Simon Whittaker (Unfair Terms)

Oxford Journal of Legal Studies, Vol. 39, No. 2 (2019), pp.
404–434
doi:10.1093/ojls/gqz003
Published Advance Access March 25, 2019
Unfair Terms in Commercial Contracts
Downloaded from https://academic.oup.com/ojls/article/39/2/404/5419289 by Universidad de La Sabana user on 09 February 2022

and the Two Laws of Competition: French
Law and English Law Contrasted
Simon Whittaker *
Abstract—The laws controlling the fairness of the terms of non-consumer

contracts in French and in English law have recently grown much further apart.
French law has introduced two new general sets of controls modeled on the
European consumer law test: the first in the Commercial Code governing all
‘commercial contracts’ and forming part of a wider law of unfair competition with a
background in ‘abuses’ by large retailers of their suppliers; the second in the Civil
Code governing the terms of contrats d’adhésion where a contracting party’s ‘will’ is
not properly engaged. By contrast, English law controls the terms of commercial
contracts principally only as regards exemption clauses and penalty clauses.
However, while it possesses no general law of unfair competition, where the
practices of grocery retailers towards their suppliers revealed a partial market
failure, the UK competition authorities imposed a dedicated Code of Practice with
a general requirement of fairness and good faith.
Keywords: unfair contract terms, commercial contracts, French law, English law,
unfair competition, competition law, Groceries Code of Practice, good faith
1. Introduction
It is widely recognised that there is an important relationship between contract
law in the traditional sense of the law governing the relative rights and duties of
parties arising from the conclusion, performance or non-performance of a
contract and the wider regulation of the environment (and typically the markets)
in which contracts are made and performed.1 An obvious example is found in
the case of consumer contracts, where legislative protections attract enforcement
* Professor of European Comparative Law, University of Oxford and Fellow of St John’s College, Oxford.
Email: simon.whittaker@law.ox.ac.uk. The author is grateful to participants at the Comparative Law Section of
the SLS Annual Conference 2016 for their comments on an earlier draft of this paper as well as to the
anonymous reviewers.
1
Hugh Collins, Regulating Contracts (OUP 1999).
ß The Author(s) 2019. Published by Oxford University Press. All rights reserved.
For permissions, please e-mail: journals.permissions@oup.com
SUMMER 2019 Unfair Terms in Commercial Contracts and the Two Laws of Competition 405
measures by public authorities as well as providing consumers with rights of

redress of various types against the traders with whom they have dealt.2 There
are also direct links between contract law and competition law (perhaps the
archetypical example of the regulation of markets) in that anti-competitive

agreements (such as price-fixing agreements between two undertakings or
contract terms ‘in unreasonable restraint of trade’) are (subject to various
conditions) illegal contracts or contract terms and therefore unenforceable.3
In this article, however, I wish to explore a less obvious aspect of the
relationship between contract law and competition law, focusing on contrasting
controls on the effectiveness of the terms of contracts between traders4 in
English law and in French law. Over the past decade, French law has created
two new legislative controls on contract terms modelled on the test of
unfairness in its Consumer Code, which implements the European directive on
unfair terms in consumer contracts,5 but applicable outside the consumer
context. The first of these originated in the regulation of the market practices
of large-scale retailers in relation to their suppliers and was inserted in the
Commercial Code in 2008 as part of the law of unfair competition, but it is
generally seen as applicable to all ‘commercial contracts’.6 The second control
was inserted into the Civil Code as part of a wider reform of the law of
contract and obligations in 2016,7 applicable to contrats d’adhésion (broadly,
standard form contracts).8
At first sight, this French position could not contrast more strikingly with
English law, which possesses a general scheme of control of the fairness of
contract terms only as regards consumer contracts, and whose particular
controls beyond this concern mainly exemption clauses and penalty clauses.9
However, the UK has addressed concerns about the commercial practices of
large grocery retailers in relation to their suppliers apparently similar to those
which led to the French controls on commercial contracts, but it did so as a
matter of competition law after market investigation and by means of a
2
As regards unfair contract terms, see the Consumer Rights Act 2015, ss 62 and 70 and sch 3; as regards
unfair commercial practices, see the Consumer Protection from Unfair Protection from Unfair Trading
Regulations 2008, SI 2008/1277, esp pt 4A (as amended in 2014).
3
Hugh Beale (gen ed) Chitty on Contracts (Sweet & Maxwell 33rd edn, 2018) paras 16-106 et seq (DD Prentice).
4
In the following, ‘traders’ refers to persons acting in the course of a business, trade or profession. In the
English context, a contract between traders would often simply be called a commercial contract, but in French
law, ‘commercial contracts’ (les contrats commerciaux) has a technical significance: see below, section 3.
5
arts L 212-1–212-3; R 212-1–212-5 Code de la consommation (C consom); Directive 1993/13/EC on
unfair terms in consumer contracts [1993] OJ L95/29 (1993 Directive).
6
art L 442-6.I.2o Code de commerce (C com) and see below, section 3.
7
Ordonnance no 2016-131 of 10 February 2016 portant réforme du droit des contrats, du régime général et
de la preuve des obligations (2016 Ordonnance) as amended by loi no 2018-287 of 20 April 2018 ratifiant
l’ordonnance no 2016-131 du 10 février 2016 portant réforme du droit des contrats, du régime général et de la
preuve des obligations (2018 loi de ratification). On the 2016 reform, see generally John Cartwright and Simon
Whittaker (eds), The Code Napoléon Rewritten, French Contract Law after the 2016 Reforms (Hart Publishing 2017).
8
Code civil (C civ) (2016 and then amended in 2018), arts 1110 and 1171. See also below, section 4. Where
provisions of the French Civil Code have been subject to reform or amendment, the version in question will be
designated by the date of its coming into force.
9
Below, section 5.
406 Oxford Journal of Legal Studies VOL. 39
dedicated code of conduct and statutory regulator.10 This contrast of approach

is particularly topical given the European Commission’s recent proposal for a
directive to regulate unfair commercial practices in the food supply chain.11
Before explaining the two national laws, I need first to note two possible

senses of ‘competition law’. In the sense usual in the UK, competition law
refers to a body of rules that seeks to ensure that competition is free, primarily
in the interests of consumers.12 In UK law, these rules set out broad controls
(modelled on EU law) on anti-competitive agreements or concerted actions
and on the abuse of a dominant position in the market, and they also provide a
series of public powers to intervene in particular markets after an investigation
has found evidence of market failure.13 French law also contains a body of law
concerned with free competition, partly modelled on EU law but with its own
particular national features14 contained in the Commercial Code under the
heading of ‘anti-competitive practices’ (les pratiques anticoncurrentielles).15
In a second sense, however, ‘competition law’ can refer to a body of law that
seeks to ensure that competition is fair in the interests of other traders rather
than, or at least as much as, of consumers. Very broadly, the idea is that
improper market behaviour by a trader (whether to other traders or to
consumers) allows that trader an unfair competitive advantage in the market
vis-à-vis other traders. In common with other continental laws,16 French law
has long possessed such a general law of unfair competition (le droit de la
concurrence déloyale), developed first by the courts under the law of extra-
contractual liability for fault in the Civil Code17 but later developed by specific
rules in the Commercial Code under the heading les pratiques restrictives de
concurrence.18 By contrast, apart from legislation governing unfair business-to-
consumer commercial practices (which implements a EU directive and which is
generally seen in the UK as concerned with the protection of consumers, even
though the directive is concerned ‘indirectly’ with the protection of the
interests of competitor traders19), neither the English common law nor statute
has recognised a general legal prohibition of (or ground of liability for) unfair
10
Below, section 6.
11
Proposal for a Directive of the European Parliament and of the Council on unfair trading practices in
business-to-business relationships in the food supply chain COM(2018) 173 final.
12
Richard Whish and David Bailey, Competition Law (OUP, 9th edn, 2018) 18–23.
13
ibid, ch 2, explaining the relationship between EU and UK law. On market investigations, see below,
section 6.
14
For example, the prohibition of ‘the unfair exploitation by a trader of another trader’s state of economic
dependence where this is susceptible to affect the functioning or the structure of competition’: art L 420-2(2) C
com.
15
arts L 420-1–420-7 C com.
16
On unfair competition generally, see F Henning-Bodewig (ed), International Handbook of Unfair Competition
Law (Hart Publishing 2013), which contains national overviews.
17
arts 1382–3 C civ (1804), now arts 1240–1 C civ (2016).
18
Book IV, Title IV C com.
19
Directive 2005/29/EC concerning unfair business-to-consumer commercial practices [2005] OJ L149/22
(Unfair Commercial Practices Directive), recital 8. art 11 requires means of enforcement of its prohibitions for
‘persons or organisations regarded under national law as having a legitimate interest in combating unfair
commercial practices, including competitors’.
trader-to-trader practices since, as Lord Devlin put it, for the common lawyer,
‘free dealing was fair dealing’.20 There is therefore no general domestic English
law of unfair competition, even though there are torts (such as passing off, or
those that sanction the infringement of intellectual property) which govern

situations typically attracting unfair competition law on continental Europe.21
What, then, is the background to the modern French law governing unfair
terms in contracts between traders?
2. The French Background: Principle and Counter-principle

The Civil Code as enacted in 1804 defined a ‘contract’ as an agreement by
which a person undertakes obligations ‘to give, to do or not to do’22 without
any restriction as to subject matter or requirement of formality and provided
that, once lawfully concluded, the contract binds the parties.23 Contracting
parties were seen as fundamentally equal24 and this led to a restrictive
approach to invalidity on the ground of public policy (ordre public) or public
morality (bonnes moeurs),25 to the rejection of invalidity on the ground of
substantive imbalance in the contract (lésion)26 and to the explicit recognition
of the binding character of penalty clauses.27 In the 19th century, this approach
found support in the idea that contracts were an expression of the ‘autonomy
of the will’ of the parties28 and that on this ground they were fair: as Fouillé’s
well-known aphorism put it, ‘qui dit contractuel, dit juste’.29
However, this picture changed considerably through the course of the 20th
century.
First, according to Raymond Saleilles, the lack of any real choice in the party
‘agreeing’ to a block of terms imposed by another party in what he called
contrats d’adhésion (under which one party unilaterally sets the terms and the
other merely ‘adheres’ to them) means that they are more akin to adminis-
trative regulations than contracts,30 and while his conclusion was not itself
20
Lord Devlin, The Enforcement of Morals (OUP 1965) 47 (emphasis added).
21
See below, section 5.
22
Translations from the French are the author’s, with the exception of the new provisions of the Civil Code
(below, section 4), which are by Bénédicte Fauvarque-Cosson, John Cartwright and the author www.textes.
justice.gouv.fr/art_pix/THE-LAW-OF-CONTRACT-2-5-16.pdf.
23
arts 1101 and 1134(1) C civ (1804).
24
See eg Jean-Etienne-Marie Portalis, ‘Discours préliminaire sur le projet de Code Civil’ in Frédéric Portalis
(ed), Discours, rapports et travaux inédits sur le Code civil par Jean-Etienne-Marie Portalis (Joubert 1844), reprinted
by Centre de Philosophie politique et juridique (Université de Caen 1990) 54.
25
See arts 6, 1108, 1128, 1131 and 1133 C civ (1804).
26
art 1118 C civ (1804), though exceptions were foreseen as regards certain types of contract.
27
art 1152 C civ (1804); penalty clauses were defined in art 1226 C civ (1804).
28
Véronique Ranouil, L’autonomie de la volonté, Naissance et evolution d’un concept (PUF 1980).
29
In fact, Alfred Fouillée, a social anthropologist, argued that contracts are a form of fraternal relationship
regulated by justice: La science sociale contemporaine (2nd edn, Hachette 1885) 410. See also Louise Rolland,
‘‘‘Qui dit contractuel, dit juste’’ (Fouillée)—en trois petits bonds, à reculons’ (2006) 51 McGill LJ 765.
30
Raymond Saleilles, De la déclaration de volonté, Contribution à l’étude de l’acte juridique dans le Code civil
allemand (Pichon 1901) 229–30; see also François Chénedé, ‘Raymond Saleilles, Le contrat d’adhésion’ [2012]
Revue des contrats 241(part 1), 1017 (part 2) for an extended discussion.
adopted by courts or most writers,31 Saleilles’ analysis led to a widespread

