Rebond .Rebound : \ʁə.bɔ\̃

« Action of taking a new

development after a downtime »

Rebond .

GUIDE

Contractual dynamics in public law

Legal measures that economic actors can take to be better tomorrow than they were yesterday.

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Publications in shambles. Tips in a rush. We don't advise anymore,we comment. With adjectives that amplify the short-term natureof lockdown and superlatives that announce the end of the post-covid 19 world, one might forget that yesterday's world is stillpresent and tomorrow is now. It is even a question ofresponsibility. Will tomorrow's world be different? Well, why not.Why could it not just be better?

Will we still have things to do tomorrow, companies to run,employees to manage and opportunities to gain? Yes, clearly.Plenty of that. And we've never had so many legal tools to dodifferently what we did well yesterday and what we can do evenbetter tomorrow.

New contractual dynamics to build more flexible and innovativerelationships. Social challenges to meet to achieve strongerresilience and collaboration. Difficulties to resolve in order tomake a fresh start... how about it?

Discover the elements of Rebound*.

.... .

Serge-Antoine TCHEKHOFFPARTNER

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Rebound.PUBLIC PROCUREMENT, A FLEXIBLE AND PROTECTIVE TOOL AT THE SERVICE

OF ECONOMIC RECOVERY

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When concluding new contracts or performing existing ones, public procurement actors are

faced today with various uncertainties leading them to seek protection from the effects of the

pandemic and manage its consequences on their contractual ties.

In addition to this legitimate defensive reaction, which may lead to a conservative position, it

is possible to take advantage of exceptional circumstances to use public procurement law, as

overturned by the exceptional measures currently in force, in order to consider the particular

nature of each situation and to reconsider, in an active and constructive manner, the

contractual relationship that has been or will be established.

It is therefore a matter of understanding the situation and integrating legal tools, allowing for

an assessment to identify the actions best suited both to managing the state of emergency

and, above all, developing rebound mechanisms.

Introduction

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This practical study is only an analytical tool, since every situation must be submitted to an individual factual and

contractual analysis by a legal professional or advisor

For this purpose FTPA draws from all of its expertise to address any questions and resolve any difficulties that a

company, whatever its sector of activity, may face during lockdown measures and activity bans which slow down and/or

interrupt production cycles in France and abroad.

Finally, in view of the regular evolution of legislative and/or regulatory texts, our recommendations are expected to

evolve in line with current events, as of May 2020, in particular with the forthcoming law on the extension of the duration

of the state of health emergency, in principle, until 10 July 2020.

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The right reflexes to have

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The first reflex: Approach my environment

using a global and cross-cutting approach

One should not limit oneself to the strict contractual framework but

try to open one’s perception of the situation by putting the difficulty

faced into context, making it easier to identify, understand and

resolve.

Who? Who are your contacts?

What? What is your relationship with them all about?

How? How is this relationship legally formalized?

If the difficulties encountered threaten proper implementation of the

services foreseen in the contract, is the situation likely to be due to

an unforeseeable event (an external and unforeseeable but not

irresistible event) or a force majeure event (an unforeseeable and

irresistible external event)?

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The diagram below can help you to :

- Identify the origin(s) of the difficulties faced;

- Identify the resources outside the contract available to each contracting party to treat its own situation and understand

the situation of its partner.

The second reflex: what does my contract say?

Even if the contract may exclude any claim for compensation in any event or exclude the health risk as

a force majeure event, it will usually provide answers and solutions.

The following questions should therefore be asked:

👉 What are the contractual documents? Are there General Conditions of Contract (GCC)?

👉 What does the contract say on:

o Informing the contracting party in case of difficulties?

o Loss and damage?

o Penalties ?

o Liability ?

o Dispute resolution ?

o Treatment of unforeseen events, hardship, force majeure ?

o Compensation in the event of termination of contract ?

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The third reflex: what does my partner think?

Priority should be given to dialogue and communication, as any

failure to do so frequently leads to disputes and litigation.

This reflex becomes essential in the current situation even if it may

seem unusual in the context of public contracts marked by the

imbalance in rights and prerogatives between public and private

parties.

The aim is to establish an empathic, collaborative dynamic

relationship between contracting parties, acting as partners, who

inform each other of their difficulties in order to work out a common

solution.

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📌 Please note

Article 6.1° of Ordinance No. 2020-319 of 25 March 2020 provides that the contractor must request an

extension of the time limit for the performance of his services before the expiry of the relevant contractual

deadline if he is unable to meet one or more deadlines or will incur manifestly excessive expenses to meet the

deadline.

