Price Increases in Commercial Contracts in France

Depending on the specific terms and conditions of the contract, the supplier may have the authority to increase its prices unilaterally.  

In principle, if the price has already been set in the contract without any provision for adjustment, the supplier must comply with the original terms of the agreement (Articles 1103 and 1104 of the French Civil Code, “FCC”). Therefore, the supplier will only be able to increase prices with the prior agreement of its co-contractor.  

However, if the parties decide to enter into what is known as a "framework contract" (« contrat cadre ») which establishes the key features of the future contractual relationship, completed by subsequent application contracts in which the supplier may have the right to set the price unilaterally, the supplier will be able to vary and increase its prices from one contract to another since the prices are generally fixed on the day the order is placed. In this case, the supplier should be able to justify his pricing in case of a disagreement with the buyer. If he engages in abusive pricing (especially if the prices do not align with the market prices), he may be liable to pay the buyer's damages, and the contract could be terminated (Article 1164 FCC).  

In addition, Article L. 442-1, II of the French Commercial Code provides that a party who terminates, even partially, a business relationship without giving sufficient written notice to the other party may be liable for it and subject to damages. In this regard, French case law has consistently held that substantial modification of commercial conditions, such as a price increase, without sufficient notice constitutes a partial and sudden termination of the commercial relationship (French Supreme Court, November 24, 2021, n°20-15.789; French Supreme Court, March 12, 2002, n°99-17.578; Paris Court of Appeal, January 17, 2019, n°16/23339).  

Thus, if the supplier can unilaterally increase prices, he has the obligation to notify this modification to the buyer with sufficient prior notice. 

Finally, even without a price adjustment clause, the FCC allows the parties to claim hardship (“Imprévision”) to renegotiate the contract in the event of a change of circumstances which could not be foreseen by the parties at the time of the contract conclusion and renders its performance excessively onerous for a party who had not accepted the risk (Article 1195 FFC). As this provision is not of public order, the parties may agree in advance to exclude or modify such provision in the contract. 

As mentioned in Question 1(a) above, if the price has already been set in the contract without any provision for adjustment, the parties must comply with the original terms of the agreement. Therefore, the supplier cannot impose a price increase (extreme or not) on the customer, and any price increase must be agreed on between the parties. 

If the price has not been set in the contract by the parties, the price can be set from one application contract to another by the supplier. 

In the event the supplier proposes a very significant price increase, the customer can refuse the price increase. If, after negotiations, the parties fail to reach an agreement, French case law considers that the commercial relationship will end due to a disagreement between the parties over the price and that neither party is responsible for the termination of the commercial relationship (French Supreme Court, July 3, 2019, n°18-10.580).  

As indicated in Question 1(a) above, if such a price increase is sudden and causes damage to the customer, the latter could claim that the supplier is responsible for the sudden termination of the commercial relationship and can seek damages from the supplier (Article L. 442-1, II of the French Commercial Code).  

For instance, the French Supreme Court considered that a business partner who multiplied previous tariffs by 2.4 to 4 times without giving sufficient notice was responsible for the sudden termination of the established commercial relationship with his co-contractor (French Supreme Court, March 12, 2002, n°99-17.578). Likewise, the Paris Court of Appeal judged that a supplier who unilaterally increased its prices by 25% to 30% with respect to those previously applied without giving sufficient notice was also responsible for the sudden termination of the established commercial relationship with his co-contractor (Paris Court of Appeal, January 17, 2019, n°16/23339).

It is permissible under French law to include a price adjustment clause in the agreement. Parties can decide either to insert an automatic adjustment clause (see points (a) and (b) below) or an adjustment clause which involves renegotiation and a further exchange of consent (see point (c) below), among which the most common are: 

1. Indexation clause whereby parties stipulate that the contract price will evolve automatically, per defined period, following an index agreed upon by the parties,  
2. Revision clause whereby parties identify the triggering circumstances for the automatic price change and the conditions of such automatic price change,  
3. Renegotiation clause whereby parties either identify the triggering circumstances for renegotiating the contract price or define a period when parties must renegotiate the contract price.

To be enforceable under French law, the price adjustment clause: 

• shall not create a significant imbalance in the parties’ rights and obligations (Article L. 442-1, I, 2° of the French Commercial Code); in this regard, the clause must be reciprocal and be revised either upwards or downwards (French Supreme Court, March 3, 2015, n°13-27.525); and 
• be visible and evident, especially in General Terms & Conditions (“GT&Cs”) (French Supreme Court, March 16, 2022, n°20-22.269). 

In addition, to be fully effective, such a clause shall notably identify (i) the triggering circumstances for the negotiation or the automatic price change and (ii) either the conditions of such negotiation or such automatic price change. These circumstances may relate to specific and determined events, such as a price increase at a fixed rate or a specific administrative measure, or serious political, economic, or financial events that the parties did not include in their forecasts and could harm one of them. 

