowing that the method of redress would be the awarding of damages and not the questioning of the price.

The application of Article 1165 of the Civil Code therefore potentially contains for the debtor of the payment of the price a power conferred on the creditor which can be formidable.

The difficulty lies in precisely understanding what the scope of this provision will be, defined as that of so-called " service " contracts, a category which refers more to an economic than a legal vision.

While the contract for services or work contracts undoubtedly appears to be at the heart of such a concept, it cannot be asserted that it is limited to it.

For example, can certain other named contracts, such as mandates and their variations, not be considered as falling under this category? And what about complex contracts that partially include a " provision of services " clause?

Once again, the lawyer must assess the opportunity to prevent the application of such a provision resulting from the reform of contract law and, where appropriate, provide for the mechanism adapted to the contractual relationship that he will have to deal with in order to prevent the uncertainties highlighted.