Apple Inc. v. Samsung Electronics Co. Ltd. et al
NOTICE by Apple Inc.(a California corporation) Translations of Foreign Authority (Attachments: #1 Exhibit 1, #2 Exhibit 2, #3 Exhibit 3, #4 Exhibit 4, #5 Exhibit 5, #6 Exhibit 6, #7 Exhibit 7, #8 Exhibit 8, #9 Exhibit 9, #10 Exhibit 10, #11 Exhibit 11, #12 Exhibit 12, #13 Exhibit 13, #14 Exhibit 14, #15 Exhibit 15, #16 Exhibit 16, #17 Exhibit 17, #18 Exhibit 18, #19 Exhibit 19, #20 Exhibit 20, #21 Exhibit 21, #22 Exhibit 22, #23 Exhibit 23, #24 Exhibit 24, #25 Exhibit 25, #26 Exhibit 26, #27 Exhibit 27, #28 Exhibit 28, #29 Exhibit 29, #30 Exhibit 30, #31 Exhibit 31, #32 Exhibit 32, #33 Exhibit 33, #34 Exhibit 34, #35 Exhibit 35, #36 Exhibit 36, #37 Exhibit 37, #38 Exhibit 38, #39 Exhibit 39, #40 Exhibit 40, #41 Exhibit 41, #42 Exhibit 42, #43 Exhibit 43, #44 Exhibit 44, #45 Exhibit 45, #46 Exhibit 46, #47 Exhibit 47, #48 Exhibit 48, #49 Exhibit 49, #50 Exhibit 50, #51 Exhibit 51, #52 Exhibit 52, #53 Exhibit 53, #54 Exhibit 54, #55 Exhibit 55, #56 Exhibit 56, #57 Exhibit 57, #58 Exhibit 58, #59 Exhibit 59, #60 Exhibit 60, #61 Exhibit 61, #62 Exhibit 62, #63 Exhibit 63)(Selwyn, Mark) (Filed on 5/7/2012)
Recueil Dalloz 1996 p. 13
Non‐determination of price in long‐term contracts: from nullity to contractual responsibility (a radical
shift by the Supreme Court of Appeal)
By these four rulings handed down on the same day, the Supreme Court of Appeal in a plenary session
firmly anihilated more than twenty years of questionable jurisprudence, which had led distribution law
to a dead end. Prepared by two precursor rulings of the First Civil Chamber (1), this event was expected
(2). It erases the past (I), marks the present (II), and prepares the future (III).
I. ‐ Past. ‐ The state of positive law just prior to the Plenary Session rulings has been widely commented
upon, sometimes with approval (3) but most often with criticism (4). It is described in the conclusions of
chief general counsel M. Jeol, reported above. Reduced to its essence, the praetorian construction
inaugurated in the 1970s is based on two affirmations:
‐ Firstly, the price must be set at the time when the contract is entered into. If this cannot be done,
because it is variable, the parties must agree on a price‐setting method that does not make it dependent
on the will of one of the parties. For instance, when it is subject to the workings of an economic index or
if the parties resort to an expert who will act as a mutual agent (civ. c., art. 1592). However, any
reference to the creditor's future rate or a market price that only the creditor can declare makes the
The rule does not only apply to sales pursuant to civ. c. art. 1591; it relates to all contracts generating an
obligation to pay either directly (5) or by means of implementation contracts which they prepare. In
which case it is based on civ. c. art. 1129, which comes under general contract theory.
Only obligations to pay in exchange for an activity escape this requirement, such as in contracts for
services and agency contracts: the parties may have left determination of the price to an agreement
coming after signature of the contract; if they are unable to reach an agreement, the courts give
themselves the right to arbitrate the price (6).
The meaning of this jurisprudence is clear: what hounds the courts is not the non‐determination of the
price in itself, because cancelled contracts generally include an agreed process. Consequently, the judge
does not have to choose between two evils: to find that the contract is lacking an essential component,
preventing if from governing the parties, or to take the place of the parties and, in their stead, fill a void
in the contract. In reality, what the courts do not accept is the price determination process, the fact that
it is set unilaterally.
