Business Contracts

Pursuant to Articles 1145 and 1146 of the Civil Code, resulting from the reform of contract law, all natural persons have the capacity to contract, with the exception of non-emancipated minors and legally-protected adults. Legal entities, on the other hand, have a limited capacity, which depends on the rules applicable to each of them (Art. 1145, para. 2). Article 1147 provides for relative invali …

Capacity to contract

Pursuant to Articles 1145 and 1146 of the Civil Code, resulting from the reform of contract law, all natural persons have the capacity to contract, with the exception of non-emancipated minors and legally-protected adults. Legal entities, on the other hand, have a limited capacity, which depends on the rules applicable to each of them (Art. 1145, para. 2). Article 1147 provides for relative invalidity in the event of incapacity to contract. As far as the principal is concerned, he or she must not only have the capacity to grant power of attorney, considered as an act of management , but also the capacity to conclude the deed for which he or she has granted power of attorney to the agent. A principal wishing to sell a property must have the capacity to dispose of it. For example, the manager of a non-trading property company (société civile immobilière or SCI) may not enter into a bilateral agreement to sell a property if he or she does not have the power to dispose of the property under the company's articles of association. Similarly, as the Public Treasury cannot endorse bills of exchange, either as a banking transaction or on an occasional basis, there is no way for anyone to act as its agent for such a commitment .

For the agent, it is sufficient to have the capacity to receive power of attorney, noting that according to Article 1990 of the Civil Code, even an unemancipated minor can be an agent. The agent is also subject to a special disqualification under Article 1596 of the Civil Code, which applies generally to public auctions, but whose scope of application has been extended by case law, and according to which agents may not, on pain of invalidity, either by themselves or through intermediaries, make themselves the purchasers of the goods they are commissioned to sell. According to the Court of Cassation, the prohibition on buying in Article 1596 of the Civil Code, which does not require, for its application, that the agent has received the power to bind his principal to a purchaser, applies whenever the purpose of the agency agreement, even if only as an intermediary, is the sale of a property , and even if the sale is made at the price fixed by the principal . Thus, a court of appeal cannot hold that the undertaking is not the purchaser of the property, but that this purchaser is another legal entity, even if they both have the same manager, without investigating whether the undertaking had not acquired, through an intermediary legal entity, the property it was commissioned to sell . Similarly, under Article 1596, a sale made to the beneficiary of a general power of attorney from the vendor, notably to sell her real estate, is void for the sole reason that it was made during the term of the agency agreement . 

Since the reform of the law of obligations, this principle has been incorporated into Article 1161, which stipulates that for the representation of natural persons, a representative may not act on behalf of several parties to the contract in conflict of interests  or contract on his or her own behalf with the principal.

Art. 1988, para. 1, Civil Code: “The agency agreement conceived in general terms covers only administrative acts.”

Cass. com. 24 February 1998, LawLex202300011998JBJ.

Cass. 1re civ, 13 April 1983, LawLex202300011778JBJ.

Cass. 1re civ. 27 January 1987, LawLex202300011777JBJ.

Cass. 3e civ, 2 July 2008, LawLex202300011775JBJ.

Cass. 1re civ, 12 December 2000, LawLex202300011774JBJ. 

This law goes against case law which permitted a real estate agent to hold both a seller's and a buyer's agency agreement for the same transaction, see e.g. Cass. 1re civ. 9 April 2015, LawLex202300011779JBJ.

Business Contracts

471. Capacity to contract

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471. Capacity to contract

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise