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E-library Commercial Contracts Agreement for provision of services (French contract law)

Agreement for provision of services (French contract law)

03 Jul 2011

What provisions should contain an agreement for the provision of services ?

A description of the services which should be provided

The services which should be provided by the service provider to the client may be described by reference to an exhibit. Their scope, volume and nature should be clearly defined.

The agreement may also authorize the client to request at any time the provision of additional services. In such case, it may be stated that, in the absence of a specific agreement between the parties regarding such additional services, the additional services shall be provided and billed in accordance with the general terms and conditions of sale of the service provider in force at the time of their provision.

Obligations, representations and warranties

The following representations and warranties may, inter alia, be given by the service provider to the client:

  • the service provider shall (use its best efforts to) provide the services in a timely, competent and professional manner by appropriately skilled, experienced and qualified personnel having at all times due regard to the client's business operations,
  • the services shall be provided in compliance with good commercial practices and applicable laws,
  • the service provider shall not subscontract the performance of the services to third parties without the prior written authorization of the client,
  • the service provider shall subscribe for and maintain, throughout the term of the agreement and with a financially sound and reputable insurance company, insurance covering damage to persons and property and professional liability in sufficient amounts taking into account all risks relating to the services
  • the services provided by the service provider shall not infringe the intellectual property and other proprietary rights of third parties,
  • etc.

The service provider may on the other hand require that the client cooperates and provides in a timely manner all information which may be necessary for the performance, by the service provider, of its obligations.

While drafting and negotiating such clauses, particular attention should be paid to the difference between the so-called "obligations to achieve a specific result" (such as, an obligation to meet a specified budget or deadline) and "obligations of best efforts" (such as, an obligation to use its best efforts to meet the budget or the specified deadline). While breach by a party of an obligation to achieve a specific result will ispo facto entitle the other party to seek damages for breach of contract, such damages may be more difficult to obtain if the obligation was one of best efforts.

Payment terms

Regarding payment terms, attention should be paid to the provisions of article L. 441-6 of the French Commercial Code ("Code de Commerce"). According to this article, and unless otherwise agreed between the parties, payment for provided services should be made within 30 days after the date on which they were provided. Furthermore, the parties are not allowed to agree on payment terms which exceed 35 days end of month or 60 days after the invoice date. Non-compliance with the provisions of article L. 441-6 is punishable by a fine up to 15.000€.

Term, termination and termination effects

The parties should pay specific attention to duration. Indeed, pursuant to French law, an agreement which does not contain a specified duration is considered to be entered into for an indefinite term. It may therefore be terminated at any time by any party, subject to a reasonable prior notice.

In addition to duration, the agreement should also provide for a right, by each party, to terminate the agreement as of right and without judicial formalities in the event of breach of its obligations by the other party. Indeed, pursuant to French law, in the absence of specific provisions enabling a party to terminate an agreement, such agreement may only be terminated upon court order.

The agreement should also specify which clauses (such as confidentiality obligations, representations and warranties, etc.) should survive its termination. Such surviving clauses should also have a duration as, pursuant to French law, an obligation which does not have a specified term is considered to be of indefinite duration and may therefore be terminated at any time subject to a reasonable prior notice.

Confidentiality

A confidentiality clause may impose confidentiality obligations on the service provider only or on both parties. The following information is generally excluded from the scope of such confidentiality obligations:

  • information which is or subsequently falls into the public domain in the absence of breach by the receiving party of its confidentiality obligations
  • information which was received by the receiving party from a third party acting lawfully and without duty of confidentiality
  • information which was, at the time of its disclosure by the other party, already known by the receiving party in the absence of a duty of confidentiality
  • information which was independently developed by the receiving party’s personnel acting in good faith, without access or reference to, or use of, confidential Information of the other party, and
  • information which is required to be disclosed pursuant to mandatory provisions of applicable law or by a court order or a decision of a governmental authority.

Confidentiality obligations may include:

  • an obligation to hold the confidential information in confidence and not to copy, reproduce, sell, assign, license, market, transfer or otherwise dispose of, give or disclose such information, in whole or in part, to third parties
  • an obligation not to use such information for any purposes (including for the other party's own needs) other than the performance of the receiving party's obligations under the agreement
  • obligation not to disclose confidential information to the receiving party's employees or subcontractors otherwise than on a need-to-know basis and subject to a confidentiality undertaking to be entered into by such recipients of confidential information
  • obligation to inform the other party immediately upon becoming aware that confidential information has been disclosed or used contrary to the provisions of the agreement
  • obligation to return or destroy all confidential information in the possession of the receiving party upon termination of the agreement
  • etc.

To survive the termination of the agreement, a confidentiality clause should specify that it shall apply after the termination or expiration of the agreement, for a specified period of time.

Non-solicitation

A non-solicitation clause prohibits a party from solliciting the employees or subcontractors of the other party. To survive the termination of the agreement, such clause should specify that it shall apply after the termination or expiration of the agreement, for a specified period of time.

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