French judges rule that the participation to a fair each year several times in a row is an established commercial relation. If one of the party terminates suddenly this commercial relation by refusing to grant a stand in this fair, the other party can claim damages.

Cour de cassation Civil chamber, September 15, 2009 - Decision N°08-19200 (Société CHRISTIAN CARBONNIERES v. COMEXPO PARIS)

The Cour de cassation detailed its position with this decision regarding a sudden termination of commercial relations.

A company intervening in the wine industry as a trader CHRISTIAN CARBONNIERES, didn't have a stand in a fair in Paris called LA FOIRE DE PARIS.

CHRISTIAN CARBONNIERES had been participating for several years in a trade fair called “VINS ET GASTRONOMIE” which had been renamed “SALON TERRE DE FRANCE ET D'EUROPE”. These trade fairs were more generally part of “LA FOIRE DE PARIS” organised by COMEXPO PARIS.

COMEXPO informed CHRISTIAN CARBONNIERES by a notice sent on the 21st of september 2004, that traders were for the future not admitted to the trade fair. The organizers wished to limit the trade fair only to certain professions of the wine industry and traders were not welcome anymore.

CHRISTIAN CARBONNIERES, seeing his demand for a stand on the trade fair being rejected, undertook legal action against the organiser. This demand had been made on the ground of a sudden termination of established commercial relations.

The Paris Court of Appeal ruled that indeed the participation each year to a trade fair could be defined as an established commercial relation. This commercial relation had been terminated without any notice and therefore damages could be claimed by the wine trader.

For the Court of appeal the article L 442-6 I 5 of the French commercial code hadn't been respected.

The organiser COMEXPO decides to bring the case to the French civil Supreme Court.

The question brought to the Court was whether the participation to a trade fair each year for several years, could be seen as an established commercial relation even though their was only one trade fair per year and therefore their was only one contract per year with a term of one or two weeks.

The second question was to determine if the organizer had terminated these commercial relations by simply modifying the conditions of participation to the fair.

The Cour de cassation rejected the appeal. The Cour de cassation approved the appeal decision considering that the definition of established commercial relations wasn't conditioned by the existence of permanent and continuous relations between parties. For the Cour de cassation, a succession of punctual contracts could constitute established commercial relations.

For the Court of appeal, the commercial relations consisted in a series of services provided by the organizer to the person having his stand at this fair. These services were the allocation of a stand in the Fair, communications, promotions, invitations ...

The Court of appeal then had ruled that the contractual relations weren't continuous but the participation was renewed for more than ten years. The Court of appeal therefore ruled that the commercial relations were established.

This decision of the commercial court of the Cour de cassation resumes perfectly the difference between the termination of a commercial contract and the termination of commercial relations. In this case there was no termination of a contract since every year a new contract had been signed. The notion of termination of commercial relations is larger. It can of course include the termination of a contract but it can also consist in the non renewal of a contract with a fixed term. The protection of article L 442-6 I 5 of the French commercial code is therefore larger than the usual protection of a party in a contract.

By Olivier Vibert, Attorney, Paris.

Article published in European Journal of commercial contract law. EJCCL.

Cour de cassation 1st Civil chamber, February 25, 2010 - Decision N°08-14787

The owner of a property in France had given an exclusive mandate to a real estate agent in order to sell his house.

The real estate agent found a potential buyer for the property. The real estate agent had sent a promise to sell the property within the scope of his mandate.

The buyer accepted the promise to sell the house but the seller then refused to proceed with the sale of the real estate property, challenging the validity of the mandate.

Under French law the sale is made as soon as the agreement is found on the object of the sale and its price. The sale was therefore normally concluded and definite. Nevertheless the seller refused to pursue the sale.

The buyer undertook litigation to ask for the Court to enforce the sale. The seller challenged these claims by arguing that the mandate he had given to the real estate agent was in fact null.

The seller considered that the real estate agent hadn't respected the formalism of an exclusive real estate mandate. The real estate should have given one sample of the mandate immediately to the seller.

The Court of appeal ruled that the mandate wasn't null. For the court the fact that the seller hadn't received any sample could only invalid the clause concerning the exclusivity but not the whole mandate.

This decision was overruled by the Cour de cassation which considered that the whole mandate was null.

Article 78 of the decree 72-678 only provides that the professional real estate agent needs to give a sample of the mandate to the owner. The sanction to this formality is that the clause isn't applicable.

The Cour de cassation therefore went beyond the decree by ruling that the whole mandate was null when this formality hadn't been respected.

This interpretation of article 78 and its consequences give a whole new interest to its formalism. If only the exclusivity clause had disappeared the real estate agent would have had no interests in applying the decree. The agent would have had the possibility of making the deal. To challenge the exclusivity once the sale was made would then have no sense.

It's interesting to see how in this decision the judge have interpreted article 78 of the decree to enforce this formality on practical terms.

