Price Determination in French Contract Law: What the Civil Code Requires

Price determination in French contract law: what the Civil Code requires

French law treats the price as part of the content of the contract, and that content must be certain. Outside two statutory exceptions, the price must be determined, or at least determinable, when the contract is concluded: a figure, a formula, an index or a third party invested with the mission of fixing it, but never a number left to a later agreement or to the discretion of one side. Where the price is neither determined nor determinable, the contract is void, and no judge will rescue it by setting the price himself (Cass. com., 4 juin 2025, n° 24-11.580).

The two exceptions are Articles 1164 and 1165 of the Civil Code: in framework contracts and in service contracts, one party may fix the price unilaterally, on condition of justifying the amount if contested, and under judicial review for abuse. This article sets out the principle and its history, the two unilateral-fixing regimes and the abuse case law, the drafting methods that make a price determinable and those the courts have struck down, third-party determination under Article 1592, and the sanctions when everything fails.

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The principle: a price determined or determinable when the contract is concluded

Unless the parties provide otherwise, the price to be determined is the sum of money one contracting party must pay the other, whatever name the parties give it: redevance (royalty), commission or royalties (CA Paris, 23 mars 1982). The price must be certain; it is a condition of the validity of the contract. Within the limits set by statute the parties fix it freely, but they cannot dispense with fixing it, because the judge cannot do it in their place (Cass. com., 4 juin 2025, n° 24-11.580). The contract contains no price at all where the amount written in letters differs from the amount written in figures (CAA Paris, 29 févr. 2024, n° 22PA03860).

The price is normally money, but the parties may agree at conclusion that a thing in kind will be handed over instead, provided that thing has been valued or can be valued from evaluation elements fixed in the contract; the courts have accepted the mechanism for the price of goods sold (Cass. 3e civ., 23 mai 2007, n° 06-13.629) and for a lawyer's result fee paid in kind (Cass. 2e civ., 19 nov. 2009, n° 07-13.268). It is then simply a dation en paiement (giving in payment). By contrast, an undertaking to fit out an equestrian centre in exchange for land, never performed and impossible to value, was held not to be a price (Cass. 3e civ., 17 mars 1981).

The requirement has a history that still shapes its scope. Article 1591 of the Civil Code has always expressly required a determined price for sale. The courts first generalised that requirement to every contract, then renounced the generalisation: from 1995, prior determination of the price ceased to be a rule of principle for all contracts, the full court holding that indeterminacy in a framework rental contract did not by itself void it (Cass. ass. plén., 1 déc. 1995), and the same relaxation was applied to an early-repayment indemnity in a loan (Cass. 1e civ., 12 mai 2004). The 2016 reform did not fundamentally disturb that settlement. Articles 1164 and 1165 now state special rules for framework contracts and service contracts, comparable to the earlier case law, and the report to the President of the Republic accompanying the reform reads them as derogations: given the danger of authorising unilateral price fixing in every contract, the mechanism was confined to framework contracts, where it matters most. For every other contract, the obligation to determine the price at conclusion subsists, and the courts refuse to make up for its absence: a transport subcontract without a fixed price could not be completed by a later document on the principal's letterhead providing an immobilisation indemnity (Cass. com., 14 juin 2016, n° 14-20.256).

Three points of scope complete the principle. First, timing: the determination must be made at the conclusion of the contract or, at the latest, when the debtor must perform (Cass. 1e civ., 11 juin 1981), and once the price has been paid its indeterminacy can no longer be raised (Cass. com., 11 juin 1985). Secondly, the requirement concerns only the essential obligation and its price, never secondary terms: indeterminacy of profit-sharing modalities supplementing a price (Cass. 1e civ., 8 juin 1977, n° 76-11.332), of the modalities of payment (Cass. civ., 30 oct. 1979), or of the division of the price between co-sellers (Cass. 3e civ., 19 mars 1986, n° 84-13.582), does not affect validity. Thirdly, the requirement is not part of French international public policy: the Vienna Convention on the international sale of goods accepts that a price be neither determined nor determinable, and no decision has held the French rule opposable to international contracts.

