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Contractual termination clause and sudden termination of established business relationships

Contractual termination clause and sudden termination of established business relationships

A succession of contracts can be established business relationships. A termination clause of right does not preclude application of the provisions of Article L 442-6 -I- 5 of the French Commercial Code on the sudden termination of established commercial relationship. On the occasion of a judgment of 12 September 2013, the Paris Court of Appeal had to decide a case between a brokerage firm and an energy supplier which had entered into three successive brokerage contracts, the brokerage invoking the legal provisions relating to the sudden termination of established commercial relationships. The contracts between the parties were signed respectively on 4 February 2008, Feb. 9, 2009 and June 2, 2009 and each included a trial period of 4 months. The third contract was terminated by the energy supplier on December, 2nd 2009 on the ground that the other party had not realized minimum targets. A brokerage contract’s clause provided a minimum target and the automatic termination of the contract if this goal was not achieved. A 30-day notice was also provided in case of termination. After termination of the contract, the brokerage company sued his former partner for unlawful termination of established commercial relationships. The Paris Commercial Court rejected this request, forcing the company to appeal. The Paris Court of Appeal held that the termination was unduly sudden. This judgment of the Paris Court of Appeal is interesting because it re-stokes the criteria for assessing the recognition of sudden termination of established commercial relationships, more particularly on two points. First, the decision returns to the criteria of established business relationships. The energy supplier argued that established business relationships could not be found here because these relationships consisted of a series of contracts with fixed terms and a substantial trial period for each. The Paris Court of Appeal did not follow this reasoning because the precarious relationships could not be accepted because “the parties [had] worked continuously and permanentlyfor 2 years. The established commercial relationships therefore existed, “regardless of whether it is through three contracts, because they have succeeded without interruption, characterizing stable, usual and sustainable commercial relationships.” This solution is in line with the French High Court’s judgment of 15 March 2009 which had held that “the characterization of commercial relationships within the meaning of Article L.442 -6- I- 5 of the French Commercial Code is not subject to the existence of a permanent and continuous exchange between the parties and a series of contracts may be sufficient to characterize an established business relationship” (Cass Com. September 15, 2009, n°08-19200). In this case, the succession of three contracts did not therefore prevent qualifying the relationships between the parties as established business relationships. The second interesting point in this judgment concerns the interaction between a termination clause and application of the legislation on the sudden termination of established commercial relationships. In this case, the Court of Appeal noted that Article L 442-6 -I- 5 of the Code de Commerce on the sudden termination of established commercial relationships is of public order and therefore, the presence of a termination clause in the contract can’t prevent its application. Therefore, “the judge is not bound by the notice and can hold, firstly, the existence of a breach by either party of its obligation, and secondly, if the duration is sufficient or reasonable“. This judgment is consistent with two judgments of the French Supreme Court which held that the existence of a termination clause in a contract does not prevent the courts from determining compliance with the legal provisions on the sudden termination (Cass Com January 16, 1996 , No. 93-16257 ; Cass Com 9 July 2013 , No. 12-21001). Finally, in the case under discussion, the Paris Court of Appeal found that there was a failure because the broker had not reached the minimum targets set out in the contract. However, because of the two years established business relation between the parties, the Court of Appeal then held that the contractual notice period of 30 days was too short. Reasonable notice was then determined by the judges as being 4 months. The Paris Court of Appeal ordered the energy supplier to pay damages for unlawful termination of established commercial relationships, for failing to respect an adequate notice.

CABINET FOUSSAT, Société d’Avocat, PARIS / BRUXELLES
contact@cabinetfoussat.com – Tél. : +33 (0)1 45 74 64 65bruxelles@cabinetfoussat.com – Tél. : + 32 (0)2 318 18 36
 

tags: contrats successifs, relation commerciale établie, rupture brutale