The application of Article 1171 of the Civil Code and the understanding of significant imbalance in business relationships between professionals

Court of Cassation, Commercial Chamber, January 26, 2022, No. 20-16.782

The judgment of January 26, 2022, rendered by the Commercial Chamber of the Court of Cassation, sheds light on the interplay between general and special law regarding significant imbalance. It also clarifies the conditions for invoking Article 1171 of the Civil Code and its effects.

The facts that gave rise to the appeal are typical in matters of relations between professionals.

A company engaged in catering and sandwich-making decided to enter into a financial lease agreement with a specialized company to lease equipment supplied by a third-party company for sixty monthly rents of €170 excluding taxes.

Following non-payment, the equipment leasing company sent a formal notice to its debtor, invoking the termination clause in the contract. The leasing company then sued the catering company for the outstanding amounts.

In a judgment rendered on October 23, 2018, the Saint-Étienne Commercial Court ordered the catering company to pay the sums owed to its contracting party. The latter has decided to appeal.

The Lyon Court of Appeal overturned the judgment under appeal, deeming article 12 of the general terms and conditions of the contract null and void, and thus declaring that the lease agreement had not been terminated and that it continued, consequently, until its expiry.

The leasing company appealed to the Court of Cassation, arguing that the general law had been misused to the detriment of specific law, namely Article L. 442-6, I, 2°, of the French Commercial Code (prior to the ordinance of April 24, 2019), which addresses restrictive trade practices. It also argued that Article 1171 of the French Civil Code had been misapplied, both in assessing the significant imbalance and in applying the sanction of a deemed unwritten contract .

The Court of Cassation partially overturned the contested ruling insofar as it held that the finance lease agreement contained a clause reserving the right to terminate the agreement automatically to the leasing company alone. The catering company had no similar right under the terms of the said agreement.

In this ruling, the High Court takes the opportunity to provide the key to the distribution between the application of the common law set out in Article 1171 of the Civil Code and the law of restrictive practices of competition (Article L.442-1, I, 2° of the Commercial Code).

In this respect, it recalls that Article 1171 of the Civil Code is intended to apply only to adhesion contracts, which are defined by three elements, namely, the presence of general conditions, the unilateral and advance determination of these by one of the parties to the contract and the absence of negotiations around these general conditions ( Article 1110 of the Civil Code ).

In practice, many business contracts meet its characteristics, including the contract concluded by the parties in this case.

The whole point of determining the applicable regime in advance lies in the very characterization of the significant imbalance and its sanction.

While, based on Article L.442-1, I, 2° of the French Commercial Code, the lack of reciprocity in the parties' obligations is frequently cited by judges as revealing an imbalance in those obligations, it must be noted that the solution adopted in this case, based on Article 1171 of the French Civil Code, is quite different. (French Court of Cassation, Commercial Chamber, April 12, 2016, No. 13-27.712 )

Indeed, the Court of Cassation considers that such a lack of reciprocity is justified by " the nature of the obligations to which the parties are respectively bound ".

However, very often, " the nature of the obligations " prevents any reciprocity in the exercise of a right reserved for one party.

It would therefore seem that the unbalanced nature of the non-negotiable clauses must be sought at the level of the very object of the said right which is not reciprocal, which is assessed in concreto , according to the general economy of the contract and not in isolation, clause by clause.

Moreover, the imbalance should not be sought on the grounds of the adequacy of the price to the service, unlike Article L.442-1, I, 2° of the Commercial Code which allows a real control of the balance of financial services by the trial judges.

It should be noted that the party intending to rely on Article 1171 of the Civil Code must, in addition, demonstrate the " significant " nature of the imbalance.

And for good reason, any abusive clause within the meaning of common law will be deemed unwritten, while in the field of the law of restrictive practices of competition, article L.442-1, I, 2° of the Commercial Code provides for the involvement of the liability of the author of the disputed practices, which is not provided for by article 1171 of the Civil Code.

Ultimately, the adage that " specialia generalibus derogant " is not intended to apply automatically to the understanding of contractual imbalances, since Article L.442-1, I, 2° of the Commercial Code should only be limited to relations between suppliers and large distributors.