Framework and service contracts: where one party may set the price

Framework contracts (Article 1164). In a framework contract, in French a contrat-cadre, meaning a contract that provides for implementation contracts, the parties may agree that the price will be fixed unilaterally by one of them, subject to the obligation to justify the amount in case of dispute (C. civ. Art. 1164, para. 1). The price so fixed must not be abusive (Art. 1164, para. 2). Where abuse is established, the victim may claim damages or the termination of the contract. The stipulation is common in distribution and supply relationships, and the case law decided under the earlier regime maps the boundary between lawful and abusive fixing.

Abuse has been found where the price was set without negotiation, having regard to the economy of the contract, the conduct of the fixing party and the absence of any justification of the amount (CA Paris, 24 oct. 2000); where it was set without reference to the market price and in conditions revealing a growing imbalance between the parties' reciprocal performances (CA Versailles, 27 janv. 2000); and where it was discriminatory against the complaining distributor, the average price invoiced to him being 25 per cent higher than to other customers and the average gross margin 29 per cent against 10 per cent on other sales (Cass. com., 4 nov. 2014, n° 11-14.026). Conversely, no abuse was found where the counterpart had the possibility of not committing itself (Cass. 1e civ., 30 juin 2004, n° 01-00.475), where it had a choice between different prices and the freedom to negotiate (Cass. com., 21 janv. 1997), or where the supplier indicated with precision the parameters, the price of labour, cotton, sundry services and energy, entering into its cost of production and on the basis of which it revised its tariffs (CA Paris, 5 juin 1998). The intervention of a conciliation commission has been treated as a means of excluding the risk of abuse altogether, because the price then no longer depends on the will of one party (CA Paris, 26 mars 1992).

Service contracts (Article 1165). For contracts for the supply of services, the absence of a price agreed at conclusion does not affect the validity of the contract once performed, unless the parties made its prior fixing a condition of the contract (Cass. civ., 23 oct. 1979), which they remain free to do. Failing agreement before performance, the price may be fixed by the creditor, subject to justifying the amount in case of dispute (C. civ. Art. 1165, para. 1). In case of abuse in the fixing of the price, the judge may be seised of a claim for damages and, where appropriate, for termination (Art. 1165, para. 2). In assessing abuse the judge may rely on the elements of the case, appraised sovereignly (Cass. 3e civ., 17 mars 2004, n° 02-17.681), on professional usages (Cass. com., 25 juin 1973), on an expert report (Cass. com., 6 nov. 1978), on the market price and the tariff habitually applied by the provider (CA Versailles, 30 mai 1996), or on professional scales he was not bound to apply (Cass. 3e civ., 24 janv. 1978). Article 1165 does not apply to the fees of a chartered accountant, which follow their own regime (Cass. com., 20 sept. 2023, n° 21-25.386).

Every other contract. For sale, the obligation to determine the price is express (C. civ. Art. 1591): no sale is concluded in the absence of a price (Cass. com., 25 sept. 2012, n° 11-23.319), while the sale is concluded as soon as the price is determinable (Cass. 1e civ., 2 déc. 1997). The better view is that the same obligation applies in every contract for which the law has not provided a derogation, Articles 1164 and 1165 being exceptions to be read strictly. The party who cannot bring its contract within one of the two texts must therefore make its price determinable by drafting, which is the subject of the next section.