Where the contract is silent, Article 3.4.2 of the GCC Works provides that "the Contractor shall promptly notify

the representative of the Contracting Authority of any changes occurring during performance of the contract

generally relating to any significant change in the operation of the business which may affect performance of the

contract".

In addition, Article 18.3 of the GCC-Works 2009 provides that "in the event of loss, damage or injury caused on

its worksites by a natural phenomenon which could not normally be foreseen, or in the event of force majeure, the

contractor shall be compensated for the loss suffered, provided (...) that it has immediately reported the facts in

writing".

In the event of a dispute, that cannot be resolved amicably, it is for the Court to decide whether the pandemic

constitutes a force majeure event exempting the relevant party from liability taking into account the health

context and contractual failures.

📌 Please note

It is possible to agree on the conclusion of an amendment to the contract to insert a safeguard or "hardship"

clause to deal with the effects of the pandemic on the performance of the contract.

Exploitingflexibility offered by the state of health emergency

Exploiting

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Text of Ordinance : https://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000041755875

Ordinance n° 2020-319 of March 25, 2020 "Adapting the rules for award, payment deadlines, performance and termination, in particular relating to contractual penalties, contained in the public procurement code, as well as stipulations in public contracts having the same purpose".

"It includes the measures necessary to relax rules applying to performance of public contracts which would be compromised as a result of the covid-19 epidemic, so as not to penalise economic operators and to allow for the continuity of these contracts." (Report to the President of the Republic on Order No. 2020-319 of 25 March 2020).

For example:

• For ongoing procedures, the buyer may decide to extend the time limits for receipt of applications and offers (Article 2) or adjust the terms of the call for tenders during the procedure (Article 3);

• Relaxing the system of advances by allowing conditions for payment of the advance to be amended in writing, abolishing the requirement to issue a bank guarantee /standby letter of credit in excess of 30% and permitting an advance to exceed 60% (Article 5);

• The contractor who cannot perform all or part of a purchase order or contract cannot be subjected to sanctions (penalties, contractual liability) if he demonstrates the lack of sufficient means or their manifestly excessive cost. The purchaser may resort to a substitute contract if the services cannot be delayed without the additional cost being charged back to the contractor;

• The contractor has a right to compensation for expenses incurred that are directly attributable to the contract or purchase order if cancelled or terminated by the purchaser as a result of measures taken by the authorities on account of the state of health emergency.

To find out more, the Legal Affairs Departmentat Bercy has a Frequently Asked Questions section accessible online:

https://www.economie.gouv.fr/daj/publication-dune-foire-aux-questions-sur-la-passation-et-lexecution-des-contrats-de-la-commande

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👉 Recommendation: To benefit from the

Ordinance, requests from tenderers in a bid

process or contractors during performance

must be necessary to deal with the

consequences of the pandemic and apply the

measures taken to counter it (Article 1 of the

Ordinance).

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"The ordinance does not create a presumption of force

majeure, which can only be identified on a case-by-case

basis. It is for the contracting authorities and economic

operators to demonstrate that the difficulties they are facing

as a result of the pandemic do not permit the procedures or

performance of contracts to continue under

normal conditions”.

AJD Text Explanatory Sheet

📌 Please note

The provisions of Article 6 of the Ordinance do not apply

where contracts contain stipulations that are more favourable

to the contractor.

Force majeure*Force

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2.1 The conditions of force majeure

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Force majeure implies that the following are

cumulatively present:

- A criterion of unpredictability;

- A criterion of externality;

- A criterion of irresistibility.

A pandemic does not necessarily constitute a force

majeure event (e.g. Dengue fever, the chikungunya

epidemic, avian flu, etc.). The novelty of the situation

and measures taken by the authorities to counter

Covid-19 may not be sufficient to qualify a situation

as force majeure.

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📌 Please note

An initial court decision handed down in the field of aliens

law described certain consequences imposed by the covid-

19 pandemic as force majeure (CA Colmar, March 12,

2020, n°20/01098)

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Unpredictability condition: Was it foreseeable that the pandemic could preventperformance of the contract on the day it was signed?