sense that standard form contracts could not be justified by reference to
established contractual principle.
Secondly, French writers and courts became increasingly hostile to exemp-

tion clauses and, later, penalty clauses. A number of techniques were used to
control exemption clauses, some direct and based on ordre public32 and some
decidedly more circuitous.33 In the case of penalty clauses, the Civil Code was
amended in 1975 so as to allow a court to reduce or increase the sum agreed
where it was ‘manifestly excessive or derisory’.34 In both cases, these controls
applied in principle to all types of contract, whatever the character of the
contracting parties (trader, consumer or neither) and whether or not the term
formed part of a contrat d’adhésion.
Thirdly, in the course of the 20th century, the French legislature created a
series of important bodies of law regulating particular types of contract
(notably, insurance contracts, various types of leases and contracts of
employment), many or all of whose rules are mandatory in the sense that
they are not subject to exclusion or modification by the agreement of the
parties in a way that reduces the rights of the protected person (insured person,
lessee or employee).35
Finally, from the 1980s, some French jurists argued that good faith (which
was required by the Civil Code in the performance of contracts36) had very
broad implications for the development of substantive law. This found a
number of concrete expressions, providing a legal basis for the imposition of
liability for the abrupt breaking off of negotiations, pre-contractual obligations
of information, contractual obligations of co-operation and ‘loyalty’, and
controls on the exercise of some contractual rights.37 Indeed, some jurists saw
good faith as reflecting the law’s proper concern with contractual justice or
fairness, itself reflecting a wider French model of ‘social solidarity’.38 In this
31
Chénedé (n 30) pt 2, 1020–1.
32
Notably, it is contrary to public policy to seek to exclude one’s liability for dol (dishonest conduct,
including deliberate contractual non-performance) or faute lourde (gross fault): see eg Com 15 juin 1959, D
1960.97 note René Rodière.
33
Notably, a business seller was held unable to exclude its liability for defects in property sold on the basis
that it was presumed to know of them: art 1643 C civ. See also Civ (1) 24 novembre 1954, JCP 1955.II.8565
note HB. A party to a contract was held unable to exclude liability for breach of its own ‘essential obligation’ on
the basis of the doctrine of la cause: Com 22 juin 1996, affaire Chronoposte, D 1997.121 note Sériaux; Com 29
juin 2010, Sociéte Faurecia, JCP G 2010.787.
34
art 1152(1) C civ (1804 amended 1975 and 1985); similar provision is now made by art 1231-5 C civ
(2016).
35
As regards the Code des assurances (first codified in 1976), see now art L 111-2. The regulatory regimes
governing leases are d’ordre public for the protection of lessees whether they concern residential, commercial or
agricultural leases: Alain Bénabent, Droit civil, Les contrats spéciaux civils et commerciaux (7th edn, Montchrestien
2001) 284.
36
art 1134(3) C civ (1804).
37
François Terré, Philippe Simler and Yves Lequette, Droit civil, Les obligations (11th edn, Dalloz, 2013)
201–4, 284 and 486–92 respectively.
38
See esp Denis Mazeaud, ‘Loyauté, solidarité, fraternité: la nouvelle devise contractuelle? in L’avenir du
droit. Mélanges en hommage à François Terré (Dalloz 1999) 603.
way, the principle of good faith can be seen as a counter-principle to the classic
principles of freedom of contract and the binding force of contracts.39
Moreover, there can be a close relationship between good faith and the broader
French doctrinal theory of the abuse of rights. So, while French courts did not

see good faith as requiring them to assess the fairness of contract terms, the
first legislative controls on the terms of consumer contracts combined ideas of
the abuse of the trader’s right to contract (hence, clauses abusives) and of the
need to correct the ‘excessive advantage’ that may result.40
How, though, did these civil law developments relate to contemporary
changes in the French regulation of the market and to competition law?
By the Décret d’Allarde of 1791, the revolutionary legislator swept away the
special ‘privileges’ of trade corporations and the wider economic regulation of
the ancien régime and established what became known as the principle of
freedom of industry and commerce, and, therefore, of competition.41 This
principle dominated the approach of French lawyers to the market throughout
the 19th century, but its ‘excesses’ were seen as needing ‘correction’, and the
basis of this was found in the idea that where competition was unfair it could
constitute delictual fault under the Civil Code.42 Judicial decisions on ‘fault’
therefore reflected the courts’ sense of what constituted improper commercial
behaviour from the point of view of competitors,43 but this was supplemented
by particular legislative rules prohibiting certain trade practices (for example, in
relation to the adulteration of food or other fraudulent trade practices) in the
interests of other traders rather than of consumers.44 As a result, a trader who
acted ‘unfairly’ in furtherance of its business was liable in damages to any other
trader suffering loss as a result and could be ordered by a court to cease the
relevant activity.45 Moreover, the purpose of the law of unfair competition was
reflected in the fact that only competing traders or trade associations could
sue.46 When, therefore, legislation began in the 1970s to be passed against
unfair practices by traders overtly to protect consumers, it was seen as
belonging to ‘consumer law’ (le droit de la consommation) and was primarily
enforced by criminal offences,47 whereas the law of unfair competition
remained part of the civil law of delictual liability. This distinctiveness of
consumer law was emphasised by its codification in the Consumer Code in
39
Simon Whittaker, ‘Contracts, Contract Law and Contractual Principle’ in Cartwright and Whittaker (n 7)
ch 2.
40
Loi no 78-23 of 10 janvier 1978 sur la protection et l’information des consommateurs de produits et de
services, art 35(1) (authorising the administration to prohibit unfair terms in consumer contracts).
41
Loi des 2 & 17 mars 1791 ‘Décret d’Allarde’; Antoine Pirovano, ‘L’évolution de l’action en concurrence
déloyale en droit francais’ in Mélanges Bernard Dutoit (Droz 2002) 467–8.
42
Traité de droit commercial Georges Ripert/René Roublot, tome 1, vol 1 (18th edn by Louis Vogel, LDGJ 2001)
590–1.
43
ibid 601 et seq.
44
Luc Bihl, Le droit penal de la consommation (Nathan 1989) 7–8.
45
Pirovano (n 41) 489–90.
46
Pirovano (n 41) 499–500.
47
Bihl (n 44) 8.
1993,48 while legislation governing unfair competition law was codified in the
Commercial Code.49
Secondly, after the Second World War, many goods and services were subject
to direct price controls imposed by administrative decree,50 despite the

principle of liberty of commerce, and even though at the time civil law writers
retained the ‘autonomy of the will’ and freedom of contract as principles of
private contract law.51 While legislation in support of freedom of competition by
subjecting anti-competitive agreements (ententes) to criminal sanctions was
enacted in the 1950s,52 it was not until 1986 that the laws on price controls
and on free competition were reformed as part of a wider liberalisation of the
French economy.53 The new law of 1986 roundly declared that ‘the prices of
property, products and services . . . are freely determined by the play of
competition’,54 it prohibited anti-competitive agreements and the abuse of a
dominant market position in a way modelled closely on the parallel EU
competition provisions, and it also prohibited the ‘abuse of a situation of
dependence’55 where it has as its aim or effect the prevention, restraint or
distortion of the play of competition on the market56 and ‘discrimination’
between customers as regards prices or terms and conditions.57 These
provisions form the background to article L 442-6-I.2o of the Commercial
Code, which provides for the review of the fairness of the terms of ‘commercial
contracts’ even where they set prices.
3. Unfair Competitive Practices and Unfair Contract Terms in the

French Commercial Code
Article L 442-6-I.2o forms part of a complex series of provisions governing
‘Transparency, practices restrictive of competition, and other prohibited
practices’ (Title IV), which belong to a wider treatment of freedom of prices
48
Jean Calais-Auloy and Henri Temple, Droit de la consommation (8th edn, Dalloz 2010) 36–7.
49
Below, section 3.
50
John Sheahan, ‘Problems and Possibilities of Industrial Price Control: Postwar French Experience’ (1961)
51 American Economic Review 345, noting that the legislation dated from the pre-war socialist government of
1936.
51
Jean Carbonnier, Droit civil, 4. Les obligations (14th edn, PUF 1990) 45–7, seeing the value of the
‘autonomy of the will’ as a principle even in an age of the ‘socialisation’ of droit civil.
52
Notably, décret no 53-704 du 9 aout^ 1953 relatif au maintien ou au rétablissement de la libre concurrence
industrielle et commerciale.
53
Ordonnance no 86-1243 du 1er décembre 1986 relative à la liberté des prix et de la concurrence (1986
Ordonnance).
54
1986 Ordonnance, art 1(1). The Ordonnance is codified in art L 410-2 et seq C com.
55
1986 Ordonnance, art 8-2.
56
art 8-2(1), referring to ‘the same conditions’, ie as are stated in art 7(1), which concerns anti-competitive
agreements or concerted action.
57
1986 Ordonnance, art 36.
and competition (Book IV). As enacted in 2008 (and as presently in force58), it

provides that:
I. The following behaviour by any producer, merchant [commerçant], manufacturer, or

person registered on the register of trades attracts responsibility in its perpetrator and
obliges him to make reparation for the loss caused by this action:
1o . . .
2o Subjecting or attempting to subject a commercial partner to obligations creating a
significant imbalance in the rights and obligations of the parties;
Unlike Title II of Book IV (which prohibits, for example, anti-competitive
agreements,59 and whose purpose is to ensure that the conduct of undertakings
contributes to the well-being of consumers by leading to lower prices, better
quality goods and services, and wider choice60), Title IV is principally
concerned to
guarantee, in the name of economic public policy, the transparency (Chapter I) and
the fairness of commercial relations between suppliers and their customers, notably in
the retail sector (Chapter II), without any real consideration of the possible effects on
competition of the practices with which it is concerned.61
In short, Title IV concerns fairness of competition while Title II concerns
freedom of competition.
The background to article L 442-6.I.2o was legislation in 1958 prohibiting
‘price discrimination’ by sellers of goods or suppliers of services as between
their customers, ie charging different customers different prices or contracting
with them on different terms.62 The original purpose was to protect small
retailers of goods from their own suppliers’ use of their bargaining power to
negotiate differential prices,63 but when the relative bargaining power of
suppliers and retailers was largely reversed in the 1970s as a result of the rise of
supermarket chains, the scope of the prohibition was nevertheless extended.64
As noted earlier, this prohibition survived the general liberalisation of prices in
1986, though its sanction was reduced from a criminal penalty to the
imposition of civil liability and the possibility of an injunction, the new law
58
Loi no 2008-776 du 4 aout ^ 2008 de modernisation de l’économie (2008 loi), art 93. Later amendments
concern only art L 442-6.IV’s provisions on consultation.
59
However, the market abuses which art L 422-6 C com sets out are designated as ways by which the
condition of l’exploitation abusive may be satisfied for the purposes of the anti-competitive practice of the abuse of
a state of economic dependency prohibited by art L 420-2(2) C com.
60
Marie-Dominique Hagelsteen, La négociabilité des tariffs et des conditions générales de vente, Rapport de Marie-
Dominique Hagelsteen (12 February 2008) (Hagelsteen Report 2008) para 2.1.1. This report was commissioned
by the French government and its recommendations led to the 2008 loi. See below in this section.
61
Hagelsteen Report 2008 (n 60) para 2.1.1.
62
Décret no. 58-545 du 24 juin 1958 modifiant certaines dispositions de l’ordonnance no 45-1483 du 30 juin
1945 relative au maintien de la libre concurrence art 1.
63
Jean-Paul Charié, Député, report on behalf of the Commission des affaires économiques, de
l’environnement et du territoire sur le projet de loi de modernisation de l’économie of the Assemblé nationale
(22 mai 2008), Ass Nat no 908 (Charié Report 2008) 284.
64
Charié Report 2008 (n 63) 285.
providing that ‘any producer, merchant, industrial operator or artisan’ is liable