Drafting a determinable price: methods that pass, methods that fail

The test is settled. The price is determined if it is formally quantified, even at one euro (Cass. com., 3 janv. 1985, n° 83-15.520), and it is determinable if it can be calculated from reference elements provided in the contract, so long as their implementation calls for no new manifestation of will by either contracting party. A price tied to a future element is therefore valid on condition that it depends neither on the sole will of one party nor on later agreements between them (Cass. com., 25 sept. 2012, n° 11-23.319; Cass. com., 10 juill. 2024, n° 22-15.651). The corollary binds the courts as much as the parties: judges cannot resort to elements external to the deed to fix the price, and could not order a share purchaser to pay on the footing that a share is worth at least its value at the date of negotiation (Cass. 1e civ., 24 févr. 1998, n° 96-13.414). Applied to the clauses met in practice, the test produces the following results.

Minimum and maximum. The price is determined where the parties have quantified a minimum and fixed the bases for calculating variations above it, a unit price with measurement of quantities, or a minimum sum plus a supplement indexed on turnover (Cass. 1e civ., 28 juin 1988, n° 86-12.812), and where they have fixed a price floor and a ceiling and left the figure between them to a third party's estimate (CA Rouen, 3 févr. 1999). Where a maximum or a floor is indicated, the price is determined whenever the parties are not obliged to negotiate to settle it, as where the debtor offers the maximum or the creditor claims the floor payable in any event (Cass. com., 30 juin 2004). But the stipulation of a ceiling does not, by itself, make the price determinable (Cass. com., 21 sept. 2022, n° 20-16.994).

Reference elements. The price is determined if it can be calculated from parameters constituting a serious, precise and objective element of reference, making the fixing of the price independent of the sole will of one party (Cass. com., 12 janv. 1988, n° 86-12.838). The formula fails where an element of uncertainty is introduced, as with a clause providing that there would not be an absolute parallel with the future evolution of professional-margin rebates (Cass. com., 27 avr. 1981, n° 80-10.720); where the price of a share transfer was to be drawn from a balance sheet to be established jointly by the parties without any mechanism to break a deadlock (Cass. com., 14 déc. 1999, n° 97-15.654); and where the price of a debt portfolio was set at 80 per cent of whatever the assignee would recover (Cass. com., 7 avr. 2009, n° 07-18.907).

Market price. A reference to the market price or market quotation of the products or services concerned is valid only if the market is identifiable (Cass. 1e civ., 14 déc. 2004) and the reference expresses a general or average price emerging from all solvent offers and demands. It fails where the quotations to be consulted are not specified (Cass. com., 10 déc. 1979, n° 78-11.278), where the reference is to the prices the supplier practises with its own clientele (Cass. com., 13 déc. 1982), or to mere market tendencies (Cass. com., 3 juin 1986). A reference to the average price of the most significant competitors is valid where the elements identifying those competitors are specified (Cass. com., 30 janv. 1978, n° 76-13.849), and a competing-offer clause, aligning the price on a competitor's offer, holds only if the conditions defining the competition, the competitor, the quality and quantity of the product, and the means of settling disputes over those conditions, are rigorously determined (Cass. com., 14 juin 1988).

The supplier's tariff. A tariff may validly serve as the reference where it was settled by common accord (Cass. com., 20 janv. 1987), accepted, or published to the public and shown to result from prices actually imposed by competition, provided those prices themselves constitute a serious, precise and objective reference independent of the will of the tariff's author (Cass. com., 12 janv. 1988, n° 86-12.838). The price may also be that agreed between the parties in other contracts, if determined there, or in contracts concluded by third parties, such as an agreement between two professional bodies of which one party is a member (Cass. civ., 1 oct. 1986). Where a price appears on an order form as indicative only, with the price payable being that in force on delivery, it must be accepted by the purchaser at delivery and cannot be imposed on him (Cass. civ., 20 mai 1981).