Written by Olivier Vibert, attorney, Paris

Article Published on the EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW.

A party in a contract cannot oppose a condition precedent clause if in fact this party has deliberately blocked its realisation.

Cour de cassation, 3rd civil Chamber, January 5, 2010 - Decision N°09-10524 (GRANDE PHARMACIE DE LA GARE v. PUEL)

A commercial lease had been signed between two parties. According to this commercial lease, the lessee had negotiated that he accepted the lease only if some modifications were made on the premises. These modifications needed an administrative authorisation.

This condition precedent had been drafted without any time limit.

The administration refused to deliver the authorisation for the repairs of the premises. This refusal wasn't definite but in fact the administration had asked for extra repairs which were more expensive than the lessee's expectations. Since the lessee had refused to make the repairs required by the public authorities, the administrative authorization never had been granted.

The lessee asked to cancel the contract, since the condition precedent never materialised.

The Court of appeal of Montpellier (19 november 2008) refused to cancel the contract on this ground. For the Court of appeal, the lessee had voluntarily caused the refusal from the administration. Therefore he couldn't possibly use this refusal to cancel the contract in his own benefit.

The Cour de cassation, approved the Court of appeal's decision. The Court ruled that the lessee had deliberately blocked the realisation of the condition precedent and therefore the lessee couldn't use this clause to escape from his initial engagement.

This decision shows the importance of drafting correctly the contracts and the importance of defining precisely the condition precedent. Hopefully for the lessor the judge has interpreted the contract in order to make sure a party couldn't use the contract's weaknesses to escape its engagements unfairly.

Article Written by Olivier VIBERT

Published in the EJCCL EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW.

Cour de cassation, 3rd civil Chamber, January 5, 2010 - Decision N°09-10524 (GRANDE PHARMACIE DE LA GARE v. PUEL)

A commercial lease had been signed between two parties. According to this commercial lease, the lessee had negotiated that he accepted the lease only if some modifications were made on the premises. These modifications needed an administrative authorisation.

This condition precedent had been drafted without any time limit.

The administration refused to deliver the authorisation for the repairs of the premises. This refusal wasn't definite but in fact the administration had asked for extra repairs which were more expensive than the lessee's expectations. Since the lessee had refused to make the repairs required by the public authorities, the administrative authorization never had been granted.

The lessee asked to cancel the contract, since the condition precedent never materialised.

The Court of appeal of Montpellier (19 november 2008) refused to cancel the contract on this ground. For the Court of appeal, the lessee had voluntarily caused the refusal from the administration. Therefore he couldn't possibly use this refusal to cancel the contract in his own benefit.

The Cour de cassation, approved the Court of appeal's decision. The Court ruled that the lessee had deliberately blocked the realisation of the condition precedent and therefore the lessee couldn't use this clause to escape from his initial engagement.

This decision shows the importance of drafting correctly the contracts and the importance of defining precisely the condition precedent. Hopefully for the lessor the judge has interpreted the contract in order to make sure a party couldn't use its weaknesses to escape its engagements unfairly.

Article written by Olivier Vibert,

Published in EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW.

Negligence of a commercial agent needs to be notified instantly and the termination of the contract should be asked promptly in case of serious negligence. If not the judges will consider that the principal has accepted the misconducts by his silence.

Cour de cassation Commercial Chamber, December 8, 2009 - Decision N°08-17749 ( SOCIETE AMG2R. v. SOCIETE MARINI SILVANO)

AMG2R had signed an agency contract with a company called MARINI SILVANO. The principal decided to terminate the agency contract. The agent therefore sued the principal to obtain damages for the termination.

The Court of Appeal of Lyon (30 april 2008) ruled that the agent had committed serious negligence in the execution of the contract. The Court of appeal nevertheless sentenced the principal to pay commissions for transactions made on the agent's territory.

Both parties challenged this decision before the Cour de cassation (French civil and commercial supreme Court).

The agent considered that the alleged misconducts had occurred one year before the termination of the contract. For the Agent, the principal, by not terminating instantly the agency contract, had accepted these misconducts. The court of Appeal couldn't therefore admit these negligence since they had been approved by the principal who didn't react for more then a year.

The Supreme Court overruled the Court of appeal's decision. The Supreme Court considered that the Court of appeal should have determined if the principal had accepted the misconducts by not reacting for more than a year. The principal should therefore be aware that negligence needs to be notified instantly and that the termination should be asked rapidly. Otherwise the judges will consider that the principal has accepted the misconducts by his silence.

This position of the Supreme is neither new nor original but it's always useful to remind the risk of leaving a misconduct unanswered.

