Newsletter No. 15 – Business Law
REGULATIONS
Reform of the law of obligations:
Draft ordinance
JURISPRUDENCE
… of December 2, 2014:
Collective proceedings of the lessee and payment of the lessor's claims
… of January 27, 2015:
Annulment of judicial liquidation and interruption of the statute of limitations by filing a claim
… of January 27, 2015: Erroneous statement in the notice of judgment published in the BODACC
… of January 15, 2015: Perpetual nature of the plea of nullity
… of January 27, 2015: Set-off of claims
… of February 3, 2015: Transfer of shares
… of February 3, 2015: Interference of a parent company in its subsidiary
… of February 4, 2015: Door-to-door sales
… of January 15, 2015: Multiple commitments and assessment of the disproportion of guarantees
REGULATIONS
Reform of the law of obligations
Article 8 of Law No. 2015-177 of February 16, 2015, concerning the modernization and simplification of law and procedures in the areas of justice and home affairs, declared constitutional by the Constitutional Council on February 12 (No. 2015-710 DC of February 12, 2015), authorized the government to take, by ordinance, the measures within the legislative domain necessary to amend the provisions of the Civil Code relating to obligations.
On February 25, 2015, the Ministry of Justice published a draft ordinance on its website and launched a public consultation, open until April 30, 2015. The ordinance was expected to be presented a few weeks after the consultation closed.
The draft published online on February 25 introduces amendments of widely varying significance. While some provisions aim to incorporate case law into the Civil Code, others depart from it.
Preliminary provisions for the conclusion of the contract and rules for contract formation.
Among the provisions provided, the following should be highlighted:
- The project defines or redefines the different types of contracts. In particular, it introduces a definition of the framework contract and the adhesion contract;
- The requirement of good faith is extended to the formation of the contract;
- The draft specifies the terms of withdrawal and acceptance of the offer;
- Right of first refusal: the penalty for breach of the right of first refusal provided for by case law is modified and incorporated into the code.
Contract validity
The draft establishes a general duty to provide information and the applicable sanctions for failure to comply with this duty.
Among the key changes, it is worth noting the removal of "cause" as a condition for the validity of a contract. However, the concept is not entirely eliminated from contract law. On the contrary, the draft ordinance incorporates existing solutions, particularly case law, and groups them with the rules applicable to the object of the contract.
Sanctions
The project creates a general regime of nullity and lapse.
Effects of the contract
The draft enshrines the theory of unforeseen circumstances.
The rules governing stipulations for the benefit of a third party are detailed in the draft.
JURISPRUDENCE
Collective proceedings against the tenant and payment of the landlord's debts
Com. 2 December 2014 (No. 13-11.059) FS-PB:
Before being placed under court-ordered administration on June 11, 2009, the tenant of premises used as a school gave notice to the landlord for July 31 of the same year. The premises having finally been vacated on November 1, 2009, the landlord sued the tenant for damages, notably for the loss suffered due to the impossibility of re-letting the premises before the start of the following school year, and for payment of the cost of the necessary repairs.
The Court of Appeal having declared the claims inadmissible, the landlord appealed to the Court of Cassation, requesting, in particular, the application of the payment terms for debts incurred after the commencement of the insolvency proceedings.
The Court of Cassation dismissed the appeal. In support of its decision, the Court held on the one hand that the landlord's claim relating to the restoration work is the consideration for a service provided to the debtor during the observation period, within the meaning of the provisions of Article L. 622-17 of the Commercial Code, only if the damages which he is accused of were committed during this period and not, as the argument supports, because the premises were returned after the judgment opening the receivership proceedings. The Court further specified that, from June 11 to November 1, 2009, the landlord had been paid, in consideration of the service provided to the debtor during this period, the rent due and then an occupancy indemnity after the termination of the lease set at July 31, 2009; consequently, the Court of Appeal correctly deduced that the damages claimed to compensate him for the loss resulting from the loss of the opportunity to immediately re-let the premises did not have as consideration a service provided to the debtor.
Cancellation of judicial liquidation and interruption of the statute of limitations for filing a claim
Com. 27 January 2015 (No. 13-20.463) FS-PB:
A debtor, in judicial liquidation, invoked the statute of limitations on a debt corresponding to a loan granted with a maturity date of June 30, 1989. This debt had been declared during liquidation proceedings that were subsequently annulled, then reinstated on March 30, 2011, during a second judicial liquidation proceeding.