Variable elements, cost price, lump sum. A price calculated on variable elements is determined if every element needed for the calculation appears in the contract and the variables do not depend on the will of a party: valid for a price varying with the turnover of the transferred practice (Cass. 1e civ., 28 juin 1988, n° 86-12.812), with own funds, current-year profit and the net book value of fixed assets in a share transfer (Cass. com., 18 juin 1996), or with a share value settled by the board on the published results of the majority shareholder (CA Paris, 29 oct. 2019, n° 18/00226); valid also for a price stipulated in foreign currency, exchange variation depending on no one's will (CA Colmar, 22 févr. 1991). A cost-price formula is valid where the components of the cost, raw materials, direct wages, amortisation, overheads, financing costs, are objectively determined, and void where the cost is left to the supplier's discretion (CA Paris, 18 oct. 1984). A lump-sum price is by definition determined, being definitively settled at conclusion, neither itemised nor revisable (T. com. Paris, 19 nov. 1979), and a single global price for several assets, three companies in one decided case, is valid (Cass. com., 8 avr. 2008, n° 06-18.042).

Indexation and price revision. An indexed price is determinable, and remains so through every revision, Article 1167 of the Civil Code admitting the validity of indexation by implication: the price is set at a given sum which varies according to a reference index, provided the index is objectively calculable (Cass. com., 4 juill. 1972). The clause fails where the index is not specified (Cass. 1e civ., 1 juill. 1981) or where it depends, even partially, on the will of one party (Cass. com., 2 nov. 1993).

Alternative-offer clauses. In shareholder arrangements, the buy-or-sell clause gives an associate the option, on defined triggers, of forcing another to choose between buying his shares at a stated price or selling his own at the price proposed. The price of such a clause stipulating no transfer price is nonetheless determinable where its mechanism permits the price to be derived from that proposed by the first offeror and its triggering is subject to objective conditions (Cass. com., 12 févr. 2025, n° 23-16.290).

The outer limit: competition law. Save where the price is fixed by mandatory provision, electricity and gas tariffs for example, the parties choose their price freely, on condition of respecting competition (C. com. Art. L 410-2). Competitors must accordingly be able to compare prices, including by having employees record prices in each other's shops (Cass. com., 4 oct. 2011, n° 10-21.862), and the price must not result from prohibited agreements or abuses of dominance or of economic dependence.

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Leaving the price to a third party: Article 1592

The task of fixing the price may be entrusted to a third party, called an "expert" (C. civ. Art. 1592). The device is frequently used where the price cannot be settled immediately, and it may be stipulated for the sole case where the parties fail to agree (Cass. com., 25 mai 1981), without amounting to an arbitration. It is valid even where provided only implicitly, as where a business-sale deed recorded that the stock would be estimated by expert (CA Rouen, 31 mai 1979). But the third party must genuinely be invested with the mission of stating the price. That is not the case where the price is that of "any duly justified purchase offer from a notoriously solvent third party", since the creditor can then procure an offer at a figure suggested by a person of his choosing (Cass. civ., 21 déc. 1987); where two experts are appointed without any provision for a third to decide between them in case of disagreement (Cass. com., 27 avr. 1968); or where the expert must fix the price by reference to the prices practised by distributors of the same supplier in the same region, which comes back to a price resulting from the supplier's sole will (Cass. com., 11 juin 1991).

The appointment follows strict rules. The parties may name the third party in the contract or later, but only if the contract so provides, the judges being unable to assume that power (Cass. 1e civ., 16 mai 1984, n° 82-17.008), and one party cannot choose him unilaterally (Cass. civ., 9 janv. 1996, n° 93-19.468). The third party is freely chosen provided he is not dependent on either party (Cass. civ., 2 déc. 1997), the courts asking whether there exists a legitimate and current doubt as to his impartiality (Cass. com., 5 oct. 2004); he may be a legal person, and the parties may agree that the price will be fixed by an expert under the conditions of Article 1843-4 of the Civil Code (Cass. com., 30 nov. 2004). The expert is invested with his mission once he has accepted it (Cass. civ., 23 oct. 1979). The failure to appoint the expert entails the nullity of the contract for want of price determination, the party responsible for the failure being exposed to damages (Cass. civ., 24 nov. 1965).