The Cour de cassation was then asked if the commission given to the agent by the Court of appeal were founded. These commissions were based on sales made in France. According to article L134-6 of the French commercial code (similar to article 7, 2 of the EC directive 86/653) when agents “are entrusted with a geographical sector or a specific group of persons, commercial agents shall also be entitled to the commission for any transaction concluded during the term of the agency contract with a person belonging to this sector or group.”

The problem was in this case that the agent hadn't specified any territory in his agency contract. The Court of appeal interpreted that the parties had defined the whole of France as the agent's territory. Despite the fact that nothing was specified in the contract, the Court of appeal interpreted the parties' will and defined the territory even though no territory was defined.

The Cour de cassation also overruled this interpretation. The Cour de cassation ruled that since no territory had been specified, the commission of article L134-6 of the commercial code couldn't apply.

The Court couldn't interpret the parties will and specify a territory when no territory had been defined in the contract.

by Olivier Vibert, Attorney in Paris

This article has been published in the European Journal of commercial contract Law.

In this decision, the Cour de cassation ruled that the arbitration clause inserted in a contract couldn't apply to the action brought by the receiver of a winding up procedure against a former contractor. The receiver has been considered by the Cour de cassation has a third party to the commercial contract.

Cour de cassation, 1st Civil Chamber, July 1, 2009 - Decision N°08-12494 (Encore Orthopedics Inc v. Enjalbert es qualité)

A distribution contract had been signed between a company in the US, and a company in France, the French company being in charge of distributing the products of the American company.

This distribution contract had a jurisdiction clause by which jurisdiction was given to an arbitration Court.

A first dispute had been already settled by the arbitrator but then the French Company was winded up.

The French Company's liquidator claimed that the American company had in fact acted as the chairman of the company and therefore asked the American company to support the debts of the French company.

This demand was brought by the liquidator before the French commercial Courts. The American company claimed the French courts didn't have jurisdiction since only the arbitration courts were designated by the contracts.

The Cour de cassation in this decision accepted the jurisdiction of the French Courts stating that the liquidator wasn't party to the contract and therefore wasn't engaged by these contracts.

Considering the type of action engaged, the liquidator indeed didn't represent the company's interests but its debtors. Therefore if the liquidator didn't act for the Company's interest he could be logically considered as a third party to the contract.

It could also have been argued that the liquidator wasn't really referring to the contract but to a more global situation which was larger than the sole execution of this contract. This argument hadn't been brought forward and the Cour de cassation therefore only qualified the liquidator as a third party to the contract to admit the French Courts jurisdictions.

By Olivier Vibert, Attorney, Paris Bar Association.

This article has been published in the European Journal of Commercial Contract Law or EJCCL.

When commercial agency contracts are terminated the commercial agent needs to notify within one year of its termination its will its intentions of claiming damages.

In this decision the Cour de cassation rules that the claims made before a jurisdiction specialised for labour law disputes cannot stop this delay.

Cour de cassation Commercial Chamber, September 29, 2009 - Decision N°08-17611 (Système Log v. Grisez)

When commercial agency contracts are terminated the commercial agent needs to notify within one year of its termination its will its intentions of claiming damages.

Article L 134-12 of the commercial code provides that :

If their relationship with their principal ceases, commercial agents shall be entitled to an indemnity for the loss suffered.

Commercial agents shall lose the right to this compensation if they have not notified the principal, within one year of the cessation of the contract, that they intend to use their rights.

The legal successors of commercial agents shall also benefit from the right to compensation when the cessation of the contract is due to the death of the agent.

In this case, the agent in fact believed that the contract needed to be qualified as an employment contract. Doing so, the commercial agent claimed damages before French courts specialized for Labour law matters (Conseil des prud'hommes).

The commercial agent obtained nothing before the labour Law courts who said they didn't have jurisdiction for a litigation between a principal and its agent.

The commercial agent then decided to claim damages before the Commercial courts.

The commercial agent hadn't notified his will to claim damages within the year of the termination.

The commercial agent argued that the first procedure before the Labour law courts should be analysed as a notification of his intentions of claiming damages complying with article L134-12 of the French commercial code.

The Cour de cassation in this decision refused to qualify the first action as a notification of the commercial agent's intentions to claim damages for the termination of the agency contract.

The Cour de cassation considered that the first procedure was introduced to obtain damages on an employment contract. Therefore claiming damages for an agency contract was a claim based on a totally different ground.

The Cour de cassation refused therefore to have a wide interpretation of the notification of article L 314-12 of the French commercial code. The intention of the commercial agent to claim damages must be clearly expressed and this intention must be on the ground of the termination of the agency contract.

By Olivier Vibert, Attorney, Paris

Article published in the European Journal of Commercial Contract Law (EJCCL).

The notion of apparent representative can be crucial in commercial contracts. A company can be engaged by a contract sgned by someone appearing to be the representative.

This decision shows how a company can be engaged by someone acting has an apparent representative.

The French case law admits that a company can be engaged in a contract if a person acts apparently has its representative.

