Business Contracts

In the Civil Code, the consequences of an agent exceeding his or her authority were initially set out only in Article 1998, paragraph 2, according to which the principal is bound to perform the commitment entered into by the agent, beyond the powers given to him or her, “only insofar as he or she has ratified it expressly or tacitly”. Then, in 2016, the reform of contract law introduced, within th …

Exceeding of authority by agent

In the Civil Code, the consequences of an agent exceeding his or her authority were initially set out only in Article 1998, paragraph 2, according to which the principal is bound to perform the commitment entered into by the agent, beyond the powers given to him or her, “only insofar as he or she has ratified it expressly or tacitly”. Then, in 2016, the reform of contract law introduced, within the Civil Code, general provisions relating to representation, including Article 1156, which regulates the excess of powers (as well as the lack of powers), according to a different regime from that established by case law in application of the provisions of Article 1998. 

An agent overstepping his or her authority raises the question of the scope of the agency agreement . An agent who, having received a power of attorney to administer an estate, limited to acts of management strictly indispensable to its preservation, leases it out, is exceeding his authority . The same applies to the project owner, whose architect's agreement only entrusted him with the task of checking the accounts submitted by contractors and subcontractors, and submitting proposed settlements to the project owner, who then approves them , or to the judicial commissioner, entrusted with the task of selling a classic car at the reserve price, who auctions it off at a lower price . A real estate agency which draws up a promise to sell which differs from the conditions of sale listed in its exclusive agency agreement also exceeds its powers, so that a court of appeal cannot order the seller to pay it the amount of the penalty clause stipulated in the event of refusal to sign an offer which conforms to the agency agreement, on the grounds that the agency's proposal deviated from it only on secondary points . Similarly, an agency agreement, which authorizes the agent, in general terms, to enter into any commitments or guarantees, does not give the agent the power to prohibit or restrict the use of the family name by the principal, which would constitute an act of disposal . In order to remove any doubts that third parties may have as to the scope of the representative's powers, the reform of contract law incorporated an interrogatory action (action interrogatoire) in Article 1158 . 

With regard to the rules governing the exceeding of authority , it has been consistently held, in application of Article 1998, that in the event of the agency agreement being exceeded, the principal is not bound by the undertakings entered into by the agent. The bank's completion of a purchase order after it has lapsed does not bind the principal . Even if a mother has received from her daughter a power of attorney over her bank account, she has not received an agency agreement to contract or guarantee her loans, so that the latter cannot be required to repay the sums borrowed by her in her personal capacity . Similarly, a loan taken out in the name of a company in formation by a managing partner cannot be considered as having been taken out under a valid agency agreement, which can only be issued to a partner or to a manager who is not a partner, so that it does not bind the guarantor, who cannot guarantee the debt of a person other than the intended debtor . However, if the agency agreement is exceeded, the principal remains liable for everything performed in accordance with the agreement .

However, the courts have been hesitant when it comes to sanctioning the exceeding of authority. They have held that, where the agent has exceeded his or her authority by acting in concert with a third party in bad faith, the principal can sue for invalidity of the deed . However, the question arose as to the nature of the invalidity - absolute  or relative - applicable to the principal: case law opted for relative invalidity, which means that it can only be invoked by the principal. Under the combined provisions of Articles 1984 and 1998 of the Civil Code, any irregularities affecting the contractual representation of a party, whether in the form of invalidity of the agency agreement, exceeding or absence of authority, are sanctioned by the relative invalidity of the act performed on behalf of the represented party, who alone may invoke it . It has also been held that the principal has a right of action for the unenforceability of a transfer of shares implemented by his agent by exceeding the powers of his general management mandate .

Article 1156 of the Civil Code now states: “An act performed by a representative without authority or in excess of his authority may not be invoked against the principal, unless the contracting third party legitimately believed in the reality of the representative's authority, in particular by reason of the principal's conduct or declarations. If the third party was unaware that the act was performed by a representative without or in excess of his powers, he may seek invalidity. Neither the act's invalidity nor its unenforceability can be invoked once the principal has ratified it”. 

The draft reform of contract law incorporates both the provisions of Article 1998 and those of Article 1156, stating: “The principal is bound to perform the undertakings contracted by the agent, in accordance with the authority given to him. An act performed by an agent without authority, or in excess of his authority, cannot be relied upon against the principal, unless the contracting third party has legitimately believed in the reality of such authority, as set out in Article 1156. If the principal expressly or tacitly ratifies the deed, it binds him from the day of its conclusion”. 

See also Cass. com. 13 June 1995, LawLex202200011476JBJ, noting that, although the mandate given by the account proprietor to the intermediary was general as to the transactions to be carried out, it excluded conditional transactions and short sales, so that, as a result of these restrictions, the brokerage firm should have checked whether the transactions requested complied with the agency agreement.

Cass. 1re civ, 18 November 1964, LawLex202300013712JBJ.

Cass. 1re civ, 26 January 1999, LawLex202200008852JBJ, noting that the plaintiffs were liable to the bank only in respect of their commitment as mortgage guarantors, limited to the property described in the deed, without being bound by clauses exceeding the agency agreement.

Cass. 3e civ, 15 April 1980, LawLex202100003218JBJ, stating that a lease contract entered into by an agent in breach of a clause contained in his power of attorney is absolutely invalid, since this clause was a decisive factor for the principal's consent.

CA Nancy, 27 January 2022, LawLex202300008845JBJ.

Cass. com. 11 March 2014, LawLex202300013715JBJ, previously, Cass. ass. plén. 28 May 1982, LawLex202300013714JBJ, stating that an emancipated minor alone has the capacity to sell his undivided share in the immovables which depend on the succession, so that the disposal granted by a person who no longer had the capacity to represent him cannot be invoked against him.

Cass. 3e civ, 11 January 1995, LawLex202300013713JBJ. 

Cass. 1st civ. 25 June 1996, LawLex202300013716JBJ.

Cass. 1re civ. 2 December 1992, LawLex202200008524JBJ.

Cass. com. 10 July 2018, LawLex201800001105JBJ.

Civil Code, Art. 1158: "A third party who doubts the extent of the authority of a contractual representative in connection with a deed which he is about to conclude, may ask the principal in writing to confirm, within a time-limit which he fixes and which must be reasonable, that the representative is authorized to conclude this deed.

The document must state that in the absence of a reply within this time-limit, the representative is deemed to have the authority to enter into the deed". 

Cass. com. 26 March 2008, LawLex202200008732JBJ.

Cass. 1re civil, 30 September 1997, LawLex202300012076JBJ

Cass. 1re civ, 2 October 2002, LawLex202200003650JBJ. See also Cass. com. 9 October 2007, LawLex202200003653JBJ, holding that an assignment of a professional debt accepted by three of the four founders of companies in formation does not commit the latter, once incorporated, in the absence of a resumption of the commitment in accordance with one of the three methods provided for by the applicable regulatory provisions.

Business Contracts

501. Exceeding of authority by agent

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501. Exceeding of authority by agent

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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