‐ Secondly, non‐determination of the price, understood in this sense, is sanctioned by the contract being
null and void. This is an absolute, automatic, and abstract nullity which does not take into account the
actual implementation of the contract and, in one stroke of the pen, obliterates all contractual relations
which the parties have had, often over a long period of time (7).
This massive jurisprudence has not modified practice to much degree, because it imposes a requirement
that is impossible to meet and claims to counter a danger that does not truly exist. As often observed by
trial judges, nullity due to non‐determination of the price is a pretext invoked after the contract has
ended in order to escape subsisting obligations having nothing to do with the price, which is accepted
without difficulty during contract performance (8). The admirable principles invoked—fairness, utility,
bilateral essence of the contract (9)—are made to serve the defense of special interests.
Sensitive to these criticisms, the First Civil Chamber turns the page on 29 November 1994 (10): the
reference to the supplier rate makes the price determinable; an end is put to litigation relating to the
issue of nullity. All that remains is that of the execution of the contract if it turns out that the supplier
abuses the exclusivity from which it benefits in increasing its rate in order to gain illegitimate profits
from it, which would run counter to the duty to execute the agreement in good faith. The solution,
though clear (11), brings up various questions: some only see in it a poorly reasoned traditional
ruling (12); others, a reluctance to sanction (13).
These four rulings of the plenary Assembly confirm and clarify the solution adopted in 1994 by the First
II. ‐ Today. ‐ The clear message that the first attorney general is pressing the Court of Appeal to initiate
lies (1) in what it decides and (2) in what it does not decide.
1. Handed down in relation to different cases, these four rulings adopt three complimentary solutions,
outlined in order of increasing importance.
a) The first is inherent to framework distribution agreements (14). The price of the implementation
agreements, for which the agreement provides the subsequent conclusion, can be undetermined in this
agreement without affecting the validity thereof. The process of fixing future prices will be litigated in
relation to contractual performance, which is to say liability (indemnification) or termination (for failure
to perform). The framework agreement can be mute on future prices, or it can expressly provide for the
fixation thereof by the supplier. It is valid without the judge having to verify that the price of the
implementation agreements can be freely negotiated and agreed upon by the parties.
These rulings therefore restore the originality of the framework agreement (15). The present case
clearly involves rental/maintenance agreements for a telephone installation. Articles 1709 and 1710 civ.
c., relevant to rental of objects and labor, are referred to. And yet these two texts do not contain any
particular requirement with respect to price. The stipulation of a price is merely an element of the
definition of these contracts, as for the majority of contracts in return for payment. By combining these
texts with articles 1134 and 1135 civ. c., the Court of Appeal gives the solution a general scope: when
implementation agreements must include a price, it is not necessary that the framework agreement
take the method for the determination thereof away from the power of one of the parties. The practice
of distribution agreements (concession, franchising, supply...) is thus rid of a threat: the supply at the
rate of the supplier can be exclusive. Possible abuse in the fixing of prices is now governed by the rules
on contractual liability.
b) The second solution (16) relates to the method used to set prices, consisting of referring to the
supplier's future price list. The Court of Appeal rules that this process “does not affect the validity of the
agreement.” In other words, the reference to the future rate practiced by one of the parties is a process
that is inherently lawful. The Court of Appeal could have been content to apply the previous solution:
the franchise agreement is in fact a framework agreement. The ruling therefore goes further, it seems: a
party can be granted the right to set the price later. If it abuses this right, the sanction will consist of the
termination of the contract or the indemnification of the debtor of the price. The ruling therefore does
justice to a would‐be “bilateral essence” of the contract, which actually confuses unilateral and
arbitrary. Nothing stands in the way of the parties agreeing to entrust one of them with the future
setting of the price. The rules of contractual liability are sufficient to protect this trust.
c) More radically still, the third solution (17) should set aside once and for all the issue of nullity for
non‐determination: article 1129 civ. c. is not applicable to the determination of the price. This can have
two meanings: article 1129 relates to all kinds of items except for sums of money (18). More radically,
it is to the “determination of the price” that it does not apply: by even admitting that the price is an item
in terms of article 1129, this text does not require that it be determined or determinable, failing which,
the obligation is null and void. And yet, article 1129 has been the basis since 1978 for the majority of
decisions to void. The turnaround is complete.