A company can be legally represented by its directors or by any persons acting on behalf of a proxy. This proxy can be a written proxy but it can also be an apparent proxy.

Cour de cassation 3rd Civil chamber, June 23, 2009 - Decision N°08-18983 (Société EST STRASBOURG v. LAROCHE)

In this case, the Cour de cassation has admitted that the company was engaged by a third party acting has representative.

A Civil Real Estate company (Société civile immobilière or SCI) was owner of a real estate good which was rented to another company. The owner accepted the extension of the lease agreeing on the price. The approval was sent by a lawyer who was in fact the son of the legal representative of the SCI who owned the place.

Then the owner tried to state to the tenant that he didn't accept the extension of the lease since this extension hadn't been duly accepted by the legal representative of the Company.

The case went to Court.

The appeal Court of Paris, found that the owner had accepted the extension of the lease and could be engaged by the letters sent by a third party acting apparently both as the owner's lawyer and as the son of the legal representative.

The Cour de cassation approved the Court's of appeal decision. The Cour de cassation ruled that the third party could legitimately appear for the tenant as the owner's representative considering that the third party said he was both the owner's lawyer and the legal representative's son.

This decision shows how French judges determine whether a third party can reasonably appear to one of the parties as a representative.

Article written by Olivier Vibert

Attorney, Paris.

This article has been published on the EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW EJCCL Volume 2, Number 1/2, 2010

Cour de cassation 2nd Civil chamber, September 3, 2009 - Decision N°08-13952 (Torki v. BNP Paribas)

French case law implies the necessity for French banks to provide information and advice when they offer group insurances to their clients.

Most of the banking operations are now accompanied in France with insurance products. When an individual takes a loan, he's usually covered against certain risks by insurances. Usually banks offer to their clients insurance products made by insurance companies from the same group or with special agreements.

In this case the Cour de cassation, defined more closely the scope of the bank's obligations.

A doctor and his spouse subscribed an insurance contract which guaranteed a loan's payment. The Doctor got ill and stopped working being on sick leave.

The Doctor asked the insurance company to cover the monthly payments of the loan.

The Insurance company refused to take in charge the loan and stated that only the death or the absolute and definitive invalidity was covered by the insurance.

The Bank's client undertook litigation against the Bank to try and engage its liability considering the absence of sufficient information when subscribing the insurance.

The Court of appeal of Paris on November 16, 2007 ruled that the Client had already made several real estate investments and operations implying the subscription of similar products. The Court therefore considered that the Client could measure his engagements without a personalized presentation from the Bank to the client on his risks with respect of his personal situation.

The Supreme Court censured this decision. The Supreme Court ruled that the bank's obligation existed even if the Client has experiences in banking or financing operations.

Whatever the level of expertise the Bank needed to provide complete and personalized information for a better understanding of the engagements, opportunities and risks.

Article written by Olivier VIBERT, Attorney / lawyer/ in Paris.

This article has been published to the EUROPEAN JOURNAL FOR COMMERCIAL CONTRACT LAW (EJCCL Vol 2 n°1).

Cour de cassation 1st Civil Chamber, October 14, 2009 - Decision N°08-16369 and 08-16549 (Wolberg v. In zone Brands)

An interesting decision of the Cour de cassation (French civil and Commercial Supreme Court) has been rendered on October 14th 2009, on the compatibility of an American anti-suit injunction procedure with the French public order.

This case concerned a distribution contract between an American Company and a French Company.

IN ZONE BRANDS is a company from the State of Georgia (USA) selling soft drinks and sodas. An exclusive distribution contract had been signed with a French company for the distribution of IN ZONE BRANDS products in Europe. The contract had a jurisdiction clause specifying that the Courts of Georgia (USA) had jurisdiction for any matters concerning the distribution contract. The contract also defined the law of the State of Georgia as the law applicable to the contract.

IN ZONE BRANDS decided to terminate the contract. The French distributor challenged the termination and undertook litigation before the French courts. IN ZONE BRANDS not only challenged the jurisdiction of the French judge but also undertook two actions before the Courts of Georgia.

The Superior Court of Cobb (Georgia) in March 3, 2006 rendered an anti suit injunction forbidding the French company to undertake any actions before the French courts and to pursue the ongoing litigation. The Superior Court of Cobb in the same decision recognized the principle of the supplier's credit.

IN ZONE BRANDS, then undertook to ask the exequatur of the decision of the Superior Court of Cobb in France.

The Court of Appeal of Versailles in April 17, 2008 declared the Georgian decision enforceable on the French territory. The appeal judges found that the supplier had seized the judge designated by the contract and that there couldn't be any fraud in such an action.

The appeal judges then ruled that the decision of the Superior Court of Cobb didn't forbid an access to a judge to the French Company since the Superior Court of Cobb only applied the jurisdiction clause.