The Court of Cassation rejected the argument based on the statute of limitations, ruling that "the decision annulling the commencement of judicial liquidation does not deprive the declaration of debt of its effect of interrupting the statute of limitations, which remains in effect until that decision."
Incorrect statement in the notice of judgment published in the BODACC
Com. 27 January 2015 (No. 13-24.619) FS-PB:
According to the Commercial Chamber of the Court of Cassation, while the law does not require that the notice of the judgment opening insolvency proceedings, published in the BODACC (Official Bulletin of Civil and Commercial Announcements), must specify the date of cessation of payments set by that judgment, the date indicated in the notice must be accurate. Consequently, the notice in this case contained an error regarding the date of cessation of payments, rendering the creditor's subsequent third-party objection to challenge the date of cessation of payments pointless, and therefore could not trigger the time limit for such an appeal.
Debt offsetting
Com. 27 January 2015 (No. 13-18.656) F-PB:
To reject a claim for set-off, the Court of Appeal's ruling stated that there can be no set-off when the debtor's claim arises from the creditor's abusive performance of the contract. This was the case here, as the judgment, which became final on this point, specifically held that the fault giving rise to the creditor's liability stemmed in part from the invoicing of royalties at an excessive rate, completely disproportionate to the nature and scope of the services provided. The Court
of Cassation overturned the ruling on the grounds that, in so ruling, when a claim resulting from overbilling, stemming from defective performance of the contract, is related to a claim arising from the same contract, the Court of Appeal violated Articles 1134 and 1147 of the Civil Code and Article L. 621-24 of the Commercial Code, in its version prior to the Law of July 26, 2005, on the Safeguarding of Businesses.
The perpetual nature of the exception of nullity
1st Civil Chamber, January 15, 2015 (No. 13-25.512) F-PB:
The Court of Cassation here recalls that the exception of nullity can only be invoked to defeat the request for execution of a legal act which has not yet been executed.
Transfer of social rights
Com. 3 February 2015 (No. 13-12.483) F-PB:
In this case, the Court of Appeal refused to grant the request to annul a transfer of shares on the grounds of fraud due to the existence of an asset guarantee.
The Court of Cassation overturned the judgment. Indeed, according to the Court, contractual guarantees relating to the nature of the company's assets or liabilities are in addition to the statutory provisions and do not deprive the purchaser of shares, who argues that their consent was vitiated, of the right to seek the annulment of the transaction based on these provisions. Consequently, the dismissal of the claim could not be justified solely by the existence of an asset guarantee.
Interference of a parent company in its subsidiary
Com. 3 February 2015 (No. 13-24.895) F-PB:
Due to non-payment by a contracting party, a company sued a holding company within the same group for payment. The Court of Appeal upheld the claim and ordered the holding company to pay a certain sum. The holding company appealed this judgment to the Court of Cassation. In support of its appeal, the holding company invoked the principle of the autonomy of legal entities, according to which a company cannot be held liable for the debts of another company within the same group.
The Court of Cassation dismissed the appeal on the grounds that several factors had created an appearance that led the creditor to believe that the holding company was acting in place of its subsidiary. Indeed, the Court of Appeal had noted, firstly, that the holding company, which held the majority of the contracting party's capital, had an email address similar to that of the debtor, the same address, and the same director. The holding company, on the other hand, had intervened at the pre-litigation stage on several occasions to discuss the amount of the obligation, proposing in particular a lower amount derived from discounts granted on previous orders, and to try to obtain an amicable settlement.
Door-to-door sales
1st Civil Chamber, February 4, 2015 (No. 14-11.002) F-PB:
In this case, the plaintiff received a letter at his home enticing him, through the promise of gifts, to have a new vehicle delivered. Following this correspondence, he went to the company's premises to conclude a lease agreement for a new vehicle with an option to purchase. Claiming unlawful solicitation, he sued the seller to have the contract annulled.
The Court of Cassation overturned the Court of Appeal's decision, which had held that the lease agreement with an option to purchase had been concluded in a place intended for marketing purposes, thus denying the plaintiff the protection afforded to contracts concluded through door-to-door sales.
Multiple commitments and assessment of the disproportionate nature of the guarantees
1st Civil Chamber, January 15, 2015 (No. 13-23.489) F-PB:
To dismiss the claim of manifest disproportion in the guarantor's commitments, the Court of Appeal held that the guarantor's debt consisted of mortgage loans. The Court of Cassation overturned the ruling, stating that the disproportion must be assessed in light of the guarantor's overall debt, including that resulting from guarantee commitments.