2. On the other hand, these four rulings neither sanction the setting of prices by the judiciary nor the
advent of the “fair price.”
a) The Supreme Court of Appeal first rejects the false alternative presented by some (19) between
nullity due to non‐determination of the price and court‐ordered determination of the price. The parties
may validly agree to leave the determination of future prices to one of the parties. The implementation
of this conventional method can be checked by the courts.
This check comes under the traditional rules of contractual responsibility. The debtor of the price,
claiming to be a victim, must therefore establish that the supplier has committed a wrongful act
consisting of a abuse of the right to set the price granted in the contract. The judge's role is to evaluate
the wrongful act, the loss, and the link of causality between them, and, when the victim takes
termination action, to make sure the requirements of civ. c. art. 1184 are met. The discovery of an ideal
price meeting the requirements of contractual fairness is only one stage in assessing the supplier's
The judge's office in our matters therefore differs profoundly from what it is in contracts for service or
agency contracts: if the parties have not previously determined the price, the price should be agreed on
between them once the work is done, since neither one has the right to set it. If they do not reach an
agreement, there is no other way than to have the judge do it. The judge then focuses on the value of
the work without any special consideration for the parties' behavior (20).
This distinction between checking and setting a price by the court naturally reflects back on the role of
the Supreme Court of Appeal: in matters of responsibility or termination, this court assesses the process
followed by the trial judge (characterization of the wrongdoing, the loss, the link of causality, etc.), while
the determination of a price, by its very nature, escapes legal control.
The distinction between these two roles of the judge in matters of price, moreover, is common in
positive law. When a contract governs the parties without one party being entitled to determine the
price, the judge is charged with setting it if there is no agreement: for example, in matters of
expropriation (21) or rent of a residential lease (22). If, however, one of the parties is entitled to impose
the price, the judge only exercises a right to check, making it possible to thwart unfair contractual
b) Nor is the purpose of the judicial check to impose a return to a "fair price" or an "objective" price, any
deviation from such a price necessarily constituting bad faith on the part of the supplier. The question
has been debated before the Supreme Court of Appeal and decided fairly: it is the "abuse in price
setting," and not the excessive price, which is condemned (24). The supplier is free to set the price. Even
when a market price exists, which is not always the case, and the judge is able to discover it, nothing
allows one to think that the parties intended to refer to it. Such an approach flies in the face of the
concrete assessment which civil responsibility involves. The market price is one element among many
which make it possible to determine the supplier's responsibility (25). In general, when the judge checks
the exercising of a unilateral right to set the price, the judge does not strive to discover the objective
value of the item but rather the fairness of the contractual process (26). There may be multiple
legitimate reasons for deviating from the so‐called "objective" price.
It is therefore henceforth accepted that the setting of a future price may be assigned contractually to
one of the parties. This sign of confidence (27) is the source of an obligation of fairness which is
consistent with a spirit of collaboration in long‐term contracts (28); flexibility in contractual
responsibility, in conjunction with a development of the duty to carry out the contract in good faith,
makes it possible to sanction the it effectively.
III. ‐ Future. ‐ the future will tell what use the courts will make of the checking power given to them by
the Supreme Court of Appeal. For the time being, we can attempt to delimit its scope of application.
The new rule obviously applies to master contracts, whether it includes a supply obligation, be it
exclusive or non‐exclusive, or an obligation to resort to the supplier for the provision of a future object
(rental) or work (service).
However, since it is deemed that the contract may leave future price setting to one of the parties
without the validity thereof being affected, the new principle, it seems, aims to govern all contracts.
