The Obligation of Information and the Duty to Advise in Contracts Under French Law

//The Obligation of Information and the Duty to Advise in Contracts Under French Law

The Obligation of Information and the Duty to Advise in Contracts Under French Law

By |2020-05-26T14:30:03+00:00May 26th, 2020|news|0 Comments

In a recent article published here on my blog on the topic of “Negotiating Software Contracts under EU Law: Practical Tips”, I explained some of the specificities of French and other continental EU civil law-based legal systems when it comes to the drafting and interpretation of warranties, warranty disclaimers, limitations and exclusions of liability under EU law. I also presented some of the most common types of warranties typically found in contracts governed by the laws of EU countries.

In my experience advising U.S. and Canada-based companies from the technology sector – and particularly SaaS vendors – in doing business in the EU in general, I often need to explain the peculiarities of a number of obligations imposed on software vendors in France, one of which is the paramount duty to advise (obligation de conseil) under French law.

In this article I am introducing this particular obligation, and the associated obligations to inform (obligation de renseignement) and to warn (obligation de mise en garde) in the context of IT contracts.

1. The duty to advise (obligation de conseil).

The duty to advise has long been a cornerstone of French law in its application to IT, and to computer and software contracts in particular. Initially limited to certain very specific use case scenarios, it is now general in its application and is implied in contracts to the same extent as the main obligation of vendors to deliver the software and related services. The rationale here is that the duty to advise and the obligation to inform on the part of the supplier towards their customer is intended to compensate for the imbalance between the technical knowledge of the supplier and that of the client.

Under Article 1112-1 of the French Civil Code, as revised in 2016, “the party who knows information which is of decisive importance for the consent of the other, must inform him of it where the latter legitimately does not know the information or relies on the contracting party.”

This obligation requires the supplier to provide their client with essential and necessary information regarding the proper use and operation of the services or equipment they offer and supply. Such information must be accurate and easy to understand for the client. With respect to software in particular, the information on the use of the software is that information which a professional vendor in the industry must give the average (assumed to be unfamiliar with IT specifics) user in order to allow such user to make an informed decision.

By way of example, the duty to advise was recognized and enforced when the Cour de Cassation, France’s highest court in civil and criminal matters, ruled against the vendor in the context where a vendor did not properly advise the client when, despite having had the opportunity to assess the client’s activity and IT needs, the vendor failed to direct the client to the software solution they needed, thereby misjudging the real needs of the client and offering them a product that was not adapted to their needs.

One interesting question is whether this duty to advise also implies an obligation to provide technical assistance even in the situation where the contract between the parties does not include an SLA or maintenance obligation. Although experts in the field have opposed such a broad interpretation of the vendor’s obligations, the Paris Court of Appeals has judged that, as part of its duty to advise, the vendor must ensure that the delivered system operates satisfactorily from the beginning without such operation being affected by technical difficulties the vendor should have been aware of.

The duty to advise also includes a duty to inform and a duty to warn.

2. The duty to inform (obligation de renseignement).

The duty to advise implies that the software vendor obtains all necessary information about its client’s needs. This obligation to be proactive in seeking out information regarding the client’s needs goes quite far under French law. The Cour de Cassation has considered that a vendor is liable for breach of contract when such vendor has agreed to commit to a general scope of work without asking any clarification nor any information on the expected use of the software by its client. In their defense, in case of a challenge by the client, the vendor must be in a position to demonstrate having made such enquiries, which typically takes the form of email and other written correspondence exchanged between the parties.

There is a general obligation under French law on vendors of products and services to provide the necessary information on the attributes of the offered products and services. In the context of IT systems, this means that the vendor must draw the client’s attention to any restrictions on the use of the system, the requirements regarding the user’s computing environment for use of the software, as well as any difficulties the use may face during installation and operation of the software. Such obligation must address the particular needs of the user. The vendor must inform the user of the limitations of the product or service, and in the context of software, the limitations on the software functionalities. The vendor must help the client in expressing their needs so as to be in a better position to advise them on the best choice for them of a solution, even if this means contracting with a 3rd party in order to obtain a functionality the vendor is not in a position to offer.

3. The duty to warn (obligation de mise en garde).

Separate from the duty to advise per se, the vendor also has a duty to draw the client’s attention to the risks and difficulties associated with the implementation of the proposed solution. This duty to warn also goes far under French law in that it imposes an obligation on the vendor to not only warn the client against any possible malfunction, but also to advise the client of any technical contingencies the client may encounter as well as any limitations of the proposed solution.

