Key French Sales Contract Clauses: The Terms That Allocate Risk

Why the clauses, not the label, decide who bears which risk

A French sale of goods is governed by a default regime in the Civil Code and, for commercial sales, the Commercial Code. Those defaults are workable, but they rarely match the commercial balance the parties actually want. The purpose of the french sales contract clauses you negotiate is to move the default allocation of risk — of ownership, of loss, of delay, of defects, of litigation cost — onto the party best placed to carry it. Where the contract is silent, the code fills the gap, and the gap-filler is often the seller's problem or the buyer's problem in ways neither intended.

French courts look at substance rather than the heading a party gave to a clause. A term described as a simple reserve may be treated as a retention of title with full proprietary effect; a clause called a guarantee may in fact narrow the seller's exposure. The label is a starting point, not the answer. When the character of a clause is disputed, the judge reads the whole contract and the parties' shared intention, and requalifies the term to match what it really does.

This matters most in three moments: when the buyer does not pay, when the goods are lost or damaged between conclusion and delivery, and when a dispute has to be litigated across a border. Each of those moments is governed by a specific clause — retention of title, transfer of risk, and jurisdiction. Draft them well and the outcome is predictable; leave them out and you inherit the code's default, which may send you to a foreign court, transfer risk earlier than you expected, or leave you an unsecured creditor in an insolvency.

Retention of title: keeping ownership until you are paid

The most valuable protective clause for a seller is the retention-of-title clause (clause de reserve de propriete). Under Article 2367 of the Civil Code, ownership of the goods can be suspended until the buyer has paid the price in full, even though the goods have already been delivered and are physically in the buyer's warehouse. Until payment, the seller remains owner. If the buyer fails to pay — and above all if the buyer becomes insolvent — the seller can reclaim the goods rather than stand in line as an ordinary unsecured creditor.

Two points decide whether the clause works. First, it must be agreed in writing at the latest at the moment of delivery; a clause that first appears on the back of an invoice sent after the goods have gone can be challenged. Second, the goods must still be identifiable and, in an insolvency, must not have been resold or incorporated into other property. French courts accept retention of title as fully effective against the buyer's insolvency administrator provided these conditions are met, which is why it is the single clause most worth getting right in a supply relationship.

Retention of title also interacts with risk. Because the seller keeps ownership, the default rule is that the seller keeps the risk of accidental loss until payment — including the risk of transport — unless the contract says otherwise. Sellers who want to retain title but pass risk on delivery must say so expressly, decoupling the two. This is a common and permitted arrangement, but it has to be written down; silence leaves the risk with the owner, which under a retention clause is still the seller.

Price, revision and payment-term clauses

The price clause must fix a price that is determined or at least determinable without a fresh agreement between the parties. A contract that leaves the price to future negotiation is exposed to a nullity argument; one that ties the price to an objective reference — a published index, a formula, a third-party valuer — is safe. In a framework supply contract, the supplier may be permitted to set the price unilaterally, subject to judicial control of abuse, but a one-off sale needs a price the buyer can calculate from the contract itself.

Where a contract runs over time, a price-revision or indexation clause protects the seller against rising costs. French law allows indexation, but the index chosen must have a direct link to the object of the contract or to one party's activity; an index tied to the general wage level or the statutory minimum wage is prohibited. A clause using an unlawful index is not simply ignored — it can be struck down, leaving the seller with the original fixed price. Choosing a compliant index is therefore part of the drafting, not an afterthought. Our note on price revision and indexation clauses sets out the permitted indices.

Payment-term clauses are heavily regulated in business-to-business sales. French law caps the agreed payment period and imposes mandatory late-payment interest and a fixed recovery indemnity that apply even if the contract is silent or tries to exclude them. A payment clause that purports to give the buyer longer than the statutory maximum is not just unenforceable to that extent — it exposes the party who imposed it to administrative fines. Foreign sellers used to 90-day terms should check the French limits before agreeing them.

Delivery and transfer-of-risk clauses (Incoterms)

Under French law the risk of accidental loss follows ownership, and ownership usually passes when the parties agree on the thing and the price — before delivery. That means a buyer can become owner, and therefore carrier of the risk, while the goods are still with the seller or in transit. If the goods are then destroyed by an event neither party caused, the buyer may still owe the price for goods it never received. Few buyers realise this, and it is precisely why a transfer-of-risk clause matters.

