A breach of contract by a party is not a contract lapse

Court of Appeal of Versailles, France, 12th chamber, 24 September 2020, no. 19/03654

Article 1186 of the French Civil Code provides that a validly formed contract lapses if one of its essential elements disappears. Case law has yet to specify the scope of this new article resulting from the 2016 reform of contract law, in particular by answering the following questions: what are the essential elements of a contract? Can the disappearance of one of these essential elements be the result of the will of the parties?

A recent judgment of the Versailles Court of Appeal provides an answer: the disappearance of the essential element of the contract within the meaning of article 1186 cannot be dependent on the will of the parties. Thus, the non-performance of its contractual obligations by a company cannot lead to a contract lapse, even if it is invoked by the party who is the victim of the non-performance. In the present case, this solution seems relevant to us. Indeed, to acknowledge the contrary would ultimately amount to authorizing the defaulting party to unilaterally terminate the contract.

Company law, business creation and transfer of business

Arst Avocats advises its clients in the following matters:

  • in the creation of companies;
  • at all stages of a company’s life, from its incorporation to its dissolution, for the realization of the simplest to the most complex operations (split, merger, listing on a stock market, et seq.);
  • in the context of the acquisition or disposal of a company, whatever its form (transfer of business or corporate rights assignment) as well as operations that precede or follow it;
  • in the implementation of agreements organizing relations between the company’s shareholders (shareholders’ agreement, employee shareholding schemes).
PAULINE JACQUEMIN CUNY

PAULINE JACQUEMIN CUNY

associate

Holder of two Master’s degrees in Multimedia and Computer Law and in European Business Law from the University of Panthéon-Assas (Paris II).