Only a legal provision obligating the parties to set the price at the time of conclusion of the contract and
subjecting future revisions thereof to mandatory requirements could keep it in check (for example,
rental agreement for a dwelling, employment agreement or insurance contract) (29). But while the law
does not obligate the parties to set the price and does not limit their freedom with respect to
subsequent changes, nothing prohibits them from relying on one of them [to set the price]. This is so in
a loan agreement with interest and even in a sales contract.
In the case of a loan with interest, article 1907, al. 2, civ. c., together with the provisions of article L. 313‐
2 consumer code, obligate the parties to set the rate of conventional interest in writing. But nothing
prohibits them from freely agreeing upon a change to this rate. Therefore, the ousting of article 1129
civ. c., on which the previous jurisprudence for prohibiting reference to the basic rate of the lender had
been based, should lead to the abandonment of the old solution: subject to the fulfillment of the formal
rules, the reference to the future basic bank rate has become lawful; but the abusive application thereof
will entail contractual liability on the part of the lender (30).
With regard to sales, there is a special text, article 1591 civ. c., according to which “the sales price must
be determined and designated by the parties.” The first requirement must be understood in light of the
reported rulings: the price is determined – determinable in any case – when the parties agree in a
definitive manner to the method for setting thereof. The second rule obligates the parties to indicate
what the agreed‐upon price is. This requirement is also satisfied when they indicate the method that will
be used to set the price (31). If all of the elements of the sale exist at that time, there is no reason to
entrust one of the parties with the later setting of the price. On the other hand, this type of
determination may be of interest when the price setting is subject to future elements as of yet unknown
at the time of the conclusion of the sale (variable price as a function of the profitability of the item,
market price, sale of a future item...). In these cases, the threat of nullity could very well be dismissed in
favor of an action based on contractual liability or on resolution for non‐performance (32).
The Court of Appeal now prefers specific control of the performance to the abstract and ill‐adapted
method of nullity. These rulings, handed down in plenary Assembly, mark a decisive turning point in the
relationships between the court and the contract: today, the function of the court focuses on how the
creditor uses the rights given to him by the contract. It is the law which states the conditions for
assessing whether it has been properly executed. It is the court’s role to assess whether it has been
executed in accordance with contractual good faith.
CONTRACT AND OBLIGATIONS * Object * Price * Non‐determination of price * Future service * Exclusive
(1) Cass. 1re civ., 29 nov. 1994, Bull. civ. I, no. 348 ; D. 1995, Jur. p. 122, note Aynès ; RTD civ. 1995, p.
358, note J. Mestre ; JCP 1995.II, n° 22371, note J. Ghestin ; Contrats, conc., consom. 1995, no.
February, no. 24, note L. Leveneur.
(2) L. Aynès, Non‐determination of price in distribution agreements: how to resolve the impasse?, D.
1993, Chron. p. 25 ; L. Vogel, Plea in favor of a turnaround: against the obligation of price
determination in distribution agreements, D. 1995, Chron., p. 155 .
(3) J. Ghestin, Reflections on the area and the basis of nullity for non‐determination of price, D. 1993,
Chron. p. 251 , reproduced in Treatise on Civil Law, The Formation of the Contract, 3rd ed., no. 712 s.; J.
Ghestin and M. Billiau, Price in long‐term contracts, LGDJ, 1990, no. 31. However, this author also
approves of the opposite solution: previous note, JCP 1995, II, no. 22371.
(4) Collart‐Dutilleul and Delebecque, Civil and Commercial Contracts, 2nd ed., no. 147 ; Malaurie and
Aynès, Special Contracts, 9th ed., no. 837 ; M.‐A. Frison‐Roche, The choice of cancellation as a sanction
for the non‐determination of price, Petites affiches 1993, no. 147 ; M. Béhar‐Touchais, The structure of
the distribution framework agreement and the non‐determination of price in implementation
agreements, JCP 1994, I, no. 3800 ; L. Vogel, previous page; L. Aynès, previous page and viewable in
Cass. com., 5 Nov. 1991, D. 1992, Abstract p. 266 .
(5) Example: the loaning of money for interest.