The usual solution is to tie risk to delivery rather than to ownership, and the standard vocabulary for doing so is the Incoterms. It is worth being precise about what an Incoterm does and does not do. Incoterms are ICC trade rules that allocate the delivery point, the transfer of risk, the cost of carriage, insurance and customs clearance. They do not, however, decide when ownership passes, they do not fix the price or payment, and they do not govern breach or warranties. French courts have confirmed that an Incoterm settles risk and cost but leaves the transfer of property to the contract and the general law.

To rely on an Incoterm you must actually incorporate it. It is not enough that a three-letter code appears on a transport document; the judge must find that both parties intended to apply that term to their sale, and the ICC rules must be referenced in their official form, for example FOB [named port], Incoterms 2020. Without an explicit reference, the court applies the Civil Code's transfer-of-risk rules instead — which brings you back to risk following ownership. Match the chosen term to your transport mode and always name the version.

Warranty limitation and liability-cap clauses — and their limits

Between businesses, French law allows the seller to limit or exclude its warranties and to cap its liability — but the freedom is bounded, and the boundaries catch the unwary. A clause excluding the warranty against hidden defects is valid only between professionals of the same speciality. Against a consumer it is void, and against a business buyer operating in a different field it is generally ineffective, because that buyer is treated like a layperson who could not have detected the defect.

A professional seller faces a further obstacle: it is presumed to have known of the defect, and a seller who knew of a defect cannot shelter behind an exclusion clause. In domestic French sales this presumption is difficult to rebut, which sharply limits how far a professional seller can exclude its liability for defects to a buyer of the same speciality. A limitation clause drafted for one relationship will not automatically protect the seller against a differently situated buyer, so the clause must be read against each counterparty.

Liability caps are enforceable in principle, but two doctrines police them. A cap that empties an essential obligation of its substance is deprived of effect — the seller cannot promise the core of the bargain and then cap its liability so low that the promise means nothing. And a cap does not survive the seller's gross negligence or wilful misconduct. Within those limits, a proportionate cap tied to the contract value is a legitimate and common risk-allocation tool. Our guide to limiting or excluding warranties in B2B sales covers the same-speciality rule in detail.

Penalty clauses and their judicial control

A penalty clause (clause penale) fixes in advance the sum payable if a party breaches — typically for late delivery or late payment. It saves the innocent party from having to prove its actual loss and gives both sides certainty about the cost of default. French law recognises the clause and gives it real force: the agreed sum is due on breach without proof of damage, which is exactly why it is worth including.

That force is not unlimited. Under Article 1231-5 of the Civil Code, a judge may reduce a penalty that is manifestly excessive, or increase one that is manifestly derisory, and may do so of the judge's own motion. The power exists to stop the clause operating as an oppressive private fine or as a token that fails to compensate. A clause set at a credible pre-estimate of loss is far more likely to be enforced as written than one pitched punitively high; drafting to a realistic figure is the best protection against later reduction.

A penalty clause should be distinguished from other money clauses it is often confused with. It is not the same as the mandatory late-payment interest that applies in B2B sales by operation of law, nor the same as a liability cap, which limits exposure rather than fixing a sum due on breach. The three can coexist in one contract, but they do different jobs, and a clause that tries to be all three at once invites argument. See our detailed treatment of penalty clauses for drafting to withstand judicial review.

Force majeure and hardship clauses

Two distinct clauses address events that disrupt performance, and they are frequently conflated. A force majeure clause deals with events that make performance impossible — an unforeseeable, unavoidable event beyond a party's control that prevents it performing. Its effect is to suspend or excuse performance and shield the affected party from liability for the resulting breach. A well-drafted clause defines the qualifying events, the notice required, and what happens if the impediment persists.

Hardship (imprevision) is different: performance remains possible but has become excessively onerous because of an unforeseeable change in circumstances. Article 1195 of the Civil Code allows the disadvantaged party to ask the other to renegotiate, and, failing agreement, to turn to the court to adapt or end the contract. Critically, the parties can contract out of Article 1195 — and in negotiated commercial sales they often do, replacing the statutory mechanism with their own tailored renegotiation clause. If you say nothing, the statutory regime applies; if you want a different outcome, you must draft it.

For a foreign party, the interaction with the applicable law is important. Where the Vienna Convention governs the sale, it has its own regime for exemption from liability for an impediment beyond a party's control, which does not map exactly onto the French domestic concepts. A contract that will or might be governed by the Convention should align its force majeure and hardship clauses with that regime rather than assume the Civil Code applies. Our note on force majeure and hardship compares the two frameworks.