The French Company appealed to the French Supreme Court. The Supreme Court confirmed the appeal judge's decision considering that the anti-suit injunction wasn't contrary to the French Public Order when it only consisted in applying a jurisdiction clause and sanctioning a breach of the contract.

The Cour de cassation in this decision took a different position than the European Court of Justice.

The Cour de cassation based its decision on the contractual aspects which is the law of the parties and not the French public Order. As long as the anti-suit injunction is only based on the contract, there shouldn't be any opposition to the public order unless the contract is in breach with the French public Order.

The question raised by this decision is whether the French supreme Court conflicts with the jurisprudence of the European Court of Justice (ECJ) in the West Tankers decision (ECJ February 10, 2009, Case C 185/07 West Tankers).

In this decision the ECJ had ruled that the anti-suit injunctions were not complying with the rules of the European Union and were going against Council regulation 44/2001. The Court clearly stated that :

“ 28 Accordingly, the use of an anti-suit injunction to prevent a court of a Member State, which normally has jurisdiction to resolve a dispute under Article 5(3) of Regulation No 44/2001, from ruling, in accordance with Article 1(2)(d) of that regulation, on the very applicability of the regulation to the dispute brought before it necessarily amounts to stripping that court of the power to rule on its own jurisdiction under Regulation No 44/2001.

29 It follows, first, as noted by the Advocate General in point 57 of her Opinion, that an anti-suit injunction, such as that in the main proceedings, is contrary to the general principle which emerges from the case-law of the Court on the Brussels Convention, that every court seised itself determines, under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it (see, to that effect, Gasser, paragraphs 48 and 49). It should be borne in mind in that regard that Regulation No 44/2001, apart from a few limited exceptions which are not relevant to the main proceedings, does not authorise the jurisdiction of a court of a Member State to be reviewed by a court in another Member State (Case C‑351/89 Overseas Union Insurance and Others [1991] ECR I-3317, paragraph 24, and Turner, paragraph 26). That jurisdiction is determined directly by the rules laid down by that regulation, including those relating to its scope of application. Thus in no case is a court of one Member State in a better position to determine whether the court of another Member State has jurisdiction (OverseasUnion Insurance and Others, paragraph 23, and Gasser, paragraph 48).

30 Further, in obstructing the court of another Member State in the exercise of the powers conferred on it by Regulation No 44/2001, namely to decide, on the basis of the rules defining the material scope of that regulation, including Article 1(2)(d) thereof, whether that regulation is applicable, such an anti-suit injunction also runs counter to the trust which the Member States accord to one another's legal systems and judicial institutions and on which the system of jurisdiction under Regulation No 44/2001 is based (see, to that effect, Turner, paragraph 24).

31 Lastly, if, by means of an anti-suit injunction, the Tribunale di Siracusa were prevented from examining itself the preliminary issue of the validity or the applicability of the arbitration agreement, a party could avoid the proceedings merely by relying on that agreement and the applicant, which considers that the agreement is void, inoperative or incapable of being performed, would thus be barred from access to the court before which it brought proceedings under Article 5(3) of Regulation No 44/2001 and would therefore be deprived of a form of judicial protection to which it is entitled.

32 Consequently, an anti-suit injunction, such as that in the main proceedings, is not compatible with Regulation No 44/2001. ”

The decision of the Cour de cassation could therefore appear as going in another direction than the ECJ.

In fact, the Cour de cassation didn't have to use the European rules since the case opposed a French and an American Company. The matter was International and not within the E.U..

The decision of the Cour de cassation could also prepare a future evolution of the European rules and position. The elected judge could prevail in the future in order to insure sufficient power to the parties in a contract.

By Olivier Vibert, Attorney, Paris, France

Article Published in European Journal of Commercial contract Law.

Réf. Vol. 2 n°1

The qualification of a breach in a contract depends of the type of products and its final use. In a luxury market, it's normal to require perfect products.

Cour de cassation Commercial Chamber, June 30, 2009 - Decision N°08-14944 ( Société TED X. v. Société MBF PLASTIQUES)

A commercial contract was signed between two companies. The contract's object was for MBF to realize parts of high standard perfume bottles. TED realized when the products were delivered that in fact they were badly made and not properly finished.

TED, considering the breach of the Contract, decided to terminate the commercial relations.

MBF established an invoice for the contract which remained unpaid. MBF claimed the payment of the invoice before the French commercial courts. The Court of Appeal of Lyon (21/02/2008) rejected MBF arguments. The appeal judges ruled that the defaults were clearly visible and that MBF knew the products were destined to the luxury market which required perfectly finished products considering the price.

MBF appealed to the Cour de cassation (French civil and commercial supreme Court).The Supreme Court approved the appeal decision. The Supreme Court ruled that the Appeal had correctly qualified the gross misconduct committed by MBF which could justify the unilateral termination of the commercial contract.