(6) See lastly; Cass. 1re civ., Nov. 24, 1993, Bull. civ. I, n° 339; RTD civ. 1994, p. 631, note P.‐Y, Gautier;
Contracts, conc., consom. 1994, February iissue, no. 20, note L. Leveneur.
(7) See lastly, Cass. com., Apr. 5, 1994, Bull. civ. IV, no. 147; Nov. 8, 1994, ibid. IV, no. 331,
(8) See for example, about variable interest rates, T. com. Nanterre, Oct. 27, 1995, Barclays Bank versus
SA Disimex, not published.
(9) J. Ghestin, note and Treatise supra.
(10) See supra, note 1.
(11) L. Aynès, note D. 1995, Jur. P. 122.
(12) L. Leveneur, prev. cit. note
(13) J. Mestre, prev. cit. obs., RTD civ. 1995, p. 358.
(14) Ruling nos. 393 and 395, respectively Cofratel (1st cause) and Cie Atlantique de téléphone (3rd cause).
(15) It had been undermined by the Commercial Chamber's rulings of 1991; See in particular Cass. com.,
Nov. 5, 1991, prev. cit. ; M. Béhar‐Touchais, op. cit., JCP 1994, I, no. 3800.
(16) Ruling no. 396, Vassali versus Gagnaire (4th cause).
(17) Ruling no. 394, Sté Le Montparnasse versus GST Alcatel (2nd cause).
(18) In this matter, M. Jeol, concl. above; Y. Loussouarn, note JCP 1979, II, no. 19034; M.‐A. Frison‐
Roche, Non‐determination of price, RTD civ. 1992, p. 277 ; Contra J. Ghestin, Treatise, supra, no. 718.
(19) J. Ghestin, op. cit.
(20) See in particular Cass. 1st civ., Nov. 24, 1993, supra
(21) C. expr., art. L. 13‐14.
(22) L. Jul. 6, 1989, art. 17, d and c.
(23) See note Cass. 3rd civ., Jul. 5, 1995, 3 rulings, JCP 1995, II, no. 22528, concl. Weber, note Djigo:
notice for the sale of rented housing constitutes an offer to sell to the renter at the price set by the
lessor (L. Jul. 6, 1989, art. 15, II). The judge may consider this price by applying the general theory of
(24) See in particular the arguments developed by Me Marc Lévis during his oral pleadings, which
opposed any reference to this concept, leading only to rescission due to gross undervalue.
(25) M. Jeol, concl. reported above.
(26) Comp. Cass. 3rd civ., Jul. 5, 1995, supra
(27) On the role of confidence as basis for the compulsory force of a contract, See not. : J. Carbonnier,
Contemporary evolution of contracts, Journées Savatier, PUF, 1986, p. 34‐35: R. Desgorces, Good faith in
contract law, thesis, Paris II, p. 113 s.; T. S. Attiah, The evolution of English law: from agreement to
"reliance" and exclusion of responsibility due to defect in the sale of goods, in D. Tallon and D. Harris,
Contracts today: French‐English comparisons, LGDJ, 1987.
(28) On the obligation to collaborate in distribution networks, See L. Amiel‐Cosme, Distribution
networks, thesis, Paris I, LGDJ, 1995, foreword Y. Guyon, no. 152 f.
(29) M. Jeol, concl. reported above.
(30) In this sense, ) M. Jeol, concl. reported above.
(31) Mr. Marc Lévis has shown, in his pleadings, that according to the Roman tradition a sale for which
no price was determined was merely flawed and could be salvaged by the later addition of the missing
(32) The First Civil Chamber has already opened the way for the new solution, by replacing the
requirement for arbitrarity by the one for unilateral price setting. Cass. 1st civ., June 28, 1988, Bull. Civ. I,
no. 212; D. 1989, Jur., p. 121, note P. Malaurie; RTD civ. 1989, p. 343, note P. Rémy. See also, Cass.
com., Nov. 4, 1952, Bull. Civ. III, no. 337; RTD civ. 1953, p. 341, note J. Carbonnier, in which the courts
carried out verifications similar to those now authorized by the Supreme Court.