The mission is to fix the price, and nothing less. The expert performs it where he fixes a price of one franc, the counter-performance being worthless (Cass. com., 3 janv. 1985, n° 83-15.520), but not where he merely proposes a minimum and a maximum to the parties (Cass. com., 29 mai 1972), nor where he confines himself to examining accounts submitted for a price adjustment (Cass. com., 26 juin 1990). He may apply the valuation methods the parties agreed, provided they can actually be implemented. Not acting as a judicial expert, he need not follow the formalities of judicial expertise, nor observe the adversarial principle (Cass. com., 19 avr. 2005).

His decision binds the parties unless they establish that it was reached through a gross error, in French an erreur grossière (Cass. com., 4 févr. 2004, n° 01-13.516; for an example where no such error was made out, Cass. com., 9 oct. 2024, n° 22-23.241). Even where gross error is shown, the court cannot fix the price in the expert's place (Cass. 1e civ., 25 janv. 2005). If the expert committed a fault in performing his mission, the victim may pursue his personal liability (Cass. com., 6 févr. 2007, n° 05-21.271). And if the third party appointed will not or cannot make the estimate, there is no sale, unless another third party makes it (C. civ. Art. 1592).

Sanctions: nullity, its nature and its effects

Save the exceptions of Articles 1164 and 1165, a contract whose price is neither determined nor determinable is void, because the content of the contract must be certain (C. civ. Art. 1128, para. 1 and Art. 1178, para. 1). Some decisions have pronounced the termination of the contract for the same defect (Cass. com., 24 mai 1994), but the qualification is open to criticism: the absence of a certain price deprives the contract of a condition of validity, it is not the non-performance of a contractual obligation. The nullity is in principle relative, since it protects a private interest (Cass. com., 22 mars 2016, n° 14-14.218; Cass. com., 10 avr. 2019, n° 14-12.409), but it should be treated as absolute where the indeterminacy proves to injure the general interest, as where an abnormally low price would force a third-party distributor out of the market (C. com. Art. L 420-5).

The effects are severe. The judge must pronounce the nullity and cannot save the contract by imposing a method of price determination on the parties (Cass. 1e civ., 25 avr. 1972), nor authorise proof of the price by enquiry (Cass. 1e civ., 6 oct. 1965), nor have the price estimated by an expert where the parties fixed no objective element in advance (Cass. 1e civ., 16 juill. 1998, n° 96-17.414), the verbal lease of Article 1716 of the Civil Code being the sole statutory exception. The fact that the contract was performed for years does not amount to confirmation (CA Paris, 2 mai 1986). On annulment, products already delivered must be paid at their real value, excluding the supplier's profit share (Cass. com., 23 juin 1992), unless the buyer accepted the invoiced amounts in later acknowledgments of debt (CA Paris, 22 mars 1991). The party who proposed a contract with an indeterminable object owes damages to the other only if it acted with carelessness or with awareness of causing harm (Cass. com., 5 nov. 1991).

The same sanction reaches the price that exists on paper but not in substance. A price that is not serious, or that is derisory, in French vil (vile, meaning far below any real value), is no price, and the contract is void (Cass. com., 8 févr. 2005, n° 03-10.749; Cass. 3e civ., 25 mai 2011, n° 10-14.464), unless the parties intended an aleatory contract, one whose outcome depends on chance (Cass. com., 3 mars 1998). The derisory character is assessed against all the consideration the seller receives: a one-euro or one-franc price is real where sufficient counter-obligations are placed on the purchaser or the contract forms part of an indivisible global operation procuring the transferor a real advantage (Cass. com., 10 oct. 2018, n° 17-12.564), or where the purchaser assumes liabilities (Cass. com., 11 févr. 1992).

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This article is for general information only and reflects French law as published at the date shown above. It does not constitute legal advice. Always seek qualified advice before acting.