Cour de cassation Commercial Chamber, November 12, 2008 - Decision N°07-17746 (Distribution Casino v. Hein)

Since the security is the accessory of the main obligation, the surety can only exist on a valid obligation according to article 2289 of the civil code. In other terms, if the obligation secured by the surety isn't valid, the surety is also invalid.

The Cour de cassation in this case has had the opportunity of applying this rule.

A franchiser had terminated a franchise agreement. The franchisee was liquidated.

The franchiser sued the surety to obtain the payment of the debt of the franchisee. The receiver intervened voluntarily in this procedure and claimed that the franchise contract was null.

The Court of appeal of Aix en Provence, (march 29,2007) found that the franchise agreement was null. The Court of appeal said that therefore the surety's engagement was also null since it was based on an invalid obligation.

The Cour de cassation overruled this decision.

The Cour de cassation held that, in a successor contract, if the contract was declared null it didn't automatically mean the surety was also null.

Only the disappearance of the different obligations can cause the disappearance of the surety's engagement. The surety's engagement remains valid as long as the obligations deriving from the contract also remain valid.

The Court of appeal should therefore have verified if the obligations deriving from the franchise agreement survived despite the fact that the main agreement had been declared null.

The credit of the franchiser consisted of different deliveries made. If the franchise agreement had been terminated, these deliveries still existed. It seems therefore that according to the Cour de cassation the surety would still be entitled to pay the amount of the franchisee's debt.

Article Written by Olivier VIBERT, LAW FIRM, Paris, France

This article has been originally published in the European journal of Commercial Contract Law (EJCCL).