for a practice
as regards his economic partner, of obtaining from him prices, delays for payment,

conditions of sale or other modalities of sale or purchase which are discriminatory
and not justified by any genuine counterpart by creating from this action for the
partner, a competitive disadvantage or advantage.65
Sellers had an obligation to communicate their ‘general conditions of sale’
(conditions générales de vente, or CGV), including their tariff of prices per unit,
together with any discounts and conditions regarding payment to all their
would-be customers,66 and it was ‘discrimination’ to deviate from them.67
Since, in practice, it was difficult to justify ‘discrimination’, it was seen as
useless to negotiate tariffs or general conditions of sale.68
Title IV of the Code also prohibited resale at a loss, that is to say, sales by a
retailer to a customer at a price lower than the ‘effective price’ paid by the
retailer to its own supplier.69 This prohibition was intended to protect small
local retailers by preventing their suppliers (for example, a manufacturer or
large food producer) from fixing their prices at an extremely low level as a loss-
leader, but it was also intended to protect producers/suppliers, as it was
thought that it would lead other retailers to put pressure on their own suppliers
to align their prices with the lowest prices already set by their competitors.70
The intention was, therefore, to force retailers to take their profits by charging
consumers more than the price that they paid to their own suppliers (a ‘front
margin’). In practice, however, many retailers circumvented the prohibition of
resale at a loss by keeping to the ‘tariff prices’ set by their own suppliers in their
CGVs, while at the same time charging them sums for supposed commercial
services, including mere ‘commercial co-operation’: these extra sums (‘back
charges’) provided a ‘back margin’ of profit for the retailers.71 Large retailers
readily used their buying power to charge their suppliers for ‘services’ in this
way rather than require them to reduce their tariff prices; however, to make up
for these back charges (which in 2005 averaged 33.5% of net prices72),
suppliers increased their tariff prices for all their customers and not merely those
who could impose back charges. And, given the prohibition of price
discrimination by suppliers, small retailers had to pay the same (tariff) prices
65
1986 Ordonnance, art 36(1), codified as art L 442-6 C com.
66
1986 Ordonnance, art 33, codified as art L 441-6.I C com, though much amended.
67
While an attempt was made in 2005 to allow a seller or supplier to ‘discriminate’ between its customers as
to prices or conditions of sale according to different categories of their customers, this possibility was little used,
not least because the administration chose not to define the categories of customer for this purpose: Charié
Report 2008 (n 63) 286.
68
69
Loi de finances no 63-628 du 2 juillet rectificative pour 1963 portant maintien de la stabilité économicque
et financière, art 1, later codified as art L 442-2(1) C com.
70
Hagelsteen Report 2008 (n 60) 8.
71
Charié Report 2008 (n 63) 287–8.
72
Hagelsteen Report 2008 (n 60) 9. They ranged from 5% up to 70%.
as large retailers, but, unlike the large retailers, they lacked the market power to
negotiate back charges. This led to an inflationary spiral affecting all parties to
the distribution of goods, including, of course, consumers.73 Unsurprisingly,
this was seen as problematic by successive French administrations.

According to the Minister of Finance, Christiane Lagarde, the solution to
these problems adopted by the legislation of 2008 was ‘to return contracts of
distribution to the free negotiation of prices and contract terms in the interests
of the greatest possible price competition’, while at the same time preserving
‘intact the possibility of a really effective sanction of abuses committed in
commercial relations, notably by reason of the imbalance in the power
relationship of the parties in question’.74 The 2008 legislation therefore
prohibited back margins by subjecting charges for so-called commercial co-
operation to severe financial sanctions.75 At the same time, it sought to facilitate
‘tariff discrimination’, leaving to contracting parties ‘every latitude to conclude
particular conditions of sale’76 by providing that, while a supplier’s CGVs
should form the ‘unique basis of commercial negotiation’, nevertheless ‘any
producer, supplier of services, wholesaler or importer may agree with a buyer
of products or possible customer of services individual conditions of sale which
are not subject to the obligation of communication’.77
Again, though, liberalisation was seen as requiring detailed provision in the
law of unfair competition so as to deal with the possible abuse of these new
rights, and to provide greater legal certainty and more effective enforcement.78
The new law therefore amended the Commercial Code so as to include in the
list of possible ‘abuses’ by traders79 ‘subjecting or attempting to subject a
commercial partner to obligations creating a significant imbalance in the rights
and obligations of the parties’ (article L 442-6.I.2o).80 Other ‘abuses’ are also
specified by article L 442-6, notably obtaining or attempting to obtain
payments for non-genuine ‘commercial services’ or to gain the acceptance of
manifestly unfair terms governing prices or payment periods by threatening to
break off commercial relations; breaking off commercial relations except
73
Hagelstein Report, 9. Attempts to avoid these results, for example, by including all financial advantages in
the calculation of the threshold of resale at a loss failed to have the desired effect: Charié Report 2008 (n 63)
289–90.
74
Lettre de mission to Mme Marie-Dominique Hegelsteen of 15 November 2007 from Mdme Christine
Lagarde, M Luc Chatel: Hagelsteen Report 2008 (n 60) 3.
75
Charié Report 2008 (n 63) 290; art L 441-7 C com. The main technique was to ensure that any charges
made for other services were included within the calculation of the price agreed for the purposes of the
transparency obligation.
76
77
art L 441-6.I(3) as amended by loi 2008, art 92.I.
78
Hagelsteen Report 2008 (n 60) 22–3.
79
Charié Report 2008 (n 63) 292–3.
80
Between 2005 and its amendment in 2008, the provision had concerned cases where the trader abused a
relationship of dependence, or of its power of purchase or sale, by subjecting its partner to unjustified commercial
conditions or obligations: art L 442-6.I.2o as amended by loi no 2003-7 du janvier 2003, art 50(V); Muriel
Chagny, ‘Une (r)évolution du droit français de la concurrence? À propos de la LME du 4 aout ^ 2008’ JCP
2008.I.196, no 15.
subject to a series of conditions; and imposing price variation clauses.81

Proceedings under article L 442-6 can be brought by ‘any person showing an
interest in doing so, by the ministère public,82 by the Minister for the Economy
or by the President of the Competition Authority as regards a case within its

competence’83; they can be brought only before one of eight specialised
commercial courts of first instance, with any appeal being heard by the Court
of Appeal of Paris.84 In addition to the imposition of liability and the possibility
of an injunction, if sued by the relevant public authorities, a court has the
power to impose a civil penalty.85 Public authorities therefore have an
important role in the policing of this special law of unfair competition, but
the traders affected may also claim.86
The adoption by article L 442-6.I.2o of the central test of the unfairness of
terms in consumer contracts in the French Consumer Code87 became
important when the article was challenged before the French Constitutional
Council (Conseil constitutionnel) by a group of nine major French retailers
sued by the Minister of the Economy for the use of allegedly unfair terms.88
The Constitutional Council upheld the constitutionality of the provision on the
basis that the courts had already explained the notion of a ‘significant
imbalance in the rights and obligations of the parties’ in the consumer context
and that this meant that the behaviour it prohibits is sufficiently ‘clear and
specific’ so as not to breach the principle of the ‘legality’ of criminal offences
and penalties in article 8 of the Declaration of the Rights of Man 1789.89
But just how broad is this control of the terms of commercial contracts?
First, on its terms, article L 442-6.I.2o applies to ‘any producer, merchant,
manufacturer or registered trader’ (including a public body90) in their dealings
with their ‘commercial partner’. Most commentators agree that, despite its
81
art L 442-6-I.1o, 4o–5o and 7o C com.
82
The ministère public is a particular category of magistrat answerable to the Minister of Justice whose role in
civil matters is to initiate or to join proceedings and submit arguments to the ‘sitting’ judges (the magistrats du
siège) as a matter of public interest.
83
First sentence of art L 442-6 III C com.
84
Last sentence of art L 442-6 III; art D 442-3 C com.
85
See below in this section.
86
Between 30 September 2009 and 5 November 2015 there were 101 decisions of the cours d’appel on this
provision, only eight of which concerned proceedings brought by the Minister of the Economy: Emmanuel
Dieny, ‘Déséquilibre significatif: sept ans après a-t-on attaint l’^age de raison?’ (2015) JCP Enterprise et affaires
1626, no 21.
87
art L 211-1(1) C consom (2016), implementing the 1993 Directive, art 3(1).
88
Conseil constitutionnel no 2010-85 QPC du 13 janvier 2011, Etablissements Darty et Fils.
89
ibid, para 4. Under art 61(1) of the Constitution of the 5th Republic of 1958 (as amended in 2008), any
question of the constitutionality of parliamentary legislation arising in the course of proceedings in the ordinary
or the administrative courts may be referred by the court to the Conseil constitutionnel for determination. Since
the 1970s, the Conseil has developed a number of grounds of constitutionality (a bloc de constituionalité) drawn
from the Declaration of the Rights of Man and the Preamble to the Constitution of the 4th Republic, as well as
from the Constitution of 1958 itself. The Conseil interpreted the requirement in art 8 of the 1789 Declaration
that penalties must be established by parliamentary legislation (loi) as requiring that these penalties are
sufficiently clear and specific: Conseil constitutionnel no 80-127 DC du 20 janvier 1981 Loi renforçant la sécurité
et protégeant la liberté des personnes, especially at para 7.
90
Dimitri Delesalle and Nicholas Genty, ‘Vers un controle ^ des clauses abusives dans les contrats entre
professionnels’ Petites affiches (17 May 2011); see also art L 410-1 C com.
background, it is not limited to the context of the commercial distribution of

goods91 and can therefore apply to any commercial contract, including
contracts of hire, sub-contracts, insurance or credit,92 though some have
argued (and some courts have accepted) that ‘commercial partnership’ requires

