Breach of Contract: Automatic and Unilateral Price Reduction

Abstract

AbstractThe recent reforms of the French Civil Code have also regulated remedies for breach of contract, by introducing price reduction as a general instrument that can be applied to all contractual types. Firstly, the article analyses the harmonisation projects and regulations on which the French reform claims to be based, for the purposes of verifying whether the French legal framework only reproduces solutions already tested or whether it is innovative with respect to such models. This study highlights the introduction of innovative solutions through which price reduction is achieved. Whilst price reduction is usually ordered by the court, following a claim by the non-breaching creditor, under the French model the price reduction remedy does not require the court’s intervention as it can be performed directly by the creditor: this is an automatic and not a court-based remedy. Secondly, the article also analyses whether the same outcome that is obtained through the automatic price reduction can also be achieved through the use of other legal instruments. This article focuses on a comparative law analysis with the common law system with respect to compensation for damages under English law. With respect to the civil law models, the article examines the Italian model in which parties generally resort to actions for compensation and the exception of partial breach.