The judges therefore analyzed the breach in consideration of the quality which was initially required considering the price of the products and the destination of these products. The judges admit in this decision that a perfume bottle for the luxury market needs necessarily to be perfect.

By Olivier Vibert

This article has been published in the European Journal of Commercial Contract Law.

Réf. : EJCCL Vol 2 n°1

When a commercial agency contract is terminated the commercial agent under French Law can claim indemnities unless he has committed serious negligence.

The French commercial code provides that the commercial agent is obliged to notify his intention of claiming indemnities within a year from the termination of his agency contract.

The Cour de cassation, French civil Supreme Court, in a recent decision has had the opportunity to detail when this delay really started.

Cour de cassation, Chambre Commerciale, 18 January 2011 pourvoi n°09-72510.

A company had terminated the contract of one of its commercial agent. The agency contract ended on February 24, 2006.

One year and three days later, on February the 27th 2007, the former commercial agent delivered a writ of summons to claim indemnities.

The company logically tried to oppose the fact that the commercial agent hadn't notified his intention of claiming indemnities within a year.

Article L 134-12 of the French commercial Code rules that :

If their relationship with their principal ceases, commercial agents shall be entitled to an indemnity for the loss suffered.

Commercial agents shall lose the right to this compensation if they have not notified the principal, within one year of the cessation of the contract, that they intend to use their rights.

The legal successors of commercial agents shall also benefit from the right to compensation when the cessation of the contract is due to the death of the agent.

The Court of Appeal in Bordeaux, maybe keen to give damages to the commercial agent, considered that the contract should have in fact being terminated on the 28th of February and not the 24. The Court of appeal, to do so, in fact interpreted the agency contract which provided a three month prior notice and that delays had ended at the end of February 2006, on the 28th.

In this case the termination had been notified on the 24th of November 2005. The Court of appeal therefore considered that the contract should have ended on the 28th of February 2006 and not the 24th of February.

The Cour de cassation overruled this decision. For the French Supreme Court the starting point for the one year delay is the effective termination of the contract. The Supreme Court doesn't care if the notice delay hasn't been respected. The one year delay doesn't start when the contract should have ended but when it has effectively been terminated.

No matter the prior notice delay, if a contract has ended on the 24th of February 2006, the one year delay starts from this date.

By Olivier Vibert, Attorney / Lawyer, Paris.

Ref.: ENG 2011-02-08

The Commercial Chamber of the Cour de cassation (Supreme Court) rendered a decision on the 7th of April 2009 on road transports. The Commercial Chamber ruled that the person who receives the cargo and accepts it without stating he acts on behalf of the recipient needs to guarantee the payment of the cargo.

Cour de cassation Commercial chamber, 7 April 2009 - Decision N°08-12919 (Sté Transports digoinnais v. Sté Sogeclo)

Several shipments were made from and to the address of a company named Sogeclo.

These shipments remained unpaid. The transporter claimed the payment to the company who was domiciled at the address where the shipments were either sent or received.

The Court of appeal of Douai rejected the transporter's claim. For the Court of appeal, Sogeclo didn't appear as the sender or the receiver on the waybill. Sogeclo only appeared in the waybill's loading or unloading boxes.

The Supreme Court overruled this decision. The Supreme Court's decision is rendered on the grounds of provision L 132-8 of the commercial code which provides that :

The bill of lading shall form a contract between the consignor, the carrier and the recipient or between the consignor, the recipient, the commission agent and the carrier. Carriers shall therefore have a direct claim for payment of their services against the consignor and the recipient who shall act as guarantors for the payment of the transport cost. Any clause to the contrary shall be deemed to be unwritten.

The Supreme Court ruled that even if he doesn't appear as a recipient on the waybill, the person who receives a shipment and accepts it without clearly expressing he acts as a representative of another person shall be a guarantor for the payment of the transport cost.

The Supreme Court applies in this decision its own case law. The person who accepts the carrier needs to state clearly if he only acts on behalf of another company. If not, the Supreme Court rules that the person who accepted the carrier must pay.

Applied to the fact the solution is therefore that Sogeclo will be untitled to pay the transport cost as guarantor. If Sogeclo had expressed acting as a representative, no payments could have been claimed.

Article written by Olivier Vibert and published in the EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW.

EJCCL VOLUME 1 NUMBER 4 2009

A French Court needs to interpret a foreign seucrity such as the “Patronatserklärung” and qualifies this security has a letter of intent with a result obligation to guarantee the reimbursment of the loans.

Court of appeal of Lyon, 4 June, 2009 - Decision N°08-5617 ( Sté Bayerische hypo und Vereinsbank v. Sté Emball'iso)

Bayerische had accepted several outstanding loans to a company named Isopack, the German subsidiary of a French company called Emball'iso. These loans represented an outstanding amount of 800.000 euros. One loan of 200.000 euros was guaranteed by a letter of intent of Emball'iso.

