By François Devedjian, partner and Fabienne Kerebel, counsel
Ordinance n ° 2020-427 of April 15, 2020 revises the adjustment of certain contractual clauses initially operated by ordinance n ° 2020-306 in the context of the fight against the spread of Covid-19: if the treatment of the relative clauses upon termination or renewal of the contract remains unchanged, that of the clauses penalizing the non-performance of the debtor is enriched and above all made more complex.
Reminder: the modifications of ordinance n ° 2020-306 of March 25, 2020 during the Suspension Period
La Suspension period is understood as the period beginning on March 12, 2020 and ending at the expiration of a period of one month following the cessation of the state of health emergency within the meaning of article 4 of the law of health emergency of March 23, 2020. The state of emergency having started on March 24, 2020 for a period of 2 months, the Suspension Period therefore runs from March 12 to June 24, 2020, the legislative extension or the early interruption of the a state of emergency which may, however, lengthen or shorten this Suspension Period.
Ordinance n ° 2020-036 of March 25, 2020 had caught our attention for its adjustment of certain contractual deadlines. Its articles 4 and 5 are indeed intended to govern certain consequences of the failure of a co-contractor:
- on the one hand, by paralyzing the legal effects of periodic penalty payments, penalty clauses, termination clauses and forfeiture clauses (article 4)
the period from which these clauses take effect or take effect, as soon as it occurs during the Suspension Period, was postponed from the expiration of a period of one month after the end of the Suspension Period (from June 25, 2020, subject to the end of the state of emergency on the date currently scheduled for May 24, 2020)
- on the other hand, by extending the contractual deadlines for termination or termination of a contract (Article 5)
the contractual period to terminate a contract or to notify its non-renewal, once it expires during the Suspension Period, was extended to expire 2 months at the end of the Suspension Period (i.e. July 24, 2020, subject to the end of the state of emergency on the currently scheduled date of May 24, 2020).
We refer to our analysis of the postponements thus organized by order n ° 2020-306 of March 25, 2020: https://www.ginestie.com/suspension-effets-des-clauses-sanctionnant-linexecution-dobligations-contractuelles/.
Update: changes to Ordinance No. 2020-427 of April 15, 2020 during the Suspension Period
Modification: penalties, penalty clauses, termination clauses, forfeiture clauses
The government, forced into a balancing act given the number and diversity of potentially concerned situations, has revised its copy. Article 4 of ordinance n ° 202-427 thus recasts article 4 of ordinance n ° 202-306, relating to the course of penalties, penalty clauses, termination clauses and forfeiture clauses.
Complexification: shift from a "flat rate report" to a "sliding report"
These penalties and clauses, when their purpose is to penalize the non-performance of an obligation within a determined period:
- are always deemed not to have started or produced effect if this period has expired during the Suspension Period;
- now resume and have effect from the expiration (i) no longer of a fixed period (one month after the end of the Suspension Period), (ii) but of a sliding period, equal to the elapsed time between (a) on the one hand, the later of the following dates: March 12, 2020 or the date on which the sanctioned obligation arose and (b) on the other hand, the date on which it should have been performed.
The mechanism is certainly more complex, without necessarily being more equitable.
Two concrete examples:
- either a commercial lease stipulating the due date for payment of the rent from the 2nd quarter of 2020 to March 31, 2020 and a termination clause in the event of non-payment allowing the contract to be terminated within the month following the issuance of a payment order; the lessee does not fulfill his payment obligation on March 31; an order to pay is validly notified on April 15, so that the termination clause must theoretically take effect on May 15, 2020
regardless of any legal mechanism allowing the policyholder to exempt himself from this obligation (for example for non-fulfillment of the obligation to deliver), the termination clause will have no effect before August 9, 2020 (i.e. 45 days after the end of the Suspension Period set on June 24, 2020, the 45-day period corresponding to the period between the due date of the unfulfilled payment obligation - April 1, 2020 - and the date on which the termination clause should normally have taken effect - May 15, 2020), date on which it can take effect if and only if the lessee has not paid the rent for the 2nd quarter of 2020 on this date
- either a senior credit agreement stipulating a lapse of the term entailing early repayment of the credit in the event of non-delivery of financial information by April 30, 2020; the information is not available at this date
the early repayment of the credit is paralyzed until August 12, 2020 and will not resume until August 13, 2020 if the information has not been delivered by that date (i.e. 49 days after June 25, 2020, the expected date of end of the state of health emergency, this period corresponding to the number of days between the start of the Suspension Period - March 12, 2020 - and the deadline for performance of the obligation - April 30, 2020)
Illustration
Assumption where the date of birth of the unfulfilled obligation is later than the start of the Suspension Period (the course of the penalty payment or the clause also depending on a notification)
Illustration
Assumption where the date of birth of the unfulfilled obligation is prior to the start of the Suspension Period (the course of the penalty payment or the clause also does not depend on any notification and resulting from the sole non-performance)
The supplement: the fate of the penalties and clauses that must have effect after the Suspension Period
Ordinance n ° 2020-306 did not deal with penalty payments and clauses sanctioning an obligation that expired, not during the Suspension Period, but at its expiration (i.e. after June 24, 2020). This ignorance has been deplored by various economic players, considering that they are not able to meet the contractual deadlines even one month after the end of the state of health emergency, given the impact of the pandemic on their activity.