Jurisdiction, applicable law and language clauses — plus a drafting checklist

The clauses that decide where and under which law you litigate are as commercially important as the price. A choice-of-law clause tells the court which substantive rules apply; a jurisdiction clause tells the parties which court hears a dispute. In cross-border EU sales these clauses are given effect under the relevant EU regulations, and a valid jurisdiction agreement will generally be respected. Without them, the applicable law and the competent court are worked out from default connecting factors — often the seller's habitual residence for the law, and the place of delivery for the court — which may not be where you want to be.

A French-law clause is not compulsory, but choosing French law and a French court has advantages if the counterparty and the goods are in France: enforcement is direct, and you avoid arguing foreign law before a French judge. Where the sale is international and the parties have their places of business in different Vienna Convention states, the Convention may apply automatically unless it is excluded; a choice-of-law clause should state expressly whether the Convention is retained or displaced, because a bare reference to French law may not exclude it. A language clause fixing the authoritative version of the contract avoids costly translation disputes later.

The clauses above do not work in isolation. Retention of title needs a matching risk clause; a warranty cap needs to respect the essential-obligation limit; a penalty needs a defensible figure; a jurisdiction clause needs a choice-of-law clause beside it. The following checklist runs through the terms in the order they tend to be negotiated, so nothing essential is left to the code's defaults.

Frequently asked questions about French sales contract clauses

What clauses should a French sales contract contain?

The essential french sales contract clauses are retention of title, price and payment terms, a transfer-of-risk clause (usually an Incoterm), warranty limitations and liability caps, a penalty clause, force majeure and hardship clauses, and choice-of-law and jurisdiction clauses. Each one shifts a risk the Civil Code would otherwise allocate by default. Which ones matter most depends on where your exposure lies — non-payment, loss in transit, defects, or cross-border litigation.

Are liability caps valid in France?

Yes, between businesses a liability cap is enforceable in principle. But a cap is deprived of effect if it empties an essential obligation of its substance, and it does not survive the seller's gross negligence or wilful misconduct. A proportionate cap tied to the contract value is the safest approach.

Can any clause be struck out as abusive between businesses?

A clause can be neutralised in several ways. A warranty exclusion fails outside the same-speciality relationship; a penalty that is manifestly excessive can be reduced by the judge under Article 1231-5 of the Civil Code; and a cap that contradicts an essential obligation is deprived of effect. French law also controls significant imbalance between contracting parties, so a one-sided clause is not safe merely because it was signed.

Which clause protects an unpaid seller?

The retention-of-title clause under Article 2367 of the Civil Code is the strongest protection. It keeps ownership with the seller until the price is paid in full, so if the buyer fails to pay or becomes insolvent, the seller can reclaim the goods as owner rather than queue as an unsecured creditor. It must be agreed in writing by the time of delivery and the goods must remain identifiable.

Do I need a French-law clause?

A French-law clause is not compulsory, but it is often sensible where the counterparty and the goods are in France, because enforcement is direct and you avoid arguing foreign law before a French judge. If the sale is international, state expressly whether the Vienna Convention is retained or excluded — a bare reference to French law may not exclude it.

Does an Incoterm decide who owns the goods?

No. An Incoterm allocates the delivery point, the transfer of risk, carriage, insurance and customs clearance, but it does not decide when ownership passes. Transfer of property is left to the contract and the general law, which is why a retention-of-title clause and an Incoterm are commonly used together. To rely on an Incoterm you must reference it in its official form, such as Incoterms 2020.

Can we contract out of the hardship rules?

Yes. Article 1195 of the Civil Code lets a disadvantaged party seek renegotiation, and ultimately judicial adaptation, when performance becomes excessively onerous — but the parties can exclude it. In negotiated commercial sales it is common to displace the statutory regime and replace it with a tailored renegotiation clause. If you say nothing, the statutory hardship mechanism applies.

Key takeaways on French sales contract clauses

How our French lawyers help with French sales contract clauses

Petroff Avocats drafts and reviews sale-of-goods contracts for businesses on both sides of the deal — sellers who need enforceable security and risk allocation, and buyers who need to avoid inheriting risk or paying for goods they never receive. We build retention-of-title, risk, price-revision, warranty, penalty, force majeure, hardship and jurisdiction clauses as one coherent set matched to your trade and transport arrangements, and we test existing terms against the French rules on same-speciality warranty exclusion, essential obligations, penalty control, significant imbalance and the Vienna Convention. Where a dispute has already arisen, we advise on which clause governs, whether it holds up, and how to enforce or resist it before the competent court.

This article is for general information only. It does not constitute legal advice and cannot replace advice tailored to your contract and circumstances. The law and its application to a given sale depend on the facts. Contact our French lawyers for advice on your situation.