By Manyl Benredouane, Victoria Hunt and Thomas Rousset, University of Montpellier, Centre du Droit de l'Entreprise, Program of Master 2 "Droit du Commerce International"
Overview
While a party should exceptionally be authorized to unilaterally modify a contract, this possibility has become more common in general contract law as well as for employment and consumer law.
Unilateral Modifications in General Contract Law
I. Principle of Prohibition
The principle is that a contract is agreed by both parties for the terms that are provided for at the time of its conclusion; therefore it is not possible for one party to unilaterally modify the terms of a contract.
II. Nevertheless, Several Limitations Exist
Some clauses provide for unilateral modification of the terms of a contract. Clauses for alternative obligations, for instance, give a choice between two objects to a party. The debtor can choose which one of the objects it decides to perform. Pursuant to Article 1307 and following of the French Civil Code, it is necessary to specify the deadline before which the alternative object should be performed. This clause could be written as "(f)or his guarantee, the driver can choose between two years and 60 000 km. However, one may say that this is not a real modification of the contract as the object of the modification is already defined at the time of conclusion of the contract.
There are also matching clauses such as a clause of the most-favored customer. This latter could be written as follows: "If at any time during the term of this Agreement, Supplier offers or sells the same or substantially similar products to a Third Party at a lower price than the price set forth herein, Supplier will immediately notify Customer and reduce the purchase price for the applicable Products to such lower price on any pending and future purchase orders for the Products hereunder". It is necessary to state how the party informs the other one that it offered a better price to a third party. By changing the price, the party can unilaterally modify the terms of this contract. Some legislations object to these clauses; thus, Article L. 442-6, II d of the French commercial code prohibits these clauses when they lead to an automatic change.
Unilateral Modifications in Employment Contracts
I. The Principle of Inflexibility of Employment Contracts
In France, the Court of Cassation held on 10 July 1996 that modifications of employment contracts are related to essential elements of the relationship between the employer and the employee. Thus, unilateral modifications of employment contracts are not permitted. The essential elements are not defined by the Code. Nevertheless, some cases qualified wages and working hours as essential elements (respectively, French Court of Cassation, Social Chamber, 20 October 1998 and French Court of Cassation, Social Chamber, 3 November 2011).
In the United Kingdom, the employer is not under the obligation to deliver to the employee a written employment contract. Nonetheless, under section 1 of the Employment Right Act of 1996 the employer shall give to the employee a written statement of particulars of employment. More particularly in English contract law, an employer cannot usually make changes to the employment contract unilaterally.
II. Exceptions to the Principle of Inflexibility of Employment Contracts
In France, the employer can modify non-essential elements of an employment contract. This modification is just considered as a change of work conditions. Thus, the French Court of Cassation held on 10 October 2000 that a refusal of such a change is a misconduct, but not a serious breach (French Court of Cassation, Social Chamber 23 February 2005).
On 22 February 2000, the French Court of Cassation admitted that an employer could change the allocation of working hours within the same day.
On 2 June 2003, the French Court of Cassation held that if the employee is not bound by a mobility clause inserted in the employment contract, or if, the employment contract does not specify a specific working place, the employer can change unilaterally this working place.
On 23 June 2010, the French Court of Cassation ruled that the employer could entrust the employee with new tasks related to the employee's qualifications as it is just a change of working conditions.
In the United Kingdom, the Employment Appeal Tribunal in Bateman and ors v Asda Stores Ltd held that employers can reserve the right to vary employees' contracts unilaterally as long as the term is clear, and they do not exercise the power in such unreasonable way that breach the term of mutual trust and confidence when doing so.
Nevertheless, in three cases, the Employment Appeal Tribunal reminded that an employer could vary an employment agreement if there is a clause allowing him to do so. First, express variation clause contained in the contract has to be unambiguous. Second, if there is a set of policies given contractual status because they give rights to the employee, they can only be amended if there is a variation clause in the contract. Third, despite such clauses the employer must conduct a thorough consultation before making the changes (Sparks v Department of Transport; Norman v National Audit Office; Hart v St Mary's School).