Ordinance No. 2020-427 therefore includes a postponement of the price and effects of these penalties and clauses also but from which obligations of sums of money remain excluded, on the grounds that the impact of the pandemic on the latter is not "Indirect" (as opposed to an obligation to deliver a building for example, the pandemic directly inducing a delay in its execution) and is moreover compensated by the economic measures put in place by the government (guaranteed loans, deferral of charges , etc.).
The deferral mechanism is similar to that provided for penalty payments and clauses penalizing the non-performance of an obligation expired during the Suspension Period: their entry into effect is postponed by a sliding period, equal to the time elapsed between (a) on the one hand, the later of the following dates: March 12, 2020 or the date on which the sanctioned obligation arose and (b) on the other hand, the end of the Suspension Period (June 24, 2020).
A concrete example: either a construction contract concluded before March 12, 2020 and providing for the delivery of a building on July 30, 2020, any delay in delivery being sanctioned by a penalty clause; the effects of this penalty clause will be postponed for 104 days (period separating March 12, 2020 from the expiry of the Suspension Period, i.e. June 24, 2020), so that the penalty clause will only take effect if the building does not is not delivered by November 11, 2020.
Illustration
Assumption where the date of birth of the unfulfilled (non-monetary) obligation is after the start of the Suspension Period
Illustration
Assumption where the date of birth of the unfulfilled (non-monetary) obligation is before the start of the Suspension Period
Maintenance: termination or non-renewal clauses
Article 5 of Ordinance No. 2020-306 is not modified.
The contractual period for terminating a contract or for notifying its non-renewal, once it expires during the Suspension Period, is always automatically extended to expire 2 months at the end of the Suspension Period (i.e. August 24 in the absence of an extension or early termination of the health emergency period).
A concrete example: a license contract concluded for a fixed period expiring on April 30, 2020 and renewable by tacit agreement unless terminated notified at least 1 month before its expiration. The co-contractor wishing to oppose the tacit renewal of the contract may do so until July 24, 2020.
Illustration
Link to Ordinance No. 2020-306 relating to the extension of deadlines expired during the health emergency period and to the adaptation of procedures during this same period: https://www.legifrance.gouv.fr/eli/ordonnance/2020/3/25/JUSX2008186R/jo/texte
Link to Ordinance No. 2020-427 on various provisions relating to time limits for dealing with the covid-19 epidemic: https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000041800899&categorieLien=id
Link to the Report to the President of the Republic on Ordinance No. 2020-427: https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000041800867&categorieLien=id
François Devedjian
Partner
A specialist in stock market law and mergers and acquisitions, he is involved, in particular, in public offers and capital market transactions, as well as in mergers and acquisitions, whether or not involving listed companies.
He regularly advises companies whose securities are traded on a regulated market in France, large industrial groups and innovative companies with strong growth, both in their daily life and on specific transactions.
Fabienne Kerebel
Counsel
She has acquired a solid expertise in the law of listed and unlisted companies and its various components, in particular private equity and mergers and acquisitions.
As such, Fabienne advises companies and executives on their external growth operations, changes in their governance or shareholding, the incentive of key managers or the reorganization of corporate structures. She has developed an in-depth practice of financial securities transactions which allows her to support start-ups, SMEs and mid-cap companies in their fundraising as well as investors at all stages of their investment.
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