By this letter of intent the holding company guaranteed to the bank that her subsidiary will always be able to respect her engagements of reimbursing the loans monthly. The letters of intent stated that the holding would either act directly or indirectly by giving cash to her subsidiary which would be affected to the loans reimbursement.

The subsidiary was placed under a bankruptcy proceeding. The bank, being unable to obtain the reimbursement of her loans, claimed to the holding in France the payment of her credit.

The holding, Emball'iso argued that she hadn't given a surety engagement and therefore that she shouldn't be entitled to pay the claimed sums.

The French company had clearly not accepted a surety engagement but it had accepted the German “Patronatserklärung”.

The Court of appeal of Lyon defined the letter of intent and then interpreted the holding's engagement as a letter of intent. The court of appeal of Lyon went farer and interpreted the letter of intent as an obligation of result and not as a simple best effort undertaking.

The holding's engagement was clear, it was to guarantee the soundness of her subsidiary. This has been interpreted by the Court as an obligation of result. If the holding's engagement would have been only to try and maintain sound the subsidiary the obligation would have been qualified as a best effort undertaking.

Therefore the fact that the subsidiary became insolvent proved that the Holding hadn't respected her engagements.

For the Court of appeal the holding was liable for the bank's damages, since she didn't respect her result duty. The amount of damages being the amount of her credit.

By this decision, the Court of appeal shows the Judges need to interpret the securities given by a company to try and qualify this guarantee under the applicable Law. The difficulty was in the present case that the guarantee was in fact a German security but that the security was ruled by French law. Therefore the appeal judges needed to qualify the German security under French Law.

Article written by Olivier Vibert and published in the EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW.

EJCCL VOLUME 1 NUMBER 4 2009

A third party cannot be declared liable for the termination of negotiations if its intervention has occured after cleraly after the termination of these negotiations.

Cour de cassation Commercial chamber, 9 June 2009 - Decision N°16.168 (Société Prodim v. Francap distribution)

Prodim had signed a franchise agreement for a small supermarket. The franchisee decided to terminate the contract and sign another franchise agreement with a competitor.

The franchise agreement signed with Prodim had a determined term and should still have run over 2 years.

Prodim had sued the franchisee considering the termination of the franchise agreement was abusive. The franchisee had been sentenced to pay damages by an arbitration court.

Prodim also tried to engage the competitor's liability believing that the new franchiser had participated in the wrongful termination of the franchise agreement.

The Court of appeal of Paris (27, March 2008) had rejected the first franchiser's claim.

The court of appeal ruled that the franchisee had clearly taken its decision to terminate the contract before the opening of negotiations between the competitor and the franchisee.

Since the termination was clear before negotiations started with the new franchiser, no misconducts could be alleged against this new franchiser.

The Cour de cassation, approved the appeal decision. The Supreme Court judges rule that the Court of appeal has correctly justified her decision.

This decision shows perfectly the conditions of a third party's liability. A third party can be declared liable in a wrongful termination of a commercial contract only if he has played a role in this termination.

If the third party has started negotiating before the end of the ongoing contract and before the prior notice has been sent, he can be declared liable if the claimant proves that these negotiations have helped terminating the contract.

This decision also shows that it's not because the negotiations between the new franchiser and the franchisee have been undertaken before the end of the first franchise contract that these negotiations can be automatically be considered as wrongful.

If these negotiations are undertaken after the termination letter has been sent, the decision of terminating the contract by the franchisee has been already taken and therefore the franchiser has lesser chances of being responsible for the contract's termination.

This article written by Olivier VIBERT has been published in the European journal of Commercial Contract Law (EJCCL).

EJCCL VOLUME 1 NUMBER 4 2009

The importance of defining the applicable law is once more illustrated by the French Supreme Court.

Cour de cassation 1st Civil Chamber, 11 February 2009 - Decision N°07-13088 ( Sté Funk International Spa v. Sté Allianz Versicherung)

Interesting decision of the Cour de cassation (French civil Supreme Court) showing perfectly the difficulties encountered by judges who are confronted to a litigation with multiple crossborders commercial relations.

A French Jeweler searched an insurance to insure its activity. It contacted its insurance broker located in France named FAC.

FAC contacted another broker in the United Kingdom named LIIB. LIIB contacted an Italian broker called Funk international who finally presented the risk to a German broker named Funk international GmbH. The German broker has placed the risk to a German insurance company, ALLIANZ.

The Jeweler suffered damages and asked for the insurance to cover the losses. The insurance company refused to pay since the insurance premium had been paid with some delay. The Jeweler claimed the payment in court.

In first instance, the Insurance company has been ordered to pay an indemnity to the Jeweler. The first instance judge applied the French insurance Code to the relation between the insurer and the Jeweler. The Insurance company had asked to be guaranteed by the brokers located in Germany and Italy but it didn't obtain any guarantees from the first instance judge.