Among automatic price adjustment clauses, the indexation clause must also comply with Article L.112-2 of the French Monetary and Financial Code, which forbids the reference to indices that are not directly related to the subject matter of the transaction, the activities of the parties, and based on general indices of the prices and salaries. French case law also states that such clauses must not only relate to upwards variations.

Depending on the sector, the nature, and the duration of the contract, it can be required to insert a price adjustment clause, which can be subject to certain conditions:  

• Certain distribution contracts (in the mass retail sector) with a duration exceeding two or three years (Article L. 441-3 of the French Commercial Code): The supplier and distributor must indicate their reciprocal obligations in a written agreement, either in a single contract or in one framework contract completed with further application contracts. In such a case, whenever parties enter into a contract with a term beyond two or three years, it must include the terms and conditions under which the price is to be revised, which may consider one or more indicators reflecting changes in the price of production factors. 
• Agricultural and food products (Article L. 441-8 of the French Commercial Code): Contracts with a term exceeding three months for agricultural and food products sales whose production prices are significantly affected by price fluctuations of agricultural and food raw materials, agricultural and food products, energy, transport, and materials used in packaging, must include a price renegotiation clause considering these upward and downward fluctuations. This clause must define the conditions and thresholds for triggering renegotiation and the period within which renegotiation occurs, which may not exceed one month. 
• Food products sold under a distributor's brand (« Produits de marque distributeur ») (Article L. 441-7 of the French Commercial Code): A contract between a supplier and a distributor for the design and production of food products tailored to the specific needs of the buyer and sold under a distributor's brand must include an automatic price revision clause based on variations in the cost of agricultural raw materials or processed products regulated by Article L. 441-1-1 of the French Commercial Code, which are used in the composition of the food products. The parties are free to determine the revision formula, considering the indicators relating to agricultural production costs mentioned in III of Article L. 631-24 of the French Rural and Maritime Fishing Code. 
• Agricultural products (Article L. 631-24 of the French Rural and Maritime Fishing Code): More generally, contracts for the sale of agricultural products (except for direct-to-consumer sales) must include clauses relating to the price and the terms and conditions of automatic upward or downward revision of this price according to a formula freely determined by the parties or to the criteria and terms and conditions for determining the price. 
• Food and pet food products (Article L. 443-8 of the French Commercial Code): 
• The agreement concerning the sale of food and pet food products must include a clause for the automatic revision of contract prices according to variations in the cost of agricultural raw materials, upwards or downwards, used in the composition of the food or pet food product.  
• Depending on the length of the production cycle, the parties are free to determine the revision formula and, under Article L. 631-24, III of the French Rural and Maritime Fishing Code, the indicators used.  
• When the supplier's acquisition of agricultural raw materials is in writing, the revision clause must include indicators relating to agricultural production costs. Price changes resulting from the automatic price revision clause are implemented no later than one month after the clause is triggered. 

For public sector contracts, there are special requirements for price adjustments due to raw material price increases. Please refer to our CMS Expert Guide on rising raw material prices. 

Price adjustment clauses in B2C agreements shall not create a significant imbalance in the rights and obligations of the parties. The French Consumer Code prohibits clauses that cause a significant imbalance in the rights and obligations of consumers and professionals (Article L. 212-1 of the French Consumer Code).  

In this regard, the French Unfair Terms Commission (« Commission des clauses abusives »), which is responsible for reviewing standard agreements usually proposed by professionals and recommending, when necessary, the deletion or modification of clauses that could be considered unfair due to the significant imbalance they create, had the opportunity to recommend the removal of a price adjustment clause based on elements that were insufficiently precise and explicit, or that depended solely on the will of the professional. In this case, the price had to be readjusted according to a complicated mathematical formula that was not illustrated by a calculation, which did not give the consumer a precise idea of the additional amount that could be claimed during the term of the contract (Unfair Terms Commission Recommendation n°97-01 of April 24, 1997).  

In addition, the professional can insert a clause allowing him to modify the price without obtaining the consumer's consent. However, such a clause can only be included in unlimited-duration agreements, and the professional must offer the customer the option to terminate the contract and inform him of the changes within a reasonable amount of time. 

Indeed, Article R. 212-1, 3° of the French Consumer Code considers that are irrefutably presumed to be abusive (i. e. “black clause”) any clauses whose purpose or effect is to “provide the professional with the right to unilaterally modify the terms of the contract relating to its duration, the characteristics or the price of the goods to be delivered or the service”. Article R. 212-4 of the French Consumer Code, however, provides an exception and specifies that: “ (...) Article R. 212-1, 3°, and Article R. 212-2, 6°, do not prevent the existence of clauses by which the contract, when concluded for an indefinite period, stipulates that the professional may unilaterally make changes relating to the price of the good to be delivered or the service to be rendered, on condition that the consumer has been warned within a reasonable period to be able, if necessary, to cancel the contract. (...)”.