As an example, the Paris Court of Appeal has judged that a vendor had failed to properly advise the client when they allowed a project to change its nature without alerting the client of the consequences of such change. Consequently it has become common for vendors to include in their contract a clause stating that “the client is aware that the project which will be developed between the parties is complex and likely to severely impact the client’s organization and work methods as well as the level of qualification of its staff, and that therefore it implies a close collaboration between the parties, a constant dialogue based on trust and mutual respect.”

4. The obligation of collaboration (devoir de collaboration) of the client.

Under French law there exists a separate obligation of collaboration on the part of the client, which obligation finds particular resonance in the context of IT projects. The client does have a separate obligation to get involved and adequately present their specific needs. It is however the vendor’s duty to seek out the assistance of the client and to obtain from them the information necessary for a precise identification of their needs. As between the vendor and the client this will typically lead to the drafting of a specific and detailed “Statement of Work” (cahier des charges) describing the key components of the projects, the tasks to be performed, the technical specifications and warranties, etc.

This has a practical implication on the running of IT projects in France in that the pre-contractual phase of the negotiation is often more important than the contract implementation phase itself. It is equally common in France as it is in the U.S. or in Canada to have contracts include an entire agreement clause whereby the signed agreement between the parties shall be deemed to constitute the sole and entire agreement between the parties, excluding any other documentation or correspondence between them, regarding its subject matter. However, because of the specific obligations a vendor has under French law to advise, inform and warn clients, and the corresponding obligation of clients to collaborate with the vendor, it is particularly important for software, IT and SaaS vendors to pay attention to any documentation exchanged between the parties, any statements by clients regarding their needs and expectations as to the software or IT service, and any representations and promises the vendor’s staff may have made in writing during the pre-contractual phase (phase de pourparlers). It is indeed very common that entire agreement clauses in IT contracts governed by French law incorporate by reference any documentation exchanged between the parties prior to the signature of the contract, and that representations, warranties, and other statements made by vendors during the pre-contractual phase make their way into express representations and warranties in the actual contract.

It is also important to add that this separate obligation for the client to collaborate with the vendor doesn’t end at the time the parties agree to the terms of the contract between them, but that it continues during the performance of the contract, i.e., during the software development phase, if any, as well as during the installation and launch of the software or IT solution.

Key takeaways

– The extent of the obligation to advise varies based on the level of competency of the client. The less sophisticated the client in matters of IT, the broader the scope of the vendor’s obligation to advise. The more the client knows about this type of projects and the specifics of IT engagements, the less the extent of the vendor’s obligation in that area. Having said that, the extent of one’s familiarity with IT issues is ultimately a fact-based analysis. However the ever-increasing complexity of IT projects and the unique features of novel technologies to implement are such that the U.S. vendor may want to assume a more engaged role in advising the client and to ensure that the client is indeed equipped with all necessary information on the proposed solution to make an informed decision;

– In international IT projects as it is in international contracts between parties from different countries, gaining an appreciation of the differences in languages and business cultures between the U.S. and France (and Europe in general) is very important to ensure a successful roll out of any project. Therefore, the same way that a U.S. or Canadian software vendor not familiar with French law and the drafting and negotiation of contracts under French and European law would be well advised to retain counsel qualified as a French lawyer to assist, the vendor would be equally advised to seek the assistance of French-speaking technical experts versed in the company’s technologies and offerings and able to convey the functionalities of the proposed solution in the French language. It may also be a good idea to create French versions of the technical documentation.

– There is an important distinction under French law between obligations categorized as obligations of means (obligations de moyens) (or a mere obligation for the obligor to use all commercially reasonable efforts in performing their obligations under the contract) and obligations categorized as obligations of result (obligations de résultat), whereby the obligor has a strict obligation to comply. With respect to the duty to advise, it is clear that such duty constitutes an obligation of result under French law, i.e. the vendor does have a strict obligation to advise the client. On the other hand, the substance and relevance of such advice are deemed to fall under an obligation of means under French law, as the effectiveness of such advice isn’t within the vendor’s control and the client remains ultimately responsible for any decisions made based on such advice. The Cour de Cassation did however point out that the software vendor must be held to a reinforced duty (higher standard of care) to advise an inexperienced client, in which case the vendor must take upon itself to discover the actual needs of the client.

Consequently, it is important to ensure the IT contract drafted under French law precisely defines the respective obligations of each party, along with their proper categorization as obligations de moyens v. obligations de résultat, such classification having a direct effect on the liability regime that is associated with any breach of such obligations.