December 31, 2019: WHO First Alert

23 February 2020: Outbreak

in Italy

11 March 2020: Classification of a

pandemic by the WHO

12 March 2020: Speech of President

30 January 2020: Coronavirus is a public health emergency of

international concern

UNPREDICTABILITYUNCERTAINTIES TO BE LIFTED ON

A CASE-BY-CASE BASIS / NO UNPREDICTABILITY

NO UNPREDICTABILITY

SIGNATURE OF CONTRACT BEFORE JANUARY 30, 2020

SIGNATURE OF CONTRACT BETWEEN JANUARY 30 AND

MARCH 12, 2020

SIGNATURE OF CONTRACT AFTER MARCH 12, 2020

The condition of unforeseeability will beconsidered fulfilled if a contract has beensigned or an offer has been submittedbefore 30 January 2020.

However, this assessment may be modifiedaccording to, for example, the place ofperformance of the service (Abroad: China,Iran, Korea...).

Between January 30 and March 12, 2020 (when VIDOC-19 is considered apandemic): the event is considered predictable in principle.

However, this assessment can be modulated according to, for example, thefollowing criteria:- the place of performance of the service (Italy...)- the nature of the services (works, supplies, services including events...)- whether or not the performance of the service is instantaneous in nature

Fate of contracts subsequent to or in the process of being negotiated or signed as of March 12, 2020: unpredictability seems to be excluded.

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Externality condition: What are the origins of the impossibility to perform the contract?

Which person

?

Non-performance of a third party in a business relationship (subcontractor, supplier, provider of an

indispensable service).

Non performance on account of the action of employee(s) internally (exercise of the right of withdrawal, multiple

individual confinement, etc.).

Non-fulfilment results from a decision of the purchaser or his co-contracting party (interruption of services outside the constraints

generated by the employees).

What constraint? Taking a personal

protection initiative not stemming from any

regulatory requirements or recommendations.

Implementation of a recommendation of an

official authority or institution competent in

public health matters

Compliance with a mandatory measure

imposed by an authority (Government, prefect,

police authorities...)

EXTERNALITY

CASE-BY-CASE UNCERTAINTY

EXTERNALITY IN MOST CASES

PRIMA FACIE NO

EXTERNALITY

Irresistibility condition: Can the event preventing performance of the contract be remedied? (telework, reorganization, other service provider, additional costs...)

NO

YES

NO

YESDo these solutions lead to a disruption in the economics of the contract or are they excessively onerous in relation to the costs normally incurred

to perform the contract?

THE CONDITION OF IRRESISTIBILITY IS MET.

THE CONDITION OF IRRESISTIBILITY IS NOT MET: ABSENCE OF FORCE MAJEURE AS DEFINED BY LAW

Possibility of awarding or seeking compensation, in particular usingthe concept of unforeseeability, in the event of disruption in the economy of the contract

2.2 The effects of force majeure

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...can be postponed

...cannot be postponed at all or if postponed too far

make it impossible to perform

...are no longer of interest. The purpose agreed by the parties who had made it a determinant element of

their consent has disappeared.

Termination of contract: Termination at the

initiative of one of the parties or by application

to the Court.

Suspension of performance

Lapse of contract: Termination

- Payment for services already

performed (only if useful in case of

lapse)

- No compensation for loss of profit due

to termination

No damages or penalties against the debtor of the

obligation/ obligor.

The services covered by the

contract...

ASSUMPTIONS

CONSEQUENCES ON PERFORMANCE OF THE

CONTRACT

EFFECT SUBJECT TO SPECIFIC CLAUSES IN

THE CONTRACTS

Unforseeability* Unforseeability *

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Condition No.1: the continuation of the contract leads to an

upheaval of itseconomy or is

carried out under excessively onerous

conditions.

Condition No. 2: the event could not be

reasonably foreseen by the contractor

Condition No. 3: The event is beyond the

control of the contractor.

NO

YES

Continuation of the contract on

the original terms

Can the disruption be compensated

by one of the mechanisms in the contract (variation

clause, revision clause, etc.)?

NO

YES

NO YES

Are the alleged extra-contractual charges

sufficiently justified? (The burden of proof lies

with the contractor. They must be verified

and examined).

GRANTING COMPENSATION

Implementation of contractual

clauses

- Not in full(generally, it covers 90% of the justified extra cost)

- it is liquidated and due at the end of the contract. Dedending on circumstances, a provisional amount may bepaid (share of the excess cost) by writtenamendment/ variation order.

Case studies*C

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1. « Does the state of health emergency justifyuse of a procedure without priorpublication or competitive bidding for the award of contracts? »

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Article 6-2° of Ordinance n°2020-319 of 25 March 2020 allows for a third party to perform

services that cannot be delayed in the event of default by the contractor facing difficulties as

a result of Covid-19.