Unilateral Modifications in Consumer Contracts
Consumer law aims at protecting consumers in the most efficient way possible, without hindering too much the rights of the professional. Such protection may begin right at the time of entering into a contract. In this respect, the European Union enacted the Unfair Terms Directive in 1993. It defines an unfair term as "a contractual term which has not been individually negotiated if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer".
Consequently, under EU law, there are many provisions allowing a professional to unilaterally modify a contract that are deemed unfair. An unfair term provided in a contract with a consumer will not bear any effect on him, as it will be rendered non-binding.
This Directive has now been implemented in all Member States and the national laws resulting from this implementation have often made a distinction between terms belonging to a black list which can never bind the consumer (I), and terms that are part of a grey list that may be enforceable depending on the particular circumstances (II).
I. Black List
A term, whose object or effect is to reserve to the professional the right to unilaterally modify the clauses of the contract relating to its duration, the characteristics or the price of the goods to be delivered or the service to be rendered are unfair and therefore deemed unwritten.
In France, the Court of Cassation has for example considered that the clause by which a bank "may, at any time, withdraw, remove or block the use of the card or not renew it", reserves the right to the professional to unilaterally modify, without notice, the conditions of use of the card, and thus contravened Article R. 132-2 of the French Consumer Code, as applicable at that time.
In the United Kingdom, a term that gives the professional a right to terminate the contract in a discretionary manner without recognizing the same faculty to the consumer will always be judged as being unfair: "a term which has the object or effect of authorising the trader to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the trader to retain the sums paid for services not yet supplied by the trader where it is the trader who dissolves the contract" (Consumer Rights Act 2015, Schedule 2 Article 7).
II. Grey List
When the contract duration is for an indefinite period, it may provide that the professional party may unilaterally make changes related to the price of the goods to be delivered or the service to be rendered provided that the consumer has been notified within a reasonable time to be able to, if necessary, to terminate the contract (French Consumer Code, Article R 212-4).
A contract may also stipulate that the professional may unilaterally make changes to the contract related to technological evolution if these changes do not induce any increase in price, any deterioration of quality and that the characteristics upon which the consumer has made his commitment remain included in the contract. This last exception makes it possible to take into account the necessities of technological developments. The modification of the contract is allowed as long as it does not alter the legitimate expectations of the consumer (see, again, as one example of the EU Directive implementation, French Consumer Code, Article R 212-4).
In the case of social media, terms of service agreements typically reserve the right to unilaterally alter or modify terms of use or service by simply posting a changed privacy policy on a website. Instagram unilaterally modified its terms regarding intellectual property rights of photographs posted, which was then contested and revoked. The definition of the minimum notice could be found in usages applicable to the business involved.
For instance, Facebook website states that: "By using our services after January 30, 2015 you accept the update of our conditions". In its Terms & Conditions, it is indicated that Facebook will inform all users of an update in the terms with a possibility for them to comment and check the new version before using it. Due to this notification, Courts usually allow these kinds of provisions (this is why they belong to the grey list). However, interestingly enough, one German Court recently held that this Facebook provision violated German law because of its significant imbalance.
Regarding the social media Snapchat, we read the following clause applying to those living outside of the United States: "In order to use Snapchat or any of our other products or services that link to these Terms […], you must have accepted our Terms and Privacy Policy, which are presented to you (i) when you first open the app and (ii) when we make any material changes to the Terms or the Privacy Policy. Of course, if you don't accept them, then don't use the Services." Both Facebook and Snapchat do not indicate precisely the minimum notice, if any, relating to unilateral modification of the terms.
Conclusion
As indicated above, the extent to which unilateral modifications of clauses are available to parties varies according to the national legislations involved. More recently, it has also been subject to differences depending on the type of industry concerned.