The termination of commercial contracts is notoriously tricky. Whether it takes place behind-the-scenes, during the initial negotiations or a posteriori in front of a judge, disputes between co-contracting parties tend to amalgamate around this central point of concern.
The French Code of Commerce has codified the laws surrounding the practices of conducting an abrupt and abusive termination of established commercial contracts (Art L442-1 : link to https://www.legifrance.gouv.fr/codes/article_lc/LEGIARTI000038414278/2019-04-26/). Article L442-1 of the Code of Commerce sets out the country’s specific legal provisions in regards to the necessary conditions for terminating an established commercial relationship. There are straight-forward notice periods set out in these regulations, as well as notable limitations regarding rules of EU Competition law.
Wrongful or abusive termination of established commercial contracts are regulated by the principle of appropriate notice. These provisions do not intervene however in situations of breach of contract or of force majeure.
Before entering into a commercial contract in France you will want to spend a decent amount of time studying the specifics of the French Code of Commerce (link: https://www.legifrance.gouv.fr/codes/article_lc/LEGIARTI000038414278/2019-04-26/).)
What constitues a wrongful or abrupt termination of commercial contracts under French law?
The abusive or abrupt nature of the termination of the contract is typically measured in respect to the duration of the commercial contract itself. The relationship between parties is considered in respect to the duration of its prior-success. A party that has failed to notify in due-time its co-contractors of its willingness to terminate their agreement is likely to be found guilty of abuse under Article L442-1 of the French Code of Commerce. The notice to terminate the commercial relationship must be formally sent out (ex: a termination letter).
An abusive termination of commercial contracts covers the total and partial termination of the relationship between parties. Under French law, the partial termination of the commercial contract may take on the shape of either a severe reduction in business-ties or say, a drastic change in prices.
When looking into declaring a wrongful termination of a commercial contract, the judges are seized on the key question of the notice period. They are asked to look into elements related to the nature of the field, the financial impacts of the contract, the exclusivity of the relationship etc…
What recourse do you have against an abrupt or wrongful termination of a commercial contract?
The First, open summary proceedings
Second, you may choose to open ordinary civil proceedings
See our guide to dispute resolution in France (link: https://novlaw.eu/a-thorough-review-of-french-dispute-resolution-and-debt-collection-procedures/)
Lastly, you may have a case to plead for damages.
What are the sanctions set up within the French Code of Commerce in cases of an abrupt termination of commercial contracts?
- the judge may declare the entire contract null and void
- the judge may decide to declare only the ‘wrongful’ elements null and void
- the judge may seek reparations through damages
There is an additional possibility, rarely practiced in France, of the Finance Minister imposing a civil fine on the party found at fault.
An alternative model in the case of an abrupt termination is the pursuit of a continued commercial relationship. The wronged party can request the continuation of the business relationship through the reestablishment of the expected orders and deliveries undergone with their defaulting partner. This tactic is typically done through summary proceedings.
The overall takeaway for business undergoing wrongful or abrupt termination of established commercial contracts in France is to always pay special attention to the appropriate or adequate notice given by the co-contracting party.
If you or your business is currently going through a wrongful termination of a commercial contract with a French company, reach out to our team at firstname.lastname@example.org or directly at Baptiste Robelin email@example.com