It is then possible to resort to a procedure without publication or competitive bidding on the

basis of Article R. 2122-1 of the French Public Order Code, according to which:

"The buyer may award a contract without prior publication or competitive bidding where an

extreme emergency resulting from external circumstances which he could not foresee makes it

impossible to comply with the minimum time limits required by the formal procedures. (...) The

contract shall be limited to the services strictly necessary to deal with the emergency situation.”

Outside a situation of default, it may be possible to use such a procedure as provided under

Articles L. 2122-1 and R. 2122-1 et seq. of the Public Procurement Code and confirmed by

the European Commission, which recently recalled that simplified procedures could be used in

the usual conditions (European Commission Guidelines on the use of public procurement

framework in the emergency situation related to the COVID-19 crisis, 2020/C 108 I/01).

The overriding reason of extreme urgency appears to be the most appropriate one.

Cases justifying use of a procedure without prior publication or competitive bidding are by

definition exceptional and construed restrictively and subject to strict interpretation of the

Courts (Conseil d'Etat of 28 July 2000, Jacquier, No. 202792).

Use of such a procedure should not be by choice of the public purchaser but rather by

necessity.

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2. « The situation of force majeure justifies termination of the contract. Who can do this? »

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If the contractor is unable to continue performance of the services due to a situation of force

majeure, the contract may be terminated.

The purchaser is the only party entitled to terminate the contract on its own initiative or at the

request of the contractor.

If termination is refused by the contracting authority, the contractor may contest this refusal

before the administrative Court, which has jurisdiction to rule over the disputed termination.

An unlawful refusal to terminate by a purchaser may trigger its liability and give rise to a

right to compensation.

👉 Recommendations :

o Termination does not necessarily mean conflict or sanctions: do not forget dialogue

o If the services being performed are nearing completion, it is preferable to agree to a price

reduction

o Make sure that the state of progress of services at the time of termination is determined in

the presence of both /all parties to prevent any dispute at a later date

3. « What is the effectof failure of the main contractor’ssubcontractor/supplier? »

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Subcontractors and suppliers are third parties to the contract between the purchaser and

(main) contractor.

The main contractor is contractually liable for any default of his subcontractors.

It is therefore incumbent on the main contractor to inform the buyer of any such default as

soon as he becomes aware of it.

If the default makes it impossible or too costly to meet relevant deadlines, the main

contractor may request an extension for a period at least equal to the period of the state

of health emergency + 2 months (article 6-1, Ordinance of 25 March 2020).

The impossibility to perform the services or the manifestly excessive financial expense

necessary to perform them, whether by the main contractor or any of its subcontractors,

must be proved.

In the event of proven force majeure, no penalty may be applied or damages claimed or

awarded to the main contractor.

👉 Recommendations :

In the event of a change of subcontractor or if the subcontracted services are assumed

either wholly or in part by the main contractor, the subcontract must be adapted or varied

accordingly.

For an overview of the relationship between the main contractor and subcontractors or

suppliers, see our Guide on Private Contracts.

4. « A public purchaser entered into a service contract for the organisation of an event.

The state of health emergency does not allow the event to take place... »

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This is a case where the contractor can still offer the service, but its purpose has disappeared,

e.g. the stage design of an event that was cancelled as opposed to being postponed.

Prerequisite: check whether such a situation is foreseen in the contract and, if so, use the

contract.

If nothing is written in the contract, the parties can agree to a postponement of the event.

If postponement is impossible, the situation of force majeure deprives the performance of the

contract of one of its essential elements (its purpose: the event). The contract is then deemed to

be null and void.

The lapse of the contract may give rise to reciprocal restitution of services.

If the services were only of value if the contract was fully performed, restitution will not include

expenses borne but may be:

- in cash in the case of a sum of money;

- in kind or in cash for the estimated value, in the case of an object.

If the services rendered have been of use in the course of performance, the contractor shall be

entitled to payment for services rendered.

The contractor will not be entitled to any compensation for loss of profit.

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To support you

Raphel CrespellePartnerrcrespelle@ftpa.fr- Public Law- Real estate and construction law

More information on our website: ftpa.com

Ludovic AlamargotAssociate- Public Law- Real estate and construction law

Tristan BoucheteilAssociate- Public Law- Real estate and construction law

Noé FontalbaAssociate- Public Law- Real estate and construction law

1 bis avenue Foch75116 Paris

Octagon Point, 5 Cheapside,

London EC2V 6AA

Web : www.ftpa.com

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