a degree of continuity and is to be distinguished from mere co-contractor.93
Article L 442-6.I.2o has been seen as applicable to contracts of hire of security
equipment,94 to provide managed hosting services for an online payment
services company,95 to set up a website,96 to provide postal services for La
Poste,97 and to the contracts between Expedia (an internet travel and holiday
company) and hoteliers.98 The Court of Appeal of Paris has indeed declared
simply that article L 442-6.I.2o can apply to any contract concluded between
traders (professionnels),99 and this was also the view of the parliamentary
rapporteurs in the course of the ratification of the later reform of the Civil Code,
though they excepted contracts between persons in business whose contracts
did not belong to droit commercial, for example, between members of a ‘liberal
profession’ (such as lawyers) and their clients.100 On the other hand, in
practice, the public enforcement authorities have focused their attention on the
large retail sector, and the courts have only rarely actually applied article L 442-
6.I.2o outside this context.101
Secondly, article L 442-6.I.2o does not require the existence of a relationship
of economic dependence between the contracting parties, as did its predeces-
sor,102 nor that the contract terms are in a standard form103 or are otherwise
not individually negotiated.104 Instead, article L 442-6.I.2o refers rather
enigmatically to one party ‘subjecting or attempting to subject’ the other to
91
Thomas Genicon in Denis Mazeaud and Thomas Genicon, ‘Protection des professionnels contre les
clauses abusives’ [2012] Revue des contrats 276, 279; Muriel Chagny, ‘L’essor jurisprudential de la règle sur le
déséquilibre significatif cinq ans après?’ RTDCom 2013.500, 502–3; Emilie Gicquiaud, ‘Le contrat à l’épreuve
du déséquilibre significatif’ RTDCom 2014.267, 270.
92
Delesalle and Genty (n 90); Dieny (n 86) no 17, quoting CA Douai 13 septembre 2012, no 12/02832 to
this effect.
93
Marie Malaurie-Vignal, Contrats Concurrence Consommation (2016) Commentaires no 141, noting CA Aix-
en-Provence 10 mars 2016, no 2016/140.
94
CA Paris 21 octobre 2011, no 10/12570.
95
Trib com ord réf 7 juin 2016, Ecritel c Cards Off noted by Grégoire Loiseau (2016) Communication
Commerce électronique, comm (July 2016) 60.
96
CA Lyon 13 Janvier 2012, no 10/08521.
97
CA Paris 19 janvier 2011, France logistique v La Poste.
98
CA Paris 21 juin 2017, RG no 15/18784, Ministre de l’Economie v Groupe Expedia.
99
CA Paris 1 octobre 2014, no 13/16336 at 14 (in the context of a large retailer and its suppliers); Paris 12
décembre 2013, no 11/18274, Sarl Securitas France c Obligi et SARL sécurité protection ouest.
100
The ambit of droit commercial is set both generally and more particularly according to context: see Michel
Pédamon and Hugues Kenfack, Droit commercial (Dalloz, 4th edn, 2015) ch 3. See also section 4.
101
Diego de Lammerville in Philippe Stoffel-Munck (ed), Réforme du droit des contrats et pratique des affaires
(Dalloz 2015) 62.
102
art L 442-6.I.2o(b) (2003–2008).
103
cf below, section 4 regarding art 1171 C civ (2016 and 2018). The control of terms in art 212-1 C
consom is not restricted to terms ‘not individually negotiated’, as foreseen by the 1993 Directive, art 3, which it
implements.
104
Armand Dadoun, ‘Faut-il avoir peur du ‘‘déséquilibre significatif’’ dans les relations commerciales?’
(2011) 73 Petites affiches 17, no 13.
the imbalanced obligations in question, a formula which has encouraged the

Commercial Chamber of the Cour de cassation to allow the courts of appeal a
good deal of flexibility.105 For example, in one case, the Court of Appeal of
Paris’s order stopping GALEC, a national supermarket company, from using

certain terms in contracts with its suppliers was challenged on the ground that
‘subjection’ requires proof of an element of constraint, such as pressure or a
threat.106 The Commercial Chamber disagreed, holding that the suppliers
(only 3% of which belonged to large groups) did not have ‘a real power of
negotiation’ and could not attempt to change the terms, and therefore risked
being de-listed by GALEC (which possessed 16.9% of the retail market); the
Court of Appeal was therefore entitled to decide that the suppliers had been
‘subjected’ to GALEC’s requirements within the meaning of article L 442-
6.I.2o.107 Here, therefore, ‘subjection’ refers to a difference in practical
bargaining power rather than the mere presence of a standard contract
term.108 In another case, however, the Commercial Chamber found the
‘submission’ of one trader to another in the fact that the terms in question
(which imposed penalties for failures in performance) formed part of a ‘pre-
drafted annex [of the contract] which left no room free for the modification of
its content, unlike two other annexes, and were not the subject of any real
negotiation’.109 Here, the lack of any possibility of negotiation of a standard
form was enough. On the other hand, it has been said that a contracting party
may be ‘subjected’ to contract terms even where they did result from a degree
of negotiation, notably where one party exploits the economic dependence of
another.110
Thirdly, unlike the controls on unfair terms in the Consumer Code or the
Civil Code, article L 442-6.I.2o does not exclude from its scope contract terms
which determine the price or the main subject matter of the contract,111
reflecting its main purpose in controlling ‘abuses’ of the freedom to negotiate
prices as well as terms introduced in 2008.112 In this respect, the Court of
Appeal of Paris has accepted that while ‘it is not for courts to fix prices which
are free and a matter for contractual negotiation’, they must nevertheless
‘determine if the prices fixed by the contracting parties create, or created, an
imbalance between them and whether this imbalance was of a sufficient
105
According to Dieny (n 86) nos 26–36, the court of appeal generally adopts a two-stage approach requiring
a proof of an imbalance in power and the absence of effective negotiation coupled with a resulting
disproportionality of obligation.
106
Com 27 May 2015, no 14-11387 (2nd moyen); Muriel Chagny, ‘La règle sur le déséquilibre significatif
devant la Cour de cassation!’ RTDCom 2015.486, 487–8.
107
Com 27 May 2015, no 14-11387 (2nd moyen).
108
Chagny (n 106) 489.
109
Com 3 mars 2015, 13-27525 (8th moyen).
110
Chagny (n 106) 488, referring to CA Paris 23 May 2013 no. 12/01166.
111
Cf art L 212-1(3) C consom; 1993 Directive, art 4(2); art 1171 C civ. Com 25 janvier 2017 no 15-23547,
AJ Contrat 2017.132.
112
Chagny (n 91) 501.
importance to be classified as significant’.113 Understandably, some French

lawyers see this aspect of article L 442-6.I.2o as creating a new general form of
substantive imbalance in the contract (lésion)114 and complain about the
resulting legal uncertainty.115

Fourthly, the Conseil constitutionnel’s reference to consumer law in
upholding the constitutionality of article L 442-6.I.2o has suggested to some
commentators that the courts should draw on the understanding of the
consumer test in interpreting and applying the commercial test; unsurprisingly,
others see this as entirely inappropriate!116 However, it is unlikely that the
consumer case law will help much, as French courts have not needed to
explain the significance of ‘significant imbalance’ there as the Consumer Code
sets out a series of factors to be taken into account for this purpose117 and,
since 2008, has provided a blacklist of terms unfair in all circumstances and a
grey list of terms presumed to be unfair.118 According to the Cour de
cassation, in the commercial context, article L 442-6.I.2o ‘invites an assessment
of the context in which the contract is concluded and its overall economic
purpose’,119 and allows a particular ‘unbalanced term’ to be compensated for
by other, negotiated terms.120 However, according to Behar-Touchais, in
practice, the Court of Appeal of Paris distinguishes between cases involving
large retailers and their suppliers (where the controls are applied very broadly,
including as to the level of the prices charged) and other cases (where most
claims for the unfairness of the contract terms are rejected).121 In this way, she
argues, the courts have ‘corrected’ the ‘legislative defect’ in the drafting of
article L 442-6.I.2o that on its terms applies to all commercial contracts, even
though its proper concern was with supply contracts made by large retailers.122
Finally, committing the unfair commercial practice described in article
L 442-6.I.2o may attract the imposition of liability in damages or the award of
an injunction (including at the request of the contracting party123), but article
113
^ 5—Chambre 5) 23 mai 2013, no 12/01166, l’arr^et IKEA; Com 25 janvier 2017, no 15-
CA Paris (Pole
23547.
114
Mazeaud and Genicon (n 91) 282.
115
Franck Tassan in Stoffel-Munck (n 101) 64.
116
cf the views of Mazeaud and Genicon (n 91) 283–4 as to the appropriateness of reference to the examples
of unfair terms in the Consumer Code in a commercial context. The decision of the Conseil constitutionnel does
not require commercial courts to follow the approach taken under the Consumer Code: Com 3 mars 2015
Eurauchan n 13-27525, Bull com 2015.IV no 42, noted by Chagny (n 106), but the commercial court can be
‘inspired’ by the consumer blacklist: CA Paris (Pole ^ 5-Chambre 4) 18 septembre 2013.
117
art 212-1(2) C consom (implementing art 4(1) of the 1993 Directive).
118
Dadoun (n 104) no 9. These lists are now contained in arts R 212-1–212-5 C consom. The 1993
Directive requires only an ‘indicative list’ of terms which may be unfair: art 3(3) and Annex.
119
Com 3 mars 2015 Eurauchan (n 116) 6th moyen.
120
Gaël Chantepie, ‘Le déséquilibre significatif au miroir de la Cour de cassation’ AJ Contrats d’affaires–
Concurrence–Distribution 2015.218 at 218–19, referring to Com 3 mars 2015 Eurauchan (n 116); cf Gicquiaud (n
91) no 17, who argues that the lower courts’ decisions tend to identify certain categories of term which are or are
not objectionable.
121
Martine Behar-Touchais, ‘Un déséquilibre significatif à deux vitesses’ (2015) JCP.I.603; Dieny (n 86) nos
24 and 25 (10% of proceedings are brought by the Ministry; 58% of decisions actually find the unfair practice).
122
Behar-Touchais (ibid) no 18.
123
‘[A]ny person with an interest’ can so claim: art L 442-6-III(1) C com.
L 442-6 itself empowers only the enforcement authorities to ask for the
annulment of an offending contract term or contract, with any consequential
restitution as necessary.124 Nonetheless, the courts allow claims by traders for a
term to be treated as ‘not written’ and so ineffective.125 In addition, the

designated public authorities may ask a court to impose a civil penalty of up to
2 million euros or up to 5% of the defendant’s net turnover in France!126
Overall, the Commercial Code empowers French courts to find that the
‘subjection’ by a trader of its ‘commercial partner’ to its terms (including price)
constitute an abuse of competition, with a range of consequences, some quasi-
penal and some affecting the relative position of the contracting parties. The
deregulation of prices and terms in the large-scale retail sector therefore led,
perhaps inadvertently, to the creation of a broad control of the fairness of the
bargain, as well as the fairness of incidental terms in commercial contracts
generally.
4. Unfair Terms in Contrats d’adhésion in the Reformed

Civil Code
The provisions of the Civil Code governing the law of obligations in general
and the law of contract in particular remained all but untouched for two
centuries after their enactment in 1804, but the law as applied by the courts
changed significantly, sometimes radically, and for French lawyers this reliance
on a fluctuating case law created legal uncertainty.127 After some 10 years of
academic and official draft instruments,128 the French government obtained
parliamentary authority to reform the Civil Code by ordonnance, a special form
of executive legislation, despite the opposition of the French upper house, the
Sénat.129 A draft was published for consultation by the Ministry of Justice (the
Ministry) in February 2015130 and the ordonnance itself was enacted in
February 2016, coming into force on 1 October 2016 for contracts made on or
124
art L 442.6.III(2) C com.
125
See, notably, Paris CA 7 juin 2013, no 11-08674, cited to this effect by Sacha Houlié, Député, report on
behalf of the Commission des lois constitutionnelles, de la législation et de l’administration générale de la
République, sur le projet de loi, adopté part le Sénat, Assemblé nationale no 429 (29 Nov 2017) (Houlié Report
2017) 70. See also Muriel Chagny, ‘La généralisation des clauses abusives (articles 1168 et 1169 du Code civil)’
in Stoffel-Munck (n 101) 53; Gicquiaud (n 90) no 30.
126
art L 442.6.III(2) C com. This second possibility was introduced by loi no. 2015-990 du 6 aout ^ 2015
pour la croissance, l’activité et l’égalité des chances économiques, art 34.
127
See generally on the process of reform Bénédicte Fauvarque-Cosson, Juliet Gest and François Ancel, ‘The
Process of Elaboration of the Reform of the Law of Contract’ in Cartwright and Whittaker (n 7) ch 2.
128
The two academic instruments were Pierre Catala (ed), Avant-projet de réforme du droit des obligations et de
la prescription: Rapport remis au garde des Sceaux (Documentation française 2006); F Terré (ed), Pour une réforme
du droit des contrats (Dalloz 2009). The Ministry of Justice constructed its own preliminary draft in 2008 which
was distributed informally.
129
Loi no 2015-177 of 16 février 2015, art 8, as foreseen by art 38 of the Constitution. art 8 was approved as
constitutional by the Conseil constitutionnel no 2015-710 DC of 12 février 2015.
130
Ministère de la justice, Projet d’ordonnance portant réforme du droit des contrats, du régime général et de la
preuve des obligations (25 Feb 2015) (Projet d’ordonnance 2015).
after that date.131 However, a particular constitutional feature of legislating by

