Reed Smith Client Alerts

Among all the Ordinances issued by the French Government in the context of the public health emergency, Ordinance No. 2020-306 of 25 March 2020 (the “Ordinance") relating to the extension of time limits during the public health emergency period and the adjustment of judicial proceedings during the same period, published on 26 March in the French Official Gazette, contains very important provisions that are impacting ongoing contracts, and the ability to manage those contracts. Less than a month later, a second Ordinance No. 2020-427 of 15 April 2020 introduces substantial changes to the provisions relating to the "freeze" on the capacity to sanction contractual breaches, and creates some uncertainty in the management of contracts.

Authors: Daniel Kadar Stéphanie Abdesselam Laetitia Gaillard

illuminated electricity

Article 4 of the Ordinance (as amended): new rules regarding the temporary suspension of clauses sanctioning breach of contract

All late payment penalties, penalty clauses, termination clauses and clauses providing for forfeiture are covered by the Ordinance, provided that: 

  1. the purpose of these clauses is to "sanction the breach of an obligation within a specified period of time";

In practice, this refers to clauses sanctioning the obligor in the event of a breach of an obligation to deliver a good, provide a service or pay off a loan within a specified period.

  1. the period available to the obligor to perform its obligations should expire during a "legally protected period" starting 12 March 2020 and ending at "the expiry of a one-month period from the termination date of the health emergency";

To date, the health emergency is for a two-month period and will therefore end on 24 May 2020. However, the date of 24 May 2020 may soon be adjusted to coincide with a resumption of economic activity and a return to the rules of ordinary law regarding time limits.