The Court of Appeal of Paris overruled partly the first instance judgment. It found that the German and Italian brokers had made an error by not communicating the specific provisions of the insurance contract to the insured client.

The Cour de cassation overruled the Court of appeal's decision. The Supreme Court ruled very classically that the Court of appeal didn't define the law applicable to the contractual relations between the two brokers and the insurance company.

For the Supreme Court, when parties invite the judge to determine the applicable law and when the contract doesn't define the applicable law, the judges need to define the applicable law. The judge then applies the law even if it's a foreign Law with the help of Parties.

This position of the Supreme Court is very classic and is perfectly concordant with its former positions. This decision shows why it's sometimes very helpful to define the applicable law in the contract. It also expresses clearly the judges duties when the applicable hasn't been clearly defined by parties.

This article written by Olivier VIBERT has been published in the European journal of Commercial Contract Law (EJCCL).

EJCCL VOLUME 1 NUMBER 4 2009

The handwritten formality in a surety engagement is an imperative rule which makes the contract automatically void. If the required formality is absent it's impossible to bypass it by interpreting the surety's real intentions with exterior elements.

Cour de cassation Commercial Chamber, 28 April 2009 - Decision N°08-11616 (Le Maner v. Banque Populaire Sud)

French Legislation on surety engagements has tried to protect the individuals who accept to secure a debt by imposing formalities for surety engagements.

The surety engagement needs to handwrite a long sentence which details his engagement and his rights. This mandatory phrase is supposed to inform the surety of the document he's about to sign. The logic when the surety handwrites a 10 lines long sentence, he must be aware of the risks deriving from the surety engagement.

In this case the surety hadn't handwritten the complete and exact sentence. The Court of appeal nevertheless ruled that the surety's will was apparent in the surety engagement and was confirmed by the surety's own pleadings in the procedure by which he recognized his engagement. For the Court of Appeal, it was clear the surety knew the risks and had nevertheless given a clear engagement.

The Surety appealed to the Cour de cassation (French Civil Supreme Court) who overruled the Court of Appeal's decision. For the Supreme Court the surety engagement is null if the act doesn't have the handwritten mention required by Law.

For the Supreme Court since the handwritten mention wasn't complete the surety's engagement was null.

The Supreme Court therefore refuses to consider this special formalism has a pure formal rule. Formal rules only make the contract void if the violation of the rule has caused prejudice to the claimant. If the handwritten formality for individual sureties had simply been a formal rule, then the surety wouldn't be automatically void. In such a situation the surety would have had the burden of proof to demonstrate that he's engagement derived from the absence of the complete handwritten sentence.

But the Supreme Court considers that the handwritten formality is an imperative rule which makes the contract automatically void. If the required formality is absent it's impossible to bypass it by interpreting the surety's real intentions with exterior elements.

Creditors will have to be very cautions when signing such an engagement. The handwritten formality must be strictly respected otherwise the engagement would have great chances of being declared null by judges.

Article Written By Olivier VIBERT and published on the EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW or EJCCL.

Cour de cassation Commercial chamber, May 14, 2009 - Decision N°07-17568 (X v. Banque Populaire du Nord)

A Bank had made a loan to Mr Y to finance an electoral campaign. The loan was secured h by a surety on Mr X, who was the second person on the electoral list.

The bank had added in the surety contract a special clause by which the surety made the following declaration:

“I recognize (the surety) to take my surety engagement with a perfect view on the financial and legal situation of the debtor, and that, in my own interest, I'll personally have to follow the company's evolution, independently from the information that the bank could eventually provide.”

The campaign didn't go as planned, the main debtor went bankrupt and the bank claimed the debt against the surety.

The surety claimed the surety was null his consent being obtained by retaining information on the financial situation of the main debtor.

The Court of appeal of Amiens (3, May 2007) ruled the surety engagement wasn't null. The Court of appeal found that the surety didn't prove that his consent had being obtained by deception. The Court of appeal stated that the clause added to the contract made more difficult the proof of the existence of deception since the surety recognized he had been informed of the main debtor's situation.

The Surety appealed to the Cour de cassation (French civil Supreme Court). The Question raised to the Supreme Court was whether a clause could relieve the Bank from its obligation to inform the surety of the financial situation of the main debtor.

The Supreme Court (1st civil Chamber) clearly stated that a contractual clause couldn't free the bank from its duty to inform the surety.

The Supreme Court with such a position protects the surety from contractual attempts to diminish the bank's duties in such operations. The bank's duties are imperative rules which cannot be contractually modified. This is reaffirmed very clearly by the Supreme Court.

Article written by Olivier Vibert

Published in the EUROPEAN JOURNAL OF COMMERCIAL CONTRACT LAW.