ordonnance in this way is that the new law so created enjoys only the status of
executive regulation (règlement) and is therefore open to review on the grounds
of its constitutionality before the administrative courts unless it is ratified by

special parliamentary legislation (loi).132 Therefore, in 2017, the French
government introduced a parliamentary bill simply to ratify the ordonnance.
But the French Parliament (and in particular the Sénat) refused to do so
without amendment, although these amendments were restricted in a ‘spirit of
responsibility’ to provisions seen as politically significant or needing
clarification.133
One of the most striking innovations of the 2016 Ordonnance was its
creation of a new general judicial power to review the fairness of contract
terms.134 The provision initially proposed by the Ministry was not restricted to
the terms of contrats d’adhésion, but this attracted considerable criticism from
the business world, which was worried about its effect on transactional
certainty and on the attractiveness of French law.135 As enacted in 2016,
therefore, the test of fairness in article 1171 of the Civil Code was restricted to
the terms of contrats d’adhésion defined by article 1110 as ones ‘whose general
conditions are determined in advance by one of the parties without
negotiation’.136 According to the Ministry, this change protects the ‘weaker
party’, establishes coherence with the legislative controls on unfair terms in
consumer contracts and in commercial contracts, and reflects wider European
developments in European instruments, such as the Principles of European
Contract Law and the Draft Common Frame of Reference, and the proposed
Common European Sales Law.137 Article 1171 provided that:
Any term of a contrat d’adhésion which creates a significant imbalance in the rights
and obligations of the parties to the contract is deemed not written.
The assessment of significant imbalance must not concern either the main subject-
matter of the contract nor the adequacy of the price in relation to the act of
performance.138
131
2016 Ordonnance, art 9.
132
art 38 Constitution (referring to an unratified ordonnance as being caduque). See further François Piller,
Sénateur, report on behalf of the Commission des lois constitutionelles, de légilsation, du suffrage universel, du
Règlement et de l’administration générale, Sén no 22 (11 Oct 2017) (Pillet Report 2017) 11–12.
133
Pillet Report 2017 (n 132) 7.
134
arts 1110 and 1171 C civ (2016).
135
Rapport au Président de la République relatif à l’ordonnance no 2016-131 du 10 février 2016 portant
réforme du droit des contrats, du régime général et de la preuve des obligations (Rapport au Président)
JO République française no 35 (11 février 2016) texte no 25 (unpaginated) 11. Cf Projet d’ordonnance 2015, art
1169.
136
art 1110(1) (2016) also defined a ‘bespoke contract’ (le contrat de gré à gré) as ‘one whose stipulations are
freely negotiated by the parties’.
137
Rapport au Président (n 133) 2 and 3. For the European instruments see especially art 4:110 PECL; art
4:110 Principes contractuels communs; arts II.-9:401–II.-9:408 DCFR (esp art II.-9:405); and Proposed Common
European Sales Law, art 86.
138
art 1171 is not the only provision controlling the validity of contract terms: ordre public remains as a
possible ground of invalidity (art 1102 al 2), and art 1170 provides that ‘[a]ny contract term which deprives a
However, in the course of ratification of the 2016 Ordonnance, while the

Assemblé nationale and the Sénat agreed that the new control should apply
only to the terms of contrats d’adhésion, they disagreed as to how those
contracts should be defined. The Sénat thought that the notion of ‘general

conditions’ used by article 1110 was unclear and that the definition should rest
on lack of negotiability rather than of negotiation of the terms, a view which was
finally accepted by the Assemblé nationale. As a result, article 1110 as ratified
defines a contrat d’adhésion as ‘one which comprises a collection of non-
negotiable terms which are determined in advance by one of the parties’139 and
article 1171 applies only to contract terms which are ‘not negotiable,
determined in advance by one of the parties’.140 These changes also avoided
the earlier problem that the controls in article 1171 appeared to apply to all the
terms of a contract using ‘general conditions’, even where the terms in question
were themselves negotiated.141
The parliamentary process of ratification also revealed the perceived
justification for the new controls. Sénateur Pillet, the rapporteur to the
relevant Sénat committee, noted the traditional concerns with the quality of the
‘will’ of a contracting party on whom the other has imposed a set of terms142
and explained that the restriction to contrats d’adhésion explains how controls
can properly be included in the ‘general law’ in the Civil Code, which is
‘marked by the equality of the parties’ to the contract, unlike the controls
governing consumer and commercial contracts, where the parties are ‘struc-
turally unequal’.143 In his view, a contrat d’adhésion ‘is characterised by the fact
that one party proposes the contract without permitting the other to discuss all
or part of its stipulations’; where a party accepts a set of terms without
choosing to discuss them, it is highly debatable whether they can later claim
that they are unfair. This was why the proper touchstone for judicial review
was seen as ‘negotiability’, that is, whether the party could have affected the
content of the term, rather than actual negotiation.144 To these arguments,
Deputé Houlié added that the new controls reflected the wider concern of the
reforms with contractual justice, here requiring the protection of a weaker party
to a contract where neither freedom nor equality is present.145 In the result, the
debtor’s essential obligation of its substance is deemed not written’, a control that reflects the well-known case
law noted above (n 33).
139
art 1110(2) (2018).
140
On the interpretation of these expressions see Olivier Deshayes, Thomas Genicon and Yves-Marie
Laithier, Réforme du droit des contrats, du régime générale et de la preuve des obligations (2nd edn, LexisNexis 2018)
347–50.
141
The former version of art 1171 controlled ‘[a]ny term of a contrat d’adhésion’, where the latter was defined
according to the lack of negotiation of the contract’s ‘general conditions’: above in this section.
142
Pillet Report 2017 (n 132) 30, referring to Raymond Saleilles (n 30).
143
Pillet Report 2017 (n 132) 30–1.
144
Pillet Report 2017 (n 132) 31.
145
Houlié Report 2017 (n 125) 17–18.
new wording reflects the justification for judicial review in a lack of opportunity
to negotiate the ‘collection of terms’, but where terms are negotiable (even if
not negotiated), they can reflect the parties’ ‘wills’ and therefore their
contractual freedom.146

What is not seen in the parliamentary debates or in legal commentaries147 is
the idea (prominent in modern German legal scholarship) that the use of
standard form contracts leads to a partial market failure in that it is futile for
the party facing the other party’s standard terms to spend time or money trying
to renegotiate them.148 This reflects, I think, a wider antipathy in French legal
circles to arguments from ‘law and economics’, which are seen as alien to the
French protective model of contract (which adopts a moral, rather than an
economic, view) and all too redolent of the utilitarian values of ‘Anglo-Saxon’
common law.149
But what is the scope of application of these controls? As part of ‘general
contract law’, article 1171 of the Civil Code can apply in principle to any type
of private law contract, whatever its subject matter and whatever the character
of its contracting parties (business, non-business, etc),150 but their practical
significance depends on their relationship to earlier controls on unfair terms in
consumer and commercial law. In principle, ‘special rules derogate from general
rules’,151 which, according to the Ministry of Justice, means that it is impossible
to apply the controls both in the Civil Code and in one of the special regimes,
whether commercial or consumer. In Sénateur Pillet’s view, however, the mere
silence of a special regime does not mean that the general regime in the Civil
Code can apply instead, as ‘the application of the general law cannot lead to
distorting the coherence or disregarding the spirit of the special law’.152 This
suggests that cases falling under the commercial and consumer regimes cannot
attract the controls in the Civil Code and, if one leaves aside consumer
contracts and commercial contracts understood broadly,153 article 1171 would
apply only to contracts between private individuals (for example, where they
use a web platform to buy and sell goods on terms set by the platform
146
Deshayes, Genicon and Laithier (n 140) 348 and 349.
147
For a classic doctrinal discussion, see Thiery Revet, ‘Les critères du contrat, article 1110 nouveau du code
civil’ D 2016.1771.
148
See R Zimmermann, The New German Law of Obligations, Historical and Comparative Perspectives (OUP
2005) 175–6.
149
According to Deputé Houlié, art 1171 reflects the fact that French law is more protective than ‘Anglo-
Saxon’ laws: Houlié Report 2017 (n 125) 27.
150
In principle, ‘administrative law contracts’ are governed by administrative contract law rather than by
private law, but it is possible that the Conseil d’Etat will be ‘inspired’ to follow the lead taken by art 1171, subject
to public law principle and the needs of the ‘public service’: cf Laurent Richer and François Lichère, Droit des
contrats administratifs (10th edn, LGDJ 2016) 37–9, explaining the use of the Civil Code by administrative courts
despite the ‘autonomy’ of administrative contract law.
151
A traditional interpretative maxim, but codified in art 1105(3) C civ (2016) as regards special rules
governing particular ‘nominate’ contracts in the Civil Code itself.
152
Pillet Report 2017 (n 132) 22–3.
153
cf above, section 3 on the scope of application of art L 442-6.I 2o C com.
provider154) and contracts between two or more persons in business which do

not count as ‘commercial’ (notably, contracts between members of a ‘liberal
profession’, such as lawyers and their clients).155 In the case of consumer
contracts, consumers are likely to rely on the consumer provisions, which are

generally more protective.156 Beyond this, it could be argued that a
contract term that passes the controls in the Commercial Code could
nevertheless fail the test in the Civil Code.157 For example, if a commercial
court finds that one trader has not ‘subjected’ the other trader to the contract
term in question so as to fall under article L 442-6.I.2o, a civil court could still
find that the term formed part of a contrat d’adhésion so as to fall under article
1171 of the Civil Code. A commercial contract could, therefore, be subject to
each control in succession.158 Art 1171(2) follows the Consumer Code by
providing that:
‘The assessment of significant imbalance must not concern either the main subject-
matter of the contract nor the adequacy of the price in relation to the act of performance.’
The purpose of this is clear. Article 1171 is not to be used by the courts for the
control of the core elements of the contract: it is a control of unfair ancillary
matters rather than a control of the substantive fairness of the contract itself.159
However, unlike the position in consumer law, the exclusion is not conditional
on the term being drafted in a clear and comprehensible manner,160 which
appears to mean that, for example, a term setting the level of a price or the
main subject matter of the contract must not be reviewed under article 1171
whether or not it is ‘clear and comprehensible’ from the point of view of the
person subject to it.161 This feature of article 1171 also distinguishes it from
the controls governing commercial contracts, which can apply to any term and
are particularly significant for price terms.162
154
Houlié Report 2017 (n 125) 72.
155
Houlié Report 2017 (n 125). The Pillet Report 2017 (n 132) 61 considers that ‘commercial leases’ (les
baux commerciaux) made by ‘institutional lessors’ would also fall under art 1171. According to Deshayes, Genicon
and Laithier (n 140) 346, art L 442-6.I.2o applies only where the underlying contract concerns an activity ‘of
production, distribution or services’, citing Com 15 février 2018 no 17-11329, which excluded a commercial
lease from its scope on this ground. However, this restriction is made by art L 442-1 for the purposes of its own
provisions and is therefore arguably inapplicable to art L 442-6.I.2o.
156
Xavier Lagarde, ‘Questions autour de l’article 1171 du code civil’ D 2016.2174, 2175.
157
See further Deshayes, Genicon and Laithier (n 140) 342–7.
158
Karl Lafaurie, ‘Clauses abusives: l’articulation du dispositifs du Code civil avec les textes spéciaux’ JCP
2017 Entreprises et affaires no 1453, no 2.
159
Cf the reference to ‘ancillary terms’ in the judgment of the CJEU in Case C-26/13 Kásler v OTP
Jelzálogbank Zrt of 30 April 2014, paras 49–50.
160
art L 212-1(3) C consom (2016), reflecting the 1993 Directive, art 4(2).
161
In the context of consumer law, the CJEU has explained that the notion that a term be ‘clear and
comprehensible’ must be understood from the point of view of the ‘average consumer’: Kásler v OTP Jelzálogbank
Zrt (n 159) para 74.
162
Above, section 3.
5. English Law: Contractual Principles and Their Exceptions

