Contracts
Software & unilateral price revision: between contractual freedom and legal framework
Through this article, we want to share with you several feedback that can help you prevent the emergence of disputes and, therefore, to secure your commercial relationships.
We will not mention relationships between traders, governed by the Commercial Code. We will focus on a particular, although relatively common, situation, namely commercial relationships between a software publisher and a professional customer.
Unilateral price revision is a contractual mechanism that allows one of the parties to the contract to unilaterally change the prices initially agreed upon, without requiring the prior agreement of the other party.
It helps to prevent the economic consequences of circumstances, such as changes in raw material costs, economic fluctuations or external events that affect the balance of the contract.
I - The main principles to be respected:
1 - The price of the service must be determined or determinable:
In contract law, and in particular in the context of contracts for the provision of services, the fundamental principle is that the price of the service must be either determined or, failing that, determinable. Indeed, the absence of any mention relating to the price leads to the nullity of the contract, in the absence of an essential element necessary for its validity.
In accordance with article 1165 of the Civil Code, the parties are, in principle, required to agree on the price at the time the contract is concluded. In the absence of such an agreement, the price may be fixed unilaterally by the creditor, provided that the creditor justifies the amount withheld.
In this case, the judge retains the right to check for possible abuse in determining the price.
2 - Unilateral review and the principle of good faith:
The revision of prices in a contract for the provision of services must respect the general principles of contract law, in particular good faith. An excessive, unreasonable, or unilateral increase could be perceived, in some situations, as an abuse of contractual authority and could lead to litigation.
It is therefore essential that the terms of price revision are clearly defined in the contract, taking into account the interests of both parties and current practices in the sector concerned. In the absence of specific stipulations, it is possible that the tariff increase will be contested, especially if it is considered excessive.
Before initiating legal proceedings, it is important to engage in a dialogue with the professional to obtain detailed explanations of the reasons for this increase and, if necessary, negotiate fairer conditions. A price increase that has no legal or contractual basis is devoid of justification.
If the increase persists without valid justification, referral to the competent authorities or the initiation of legal proceedings is possible to challenge the abusive nature of the tariff change.
3 - Unilateral revision of the prices contractually provided for by the parties:
It is possible to increase the price of a service if the contract explicitly provides for it, in particular through specific clauses allowing a price revision. These revisions may be based on objective and measurable criteria, in particular:
☞ The indexing clause
This clause makes it possible to adjust the price of the service according to the evolution of an external index, such as the consumer price index or production costs. The price is thus revised periodically according to the evolution of this index.
The revision index must take into account the nature of the contract and that of the activity of the co-contractors. The Syntec Index is a key barometer for the digital, engineering, consulting, and vocational training sectors. It traces the evolution of labor costs, mainly intellectual ones, on long-term projects, spread over months or years.
The SYNTEC index is very often used in IT contracts concluded for more than one year (maintenance contracts for information systems, software packages, applications, outsourcing contracts, etc.)
In order to avoid an excessive increase, ceilings may be provided. For example, the clause may state that the increase cannot exceed 5% per year, even if the index exceeds this threshold.
☞ The review clause
The revision clause allows prices to be adjusted according to specific circumstances, such as a change in the scope of the service or the occurrence of events.
Unlike the indexing clause, the revision can be negotiated freely between the parties and is not necessarily linked to an external index. There is no fixed legal rule as to the maximum percentage increase in the context of a price revision.
However, the increase must be reasonable and justified by factual factors, such as changes in production costs or changes in market conditions.
It is essential to anticipate the unilateral revision of the contract and to precisely define the terms of the revision as soon as the contractual relationship is established, in order to prevent any possible source of conflict.
While this mechanism is useful in maintaining the economic viability of the parties, in practice it raises questions about fairness, transparency, and the protection of the interests of each party. From this perspective, the contractual clauses must be rigorously drafted, in order to ensure the stability of contractual relationships.
II - A few tips:
1 - On the customer side: Receiving the amendment sent by the software publisher, how to react?
When the customer receives an amendment to the contract, he has the option of refusing to sign it. However, this refusal can have significant consequences on the contractual relationship.
☞ Termination of the contract:
The refusal to sign an amendment formalizing the price increase under conditions that respect the initial contract may result in the termination of the contract. Both the customer and the publisher must be aware of this possible outcome. It is important to provide a reasonable period of notice.
This situation may occur, for example, in the context of changes in the regulatory framework requiring the publisher to make heavy investments in order to carry out the IT developments necessary for compliance. The customer often considers that it is “normal” for the publisher to make the software evolve at his expense while the publisher will be able, if this is well provided for in the contract, to submit a quote to the customer.
In this situation, it may be appropriate from a strategic point of view to seek an amicable solution to avoid a long and costly procedure, while maintaining the continuity of service provision.
In any event, it's always best not to sign under pressure. Remember that within the framework of the contractual relationships examined here, the customer will not be able to benefit from the 14-day withdrawal period, reserved for consumers.
2 - On the software publisher's side:
As a software publisher, it is essential to take into account several elements in order to ensure balanced and transparent contractual relationships with your customers.
When drafting the contract, particular attention must be paid to the drafting of price revision clauses, which must be rigorously designed in order to prevent any ambiguity and to ensure the mutual protection of the parties in the face of economic fluctuations.
It is also necessary to anticipate the modalities linked to article 1195 of the Civil Code relating to unforeseeability. The publisher must therefore provide for the precise conditions of application of this article, in order to allow the contractual terms to be adapted in the event of the occurrence of major unforeseen events.
In the event of a dispute arising from a unilateral price increase, it is imperative to give priority to an open dialogue with the customer and to start negotiations. Such an approach promotes the maintenance of a relationship of trust and makes it possible to resolve disagreements in a constructive manner.
3 - In summary:
We recommend that you get legal support in the drafting of your contracts, in particular in the drafting of price revision clauses.
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