English courts have long accepted that, once agreed, the principles of freedom
of contract and the binding force of contracts oppose controls on the

effectiveness of the terms of contracts, and they have rejected the recognition
of such controls at common law.163 There are, of course, exceptions to this
picture, notably as regards exclusions of liability for personal fraud (which are
ineffective164), covenants in restraint of trade (which are subject to a test of
reasonableness)165 and penalty clauses (which are ineffective where they
impose ‘a detriment on the contract-breaker out of all proportion to any
legitimate interest of the innocent party in the enforcement of the primary
obligation’).166 This absence of direct controls threw more weight on the rules
governing the incorporation of terms (by requiring reasonable notice in the
absence of signature167) and on the rules governing the construction of
contracts, but, since the advent of legislative controls, English courts have
tended to abandon traditional, protective approaches to construction, such as
under the maxim contra proferentem.168
In terms of legislation, the broadest exception to this picture is found in
relation to the terms of consumer contracts now contained in part 2 of the
Consumer Rights Act 2015.169 This follows the scheme of the European
directive on unfair terms in consumer contracts very closely, except that it
applies the test of unfairness to terms whether or not they are ‘individually
negotiated’ and it retains the special control on exclusions of liability for
negligence causing death or personal injury drawn from the Unfair Contract
Terms Act 1977 (which no longer applies to consumer contracts).170 For other
contracts, the most important exceptions to the general effectiveness of
contract terms remain in the 1977 Act, but its broadest control on the ‘written
standard terms of business’ applies only to exemption clauses171 and to terms
163
On these principles, see S Whittaker in Beale (n 3) paras 1-031 et seq. Photo Production Ltd v Securicor
Transport Ltd [1980] AC 827, 844 and 847 overruled Harbutt’s ‘Plasticine’ Ltd v Wayne Tank & Pump Co Ltd
[1970] 1 QB 447, which had accepted a legal doctrine of fundamental breach of contract.
164
S Pearson & Son Ltd v Dublin Corp [1907] AC 351, 353, 362; HIH Casualty and General Insurance Ltd v
Chase Manhattan Bank [2003] UKHL 6, [2003] 2 Lloyd’s Rep 61.
165
Beale (n 3) paras 16-106 et seq.
166
Cavendish Square Holding BV v El Makdessi, ParkingEye Ltd v Beavis [2015] UKSC 67, [2015] 3 WLR
1373, [32] (Lord Neuberger PSC and Lord Sumption JSC, with whom Lord Carnwath JSC and Lord Clarke
JSC agreed).
167
L’Estrange v Graucob [1934] 2 KB 394 (signature); Interfoto Picture Library Ltd v Stiletto Visual Programmes
[1989] 1 QB 433 (the onerous nature of the term is relevant to reasonableness of the notice).
168
Nobahar-Cookson v Hut Group Ltd [2016] EWCA Civ 128, [2016] 1 CLC 573. See also Beale (n 3) para
15-012. A statutory form of contra proferentem applies to consumer contracts: 2015 Act, s 69.
169
Replacing the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083).
170
2015 Act, ss 65–6; cf 1977 Act, s 2. The other change to the scope of the general controls in s 62 of the
2015 Act from the 1993 Directive is found in relation to the ‘core exclusion’ in s 64 implementing and apparently
extending the consumer’s protection as compared with art 4(2) of the 1993 Directive: on this see Whittaker in
Beale (n 3) paras 38-394–38-399, which doubts the reality of this extension given the broad interpretation given
to the proviso for the application of the exclusion that the relevant terms are in ‘plain intelligible writing’ by the
CJEU in Kásler v OTP Jelzálogbank Zrt (n 159).
171
Defined broadly by 1977 Act, s 13.
that allow a party to ‘render a contractual performance substantially different

from that which was reasonably expected of him, or . . . in respect of the whole
or any part of his contractual obligation, to render no performance at all’, such
as some types of variation clause.172 Moreover, this control does not apply to

some important types of contract (including contracts of insurance and for the
creation or transfer of intellectual property or of securities173), to international
supply contracts174 or to contracts governed by English law only by reason of
choice of law.175
In looking at the 1977 Act, we can notice the more neutral expression used
to describe the terms controlled: unlike the French contrat d’adhésion, which
draws attention to the lack of proper consent of the party subject to the terms,
they are described as standard terms, an expression which (before the 1977
Act) had no technical meaning but which was understood as referring to the
situation where one of the parties habitually makes contracts of the same type
in a particular form (that is, set of terms), with little if any variation allowed
from that form.176 The Law Commissions saw the justification for creating
some control over terms in standard contracts between persons in business as
being ‘the lack of negotiation that exists in most situations where they are
used’, but they did not consider that the ‘lack of negotiation, or of any
opportunity for negotiation’, could be regarded as the distinguishing feature of
this type of contract, as there may be negotiation of some terms (such as
quantity or price) even though the exemption clauses (which were the focus of
the Law Commissions’ attention) were proffered on a ‘take it or leave it’
basis.177 They therefore recommended that the lack of opportunity to vary or
negotiate terms should not be made a feature of the statutory definition of
standard terms,178 and this is reflected in the 1977 Act’s reference simply to
‘written standard terms of business’.179 In considering this formula, the courts
have held that ‘it has to be shown that [the] other party habitually uses those
terms of business’ that includes the term challenged: it is not enough that a
model form has, on the particular occasion, been used.180 Moreover, where
negotiations have in fact ‘taken place around standard terms before the
contract is made, and amendments agreed, it is a question of fact whether one
172
1977 Act, s 3(2)(b) and see Whittaker in Beale (n 3) paras 15-085–15-086. 1977 Act, s 2 also controls the
exclusion of business liability for negligence and of liability for breach of implied terms in contracts of sale of
goods etc in ss 6 & 7 of the Act, neither of which are restricted to standard terms.
173
1977 Act, s 1(2), sch 1 para 2(a), (c)–(e).
174
1977 Act, s 26.
175
1977 Act, s 27(1).
176
Law Commission, Scottish Law Commission, Second Report on Exemption Clauses, Law Com No 69, Scot
Law Com No 39 (1975) para 151, referring to HB Sales, ‘Standard Form Contracts’ (1953) 16 MLR 318.
177
Law Commission (n 176) para 156.
178
Law Commission (n 176) paras 156–7.
179
s 3.
180
African Export-Import Bank v Shebah Exploration and Production Co Ltd [2017] EWCA Civ 845, [2018] 1
WLR 487 at [20] per Longmore LJ (with whom Henderson LJ agreed).
party can be said to have dealt on those standard terms’.181 The burden of
proof on this issue lies on the person claiming to be subject to the standard
terms,182 and it is unlikely to be discharged where the contract has been
subject to substantial variations, even if these do not relate to the contract term

(typically an exemption clause) challenged.183 The starting point for the
English law, therefore, is with the standard nature of the terms (their habitual
use) rather than merely being prepared in advance (as in French law).
However, once this test is satisfied, the question whether or not the party has
dealt on them depends on a combination of actual negotiation and
negotiability. It must be remembered, though, that in English law this issue
relates only to exemption clauses and certain related terms, rather than to the
majority of contract terms as in the French context.184
In 2005, the Law Commissions considered reforming the law of unfair terms
(consumer and non-consumer) and recommended the extension of the general
scheme governing consumer contracts to contracts made with small busi-
nesses,185 on the ground that they are unlikely to understand standard terms and
that, even if they do, imbalances of power between them and their business
partners may create ‘market distortions’.186 For contracts other than those with
a small business, the Law Commissions recommended that the existing scheme
of control in the 1977 Act should be retained, tying the controls more firmly to
the use of standard terms.187 In doing so, they considered whether the legislative
controls should formally be restricted to cases where the protected business had
no opportunity to negotiate a standard term and was therefore genuinely taken
by surprise, but ultimately concluded that this was unworkable.188
However, the new legislation on unfair terms as enacted in the 2015 Act did
not follow the Law Commissions’ recommendations. Instead of extending the
controls on unfair terms in consumer contracts to commercial contracts made
with small businesses, the 2015 Act separated the law governing terms in
consumer contracts (which it itself contains) and the law governing (mostly)
exemption clauses in other contracts which remains in the 1977 Act. In doing
so, it abolished the category of persons ‘dealing as consumer’ used by the 1977
Act, thereby removing the protection of section 3 from persons (including
corporate persons) who did not contract as an integral part of their business
181
Beale (ed) para 15-084, an earlier edition of which was cited with approval by University of Wales v London
College of Business Ltd [2015] EWHC 1280 (QB), [93].
182
British Fermentation Products Ltd v Compair Reavell Ltd [1999] 2 All ER (Comm) 389, [49].
183
African Export-Import Bank v Shebah Exploration and Production Co Ltd [2017] EWCA Civ 845, [25], [35]
and [36] (Longmore LJ, with whom Henderson LJ agreed).
184
Above, section 4.
185
Law Commission, Scottish Law Commission, Unfair Terms in Contracts, Law Com No 292, Scot Law
Com No 199 (2005).
186
Law Commission (n 185) paras 5.16 and 5.19.
187
Law Commission (n 185) paras 4.21–4.29. It recommended that the special controls on the exclusion of
liability for breach of the statutory implied terms in ss 6(3) and 7(3) of the 1977 Act (which are not restricted to
standard terms) should not be retained: paras 4.25–4-29.
188
Law Commission (n 185) paras 4.13–4.16.
and, if the contract was only incidental to it, it was not of a type regularly
entered:189 section 3 therefore applies now only to cases where one person is
dealing on the other’s written standard terms of business.190 Apart from the
1977 Act, particular legislative qualifications exist on the validity of terms in

particular commercial contexts, for example, in the context of the late payment
of commercial debts191 or as regards ‘basis of the contract clauses’ in non-
consumer contracts of insurance.192
Furthermore, the general attachment of English judges to the principles of
freedom of contract and the binding force of contract provides one of the
reasons to explain the absence of any general requirement of good faith in
contracting parties, whether this is expressed as a legal requirement or a
general implied term.193 As regards the latter, it has recently been suggested
judicially that there should be an implied term as to good faith at least in
‘relational’ commercial contracts.194 This idea, however, has not generally
found favour with the courts. For example, Moore-Bick LJ has observed that
‘[t]here is . . . a real danger that if a general principle of good faith were
established it would be invoked as often to undermine as to support the terms
in which the parties have reached agreement’.195
There are also other important absences in terms of legal principle in the
English approach, for, unlike French law, English law possesses no general
principle or independent concept of the abuse of rights,196 nor any general
legal principle of unfair competition. As regards the latter, while there are a
number of particular grounds of claim provided to a trader who is prejudiced
by another trader’s commercial conduct (including the tort of passing off, the
tort of intimidation and the various protections provided for intellectual
property), these are seen as having their own distinct remits rather than
forming part of a wider law of ‘unfair competition’.197 As with unfair contract
terms, the most important exception to this pattern can be seen in the
189
R & B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321.
190
Unfair Contract Terms Act 1977, s 3 (as amended by the 2015 Act).
191
Late Payment of Commercial Debts (Interest) Act, ss 7–10 (as amended).
192
Insurance Act 2015, s 9, 16(1).
193
See further Whittaker in Beale (n 3) paras 1-043–1-063, noting the exceptions and qualifications.
194
Yam Seng Pte Ltd v International Trade Corp Ltd [2013] EWHC 111 (QB), [2013] Lloyd’s Rep 526, esp
[143] (Leggatt J); Al Nehayan v Kent [2018] EWHC 333 (Comm), [167]–[176] (Leggatt LJ at [174]).
195
MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] EWCA Civ 789, [45], rejecting the
approach of Leggatt J at trial, who had earlier given judgment in Yam Seng Pte Ltd v International Trade Corp Ltd
[2013] EWHC 111 (QB).
196
This position is generally associated with the decision of the HL in Bradford Corp v Pickles [1895] AC 587.
See generally J Limpens, RM Kruithof and A Meinertzhagen-Limpens, ‘Liability for One’s Own Act’ in
International Encyclopedia of Comparative Law, vol XI, Torts (1980) ch 2, para 2.233.
197
Stephen Weatherill, ‘United Kingdom’, annex to Reiner Schulze and Hans Schulte-Nolke € (eds), Analysis
of National Fairness Laws aimed at Protecting Consumers in Relation to Commercial Practices (June 2003) 9. cf
Richard Arnold, ‘English Unfair Competition Law’ (2013) 44 International Review of Intellectual Property and
Competition Law 63, arguing that, although there is no general tort of unfair competition in English law, its
inclusion of many particular forms of unfair competition justifies the recognition that there is an English law of
unfair competition. According to Iain Ramsay (writing in 1989), ‘fair trading’ was seen as a matter for a
combination of self-regulation (via the encouragement of industry codes of conduct), ad hoc intervention by a
public body or bodies, as needed, and a restricted range of regulatory criminal offences, primarily concerned with
consumer context, itself derived from EU law, where there is a general

prohibition of unfair commercial practices partly for the protection of
consumers and partly in the interests of other traders.198 In this respect, the
relationship between the laws governing unfair business to consumer commer-

cial practices and unfair contract terms is a close one, as use of an unfair term
by a trader may constitute an unfair commercial practice.199 An important
example of the regulation of an unfair commercial practice affecting the validity
of terms as between two traders may be found in legislation governing the late
payment of commercial debts, whose purpose is to protect commercial
creditors from being kept waiting for payment and which invalidates unrea-
sonable contract terms affecting the payment of statutory interest.200
Nevertheless, this background still contrasts very sharply with the French
position, where the principles of freedom of contract and the binding force of
contract are countered by the principle of good faith, and where the
constitutional principle of freedom of commerce is countered by the idea
that this freedom should not be abused, an idea given legal expression by the
law of unfair competition.201 However, the English picture would remain
incomplete without reference to the controls on unfair practices and unfair
terms created after investigation by the UK competition authorities of potential
anti-competitive practices of the large retail grocery sector in relation to their
suppliers.202
6. Promoting Competition and Fairness in the UK Groceries Sector

The Groceries Supply Code of Practice imposes on listed grocery retailers a
general requirement of fair dealing with their suppliers and provides that any
terms on which they deal must not be inconsistent with the Code. These
controls originated in a ‘market investigation reference’ of the grocery retail
sector made by the then Office of Fair Trading under powers provided by part
4 of the Enterprise Act 2002 in situations where it suspects that any ‘feature or
combination of features’ of a market prevent, restrict or distort competition in
misstatements concerning the description of goods: Iain Ramsay, Consumer Protection, Text & Materials (1st edn,
Weidenfeld & Nicolson 1989) 270.
198
See Unfair Commercial Practices Directive 2005, recital 5. The 2005 Directive is implemented in UK law
by the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277).
199
Case C-453/10 Pereničovà v SOS finance, spol sro [2012] 2 CMLR 28; see also Whittaker in Beale (n 3)
para 38-278.
200
Late Payment of Commercial Debts (Interest) Act 1998, s 14, implementing and extending the control
foreseen by Directive 2011/7/EU on combating late payment in commercial transactions, art 3(4) and (5).
201
Above, section 2.
202
In 2017 the office of Small Business Commissioner was created with the role of helping small businesses
that are unfairly treated by larger businesses as regards payment for the goods or services that they supply, as well
as providing advice to them more generally: Enterprise Act 2016, pt 1. See also www.smallbusinesscommissioner.
gov.uk/ accessed 5 December 2018.
the UK or part of it.203 The market investigation regime recognises that not
every market failure can be cured through the application of the classic
prohibitions found in articles 101 and 102 TFEU and their domestic
analogues;204 it focuses on markets rather than on the behaviour of individual

firms, enables the Competition and Markets Authority (CMA; formerly the
Competition Commission) to investigate whether features of the market have
an adverse effect on competition and allows a wide variety of measures to be
adopted to correct this.205 The case of retail grocery supply provides a
particularly good example of the nature of the analysis of competition that
these investigations entail and of the ‘remedies’ that the regulator may
impose—and in the very same sector that has formed the context of the French
reforms of commercial law.206
In the case of the supply of retail groceries, the Competition Commission
identified a number of positive features about the market and considered that
aspects of it were not anti-competitive. In particular, it did not see the
purchasing power of the large retailers (especially in being able to obtain lower
prices from their suppliers) as itself a problem for competition: indeed, it saw
this as beneficial to consumers as it tended to reduce prices.207 Moreover, the
Competition Commission did not see the use by large retailers of below-cost
selling in itself as predatory in relation to other grocery retailers, as it
represented effective competition between retailers, which benefits consumers
by reducing the average price for a basket of products.208 However, the
Competition Commission did see the practices of very large retailers in relation
to their suppliers as problematic for competition, as ‘the transfer of excessive
risks or unexpected costs by grocery retailers to their suppliers is likely to lessen
suppliers’ incentives to invest in new capacity, products and production
processes’ and ‘if unchecked, these practices would ultimately have a
detrimental effect on consumers’.209 The principal manner in which these
risks or costs were transferred was ‘through retailers making retrospective
adjustments to the terms of supply’.210 The remedy for these problems was the
203
Enterprise Act 2002, s 131. The powers are now possessed by the Competition and Markets Authority.
204
Whish and Bailey (n 12) 469.
205
Whish and Bailey (n 12); Enterprise Act 2002, s 161 and sch 8.
206
The Competition Commission and subsequently the CMA have undertaken market investigations in a
variety of sectors and with very differing results: Andrea Coscelli and Antonia Horrocks, ‘Making Markets Work
Well: The UK Market Investigation Regime’ (2014) 10 Competition Policy International 24, esp 33–43
(summarising the cases so investigated). None of these investigations led to the sort of broad code of conduct
affecting commercial contract terms that was imposed in relation to the retail grocery sector, though, in the case
of local bus services, local bus operators that manage bus stations were required to provide access to bus stations
for rival operators on ‘fair and reasonable’ and non-discriminatory terms in order to open up the bus services
market to competition: the Local Bus Services Market Investigation (Access to Bus Stations) Order 2012.
207
Competition Commission, The supply of groceries in the UK market investigation (30 April 2008)
Summary paras 35–6. The full report runs to 260 pages.
208
Competition Commission (n 207), Summary para 19. In addition, the Commission identified problems
arising from the fact that several retailers have strong positions in local markets: paras 22–31.
209
Competition Commission (n 207) Summary para 36.
210
Competition Commission (n 207) Summary para 37.
establishment of a Groceries Supply Code of Practice, based on the existing

Supermarkets Code of Practice but amended in a number of ways.211 The
Competition Commission therefore made an Order in 2009 that introduced a
new Code of Practice (‘the Groceries Code’ or ‘Code’) that applies to all

‘designated retailers’, ie 10 named large retailers of groceries (as defined) and
any retailer with a turnover exceeding £1 billion with respect to UK retail
supply of groceries and designated by the CMA or any person carrying on the
whole or a substantial part of their business.212 The 2009 Order provides that
‘a Designated Retailer must not enter into or perform any Supply
Agreement213 unless [it] incorporates the Code and does not contain any
provisions that are inconsistent with the Code’.214 A supply agreement must be
recorded in writing and the supplier must be provided, inter alia, with a written
copy of the agreement, ‘and of all terms and conditions which are intended to
be incorporated, but are not fully documented, in the Supply Agreement’.215
The Groceries Code itself contains 17 provisions, running to nearly 2,500
words.216 Paragraph 2 Principle of fair dealing provides:
A Retailer must at all times deal with its Suppliers fairly and lawfully. Fair and lawful
dealing will be understood as requiring the Retailer to conduct its trading
relationships with Suppliers in good faith, without distinction between formal or
informal arrangements, without duress and in recognition of the Supplier’s need for
certainty as regards the risks and costs of trading, particularly in relation to
production, delivery and payment issues.
To an English contract lawyer, this provides a very striking recognition of a
general requirement of fair dealing in a commercial context, defined, in part,
by reference to good faith! The Competition Commission considered that such
an ‘overarching principle’ would ‘add to the effectiveness of the dispute
resolution function by giving the arbitrator a general standard by which to
judge retailers’ conduct’, would provide an ‘overarching context in which other
provisions of the [Code] could be interpreted’, and would represent ‘an
important safeguard against the transfer of excessive risk and unexpected cost
from grocery retailers to their suppliers’.217 As this indicates, the Competition
Commission was particularly concerned with distortions in the market resulting
211
Competition Commission (n 207) Summary paras 46–51.
212
Competition Commission, The Groceries (Supply Chain Practices) Market Investigation Order 2009
(2009 Order), art 4 and sch 2. Two more retailers were added in 2018: CMA Notices of Designation for Ocado
Group plc and B & M European Value Retail SA.
213
Defined as an agreement made between a designated retailer and a supplier under which the latter
supplies groceries directly to the retailer for resale in the UK: 2009 Order (n 212) art 2(1) (referring to art 6).
214
2009 Order (n 212) art 5(1).
215
2009 Order (n 212) art 6(1) and (2).
216
2009 Order (n 212) sch 1.
217
Competition Commission (n 207) paras 11.314 and 11.315. The test was modeled on the Unfair
Commercial Practices Directive 2005 (n 19) art 5, the Committee of Advertising Practice Code, and BERR’s at
the time draft Business Protection from Misleading Marketing Regulations: Competition Commission (n 207)
para 11.313.
from retailers’ practices in relation to their suppliers’ risks and costs. The Code
therefore controls the extent and the method by which retailers are able to vary
the terms of supply, requiring that the Supply Agreement sets out ‘clearly and
unambiguously’ where and how any specific change of circumstance may allow

adjustments.218
The Code further provides that a retailer must pay the supplier in accordance
with their agreement and, ‘in any case, within a reasonable time after the
supplier’s invoice unless provided in the supply agreement’,219 the retailer must
not require a supplier to make any payment towards the retailer’s marketing costs
(such as artwork or packaging design, consumer or market research, or the
opening or refurbishment of a store220), or payments for shrinkage (ie losses of
groceries after delivery caused by their loss, theft or an accounting error), wastage
or for being a supplier (with certain exceptions).221 The retailer must not require
the supplier to make any payment in respect of consumer complaints made by
the retailer, unless these are justified in certain ways.222 Finally, paragraph 16(1)
governs de-listing by a retailer, ie ceasing to purchase or reducing the volume of
purchases of groceries for resale from a particular supplier.223 It provides:
A Retailer may only De-list a Supplier for genuine commercial reasons. For the
avoidance of doubt, the exercise by the Supplier of its rights under the Supply
Agreement (including this Code) or the failure by a Retailer to fulfil its obligations
under the Code or [the 2009] Order will not be a genuine commercial reason to De-
list a Supplier.
Where a retailer does de-list, it must give the supplier reasonable notice of its
decision and its reasons for doing so in writing, with the possibility of this
decision being reviewed by one of the retailer’s own designated senior buyers.224
The 2009 Order itself provides that a ‘Designated Retailer must negotiate in
good faith with a Supplier to resolve any dispute arising under the Code’225
and originally envisaged an ombudsman scheme for the arbitration of any
disputes unresolved by the parties.226 However, the adjudication of disputes
under the Code was put on a statutory basis by the Groceries
Code Adjudicator Act 2013, which created the office of Groceries Code
Adjudicator (GCA).227 Where a supplier refers a dispute under the Code with
a designated retailer to arbitration under the 2009 Order, the Adjudicator must
218
Groceries Code, para 3.
219
220
Groceries Code, para 6. It also controls the extent to which retailers can charge their suppliers for better
positioning of their products: Groceries Code, paras 12 and 13.
221
Groceries Code, paras 7–9. The definitions of shrinkage and wastage are found in para 1(1).
222
223
Groceries Code, para 1(1) ‘De-list’.
224
Groceries Code, paras 16(2) and 17.
225
2009 Order (n 212) art 11, which also explains when a dispute arises for these purposes.
226
2009 Order (n 212) art 11.
227
Groceries Code Adjudicator Act 2013, s 1 and sch 1 www.gov.uk/government/organisations/groceries-
code-adjudicator accessed 5 December 2018.
arbitrate the dispute or appoint another person to do so; where a retailer refers
a dispute to arbitration under a supply agreement, the Adjudicator may accept
appointment as the arbitrator.228 The Adjudicator has considerable powers of
investigation and enforcement, the latter including recommendations as to

what the retailer should do to comply with the Code, requiring the retailer to
publish information relating to the investigation, and imposing a financial
penalty.229 The maximum penalty has been set at 1% of the UK turnover of
the retailer.230
In 2016, the CMA reported on its own work monitoring compliance with the
2009 Order (compliance with the Code is for the GCA) in relation to
Groceries Supply Agreements.231 The CMA found that these agreements
varied in style and content from sets of standard terms to bespoke agreements,
and it set out a checklist of key points to assist retailers in complying with the
Order, but it did not identify any breaches of the Order.232 The GCA itself
reports annually on its work, and has explained that it adopts ‘a modern
regulatory approach, with collaboration and business relations at its core’ in the
interests of reducing the costs of regulation and delivering results more
quickly.233 It receives a number of complaints (in confidence) and has
published lists of the issues thereby raised.234 Moreover, it has launched
investigations into the practices of particular retailers when it has concerns
about compliance with requirements of the Code.235
How does this system of control compare with the controls in article L 442-
6-I.2o of the French Commercial Code?
First, while the origins of the French provisions concerned large-scale retail
distribution, the controls in article L 442-6-I.2o are not so restricted, let alone
being restricted to a specified set of retailers designated by reference to their
market share or turnover, as are the UK controls.236 Moreover, the processes
by which the controls were put in place were very different. The UK Groceries
Code resulted from a sophisticated market investigation by the Competition
Commission at the request of the Office of Fair Trading, whereas the changes
to the French Commercial Code were—if one looks at the published
228
Groceries Code Adjudicator Act 2013 (n 227), s 2.
229
Groceries Code Adjudicator Act 2013 (n 227), ss 7–9.
230
Groceries Code Adjudicator (Permitted Maximum Financial Penalty) Order 2015 (SI 2015/722) (which
provides how turnover is to be calculated for this purpose). The power to fine came into force after the only
completed investigation undertaken by the GCA into Tesco plc’s payment practices (26 January 2016).
231
CMA, Supply Agreements under the Groceries (Supply Chain Practices) Market Investigation Order
2009; CMA’s Report on compliance (12 July 2016).
232
CMA’s Report on compliance (12 July 2016), paras 4–5.0.
233
GCA, Groceries Code Adjudicator, Annual Report and Accounts (1 April 2017–31 March 2018) 11–12.
234
GCA (n 232) 31–49.
235
GCA (n 232) 13 and 27–8, noting its investigation into possible breaches of the Code by the Co-operative
Group Ltd in relation to de-listing, benchmarking and depot quality control charges. See also its investigation
into the payment practices of Tesco plc (n 230).
236
Above, section 3.
materials—the result primarily of political and legal argument, with a relatively

restricted economic analysis.237
Secondly, the most important differences lie in what the two regimes
replaced and in their treatment of the prices paid to suppliers. The French

legislative changes of 2008 sought to allow retailers and their suppliers to enjoy
the benefits of free negotiation of prices and terms, instead of the earlier
controls based on the ‘tarification’ of prices, the prohibition of below-cost
selling by retailers and the resulting abusive back margins charged for
‘commercial services’ by retailers.238 The background to the UK Groceries
Code was the legal recognition in principle of freedom to negotiate prices and
terms, an acceptance of the use of below-cost selling and—most surprising of
all from a French point of view—an acceptance of the greater bargaining power
of retailers over their suppliers on the ground that it is good for consumers.239
What the French and English regimes have in common, though, is the idea that
free negotiation should be subject to the requirements of fairness, including as
to payment terms and the breaking off of the commercial relationship
(de-listing).240 A key difference is that the French scheme allows a court to
assess not only the general terms on which a supply contract is made, but also
the level of the prices charged,241 whereas the UK Groceries Code of Practice
does not subject to review the level of the cost of groceries, even though it
prohibits certain charges by retailers that could well be seen as disguised ways
of reducing their supply costs (rather like the French ‘back charges’).242
Thirdly, in terms of enforcement, the UK Groceries Code as policed by its
adjudicator seeks to establish fairness in the conduct of very large retailers by
responding to supplier complaints and then working together with the retailers
themselves. While investigations into breaches of the Code (which can result in
the imposition of penalties) have taken place, they are rare. By contrast, under
the French regime, the commission of unfair commercial practices by retailers
(and others) attracts their ‘responsibility’, and this may be invoked both by the
public regulator in enforcement proceedings and, much more commonly, by
the other traders thereby affected.243
237
See, notably, the main report which preceded the loi of 2008, the Hagelsteen Report 2008 (n 60),
although it should be added that an earlier report to the French Ministry of the Economy, finance and industry
by a working group chaired by Guy Canivet included an extended market analysis: Restaurer la concurrence par les
prix - Les produits de grande consommation et les relations entre industrie et commerce (October, 2004). Moreover,
further market analysis may have been carried out internally by the Ministry or by the French competition
regulator, the Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes.
238
Above, section 3.
239
Above, section 3 (French law) and in this section (English law).
240
These issues are governed specifically by art L 442-6-I.1o, 4o–5o, 7o and 8o C com.
241
Above, section 3.
242
Above, section 3.
243
Above, section 3 and n 86.
7. Conclusion
The contract laws controlling the fairness of non-consumer contract terms in
French and English law have recently grown much further apart. French law

has introduced two new broad sets of controls, each with its own background
and concerns. The controls on commercial contracts in the Commercial Code
have a background in the regulation of prices and contract terms, and in
particular concerns about unfair competition in the large-scale retail sector;
controls were needed in the interests of other traders rather than of consumers,
though it was realised that the earlier regime had in fact encouraged inflated
prices for consumers.244 Ironically, liberalisation, which introduced the free
negotiation of prices and contract terms, led to new judicial controls on all the
terms of a contract, including those setting the level of the prices in all
commercial contracts.245 By contrast, the new general controls on the terms of
contrats d’adhésion in the Civil Code have deep roots in French civil law’s
distrust of contracts in which the parties’ wills are not fully engaged and in the
doctrinal concept of a contrat d’adhésion itself, but the criterion of ‘negotiability’
ultimately used to define such a contract does suggest that where terms are not
negotiable (as opposed to not negotiated), the normal play of the market is not
possible—a form of market failure.
The odd feature remains, however, that in French law the prices and
definition of the subject matter of commercial contracts may be reviewed for
their ‘significant imbalance’ provided only that one party ‘subjected’ their
‘commercial partner’ to them, whereas the prices and subject matter of civil or
consumer contracts are generally immune from review.246 It remains to be seen
whether this will be corrected by further amendment of the Commercial Code
or even by judicial interpretation so as to restrict the sphere of application its
controls of unfair terms to the intended context of contracts made in the large-
scale retail sector.247 More broadly, the provisions in both the Civil Code and
the Commercial Code affecting the validity of contract terms reflect funda-
mental values adopted by French law: the private law principles of freedom of
contract, the binding force of contract and the market law principle of freedom
of commerce all require qualification on the basis of fairness and justice.
Contrary to the apparent sense of Fouillé’s famous aphorism,248 fairness is no
longer seen as what one agrees in the contract; rather, it is an independent
standard by which the contract is to be judged. This may well reflect the
special and more ‘social’ model of contract law advocated by some French
scholars, but the broad scope of the review of contract terms significantly
244
Above, section 3.
245
Above, section 3.
246
Above, sections 2 and 4.
247
As advocated by Deshayes, Genicon and Laithier (n 140) 344–5.
248
Above, section 1.
undermines the claim of the 2016 reforms to make French law more attractive
as a law of choice for international commercial contracts.249
By contrast, general English law still reflects the liberal values of its 19th
century origins, buttressed by a keen sense that this promotes the fundamental

role of contracts as a market mechanism. Freedom of contract remains a potent
common law principle, whereas broad qualifying principles, such as a
requirement of good faith, a general law of unfair competition or a general
theory of the abuse of rights, remain rejected as principles, even if particular
examples of each can be identified either in so many words or in terms of
functional equivalence. In the case of the control of the fairness of the terms of
contracts, all this argues against any general power of review unless a particular
justification is established: in the type of economic relationship (consumer
contracts), in the type of contract term (exemption clauses or penalty clauses),
or owing to the particular type of contract or its market context. As regards the
latter, where a market failure is established in a particular commercial sector,
the UK has proved willing to adopt dedicated control measures to correct it,
including the provision for complaints to be made of unfair trade practices by
other traders. And, where such controls are put in place, fairness and good
faith may be given a central role.
249
Rapport au Président (n 133) 3. art 1171 is clearly mandatory in national law (Rapport au Président (n
133) 11, ie its application cannot be excluded by contract) and it is not clear that French courts would allow the
choice of a foreign law to avoid the control in art 1171, which could be treated as an ‘overriding mandatory
provision’ within the meaning of Regulation 593/2008 on the law applicable to contractual obligations (Rome I)
[2008] OJ L177/6 art 9. The Tribunal de commerce of Paris has held that art L 442-6.I.2o C com falls within art
9 of Rome I: Trib com 7 mai 2015, Expedia Inc no 2015000040.

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Oxford Journal of Legal Studies, Vol. 39, No. 2 (2019), pp.

Unfair Terms in Commercial Contracts

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Abstract—The laws controlling the fairness of the terms of non-consumer

measures by public authorities as well as providing consumers with rights of

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dedicated code of conduct and statutory regulator.10 This contrast of approach

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2. The French Background: Principle and Counter-principle

adopted by courts or most writers,31 Saleilles’ analysis led to a widespread

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3. Unfair Competitive Practices and Unfair Contract Terms in the

and competition (Book IV). As enacted in 2008 (and as presently in force58), it

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providing that ‘any producer, merchant, industrial operator or artisan’ is liable

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subject to a series of conditions; and imposing price variation clauses.81

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background, it is not limited to the context of the commercial distribution of

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the imbalanced obligations in question, a formula which has encouraged the

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importance to be classified as significant’.113 Understandably, some French

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4. Unfair Terms in Contrats d’adhésion in the Reformed

after that date.131 However, a particular constitutional feature of legislating by

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However, in the course of ratification of the 2016 Ordonnance, while the

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provider154) and contracts between two or more persons in business which do

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5. English Law: Contractual Principles and Their Exceptions

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that allow a party to ‘render a contractual performance substantially different

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consumer context, itself derived from EU law, where there is a general

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6. Promoting Competition and Fairness in the UK Groceries Sector

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establishment of a Groceries Supply Code of Practice, based on the existing

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materials—the result primarily of political and legal argument, with a relatively

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