Business Contracts

When the sale involves real estate, the transfer of ownership is enforceable against third parties only after publication of the title deed in the real estate register . Third parties are kept informed through the land registry system, which is governed by Decree No 55-22 of 4 January 1955 reforming the land registry system. Article 30 of this decree stipulates that deeds and court rulings subject to publication, if they have not been published, cannot be enforced against third parties who, in respect of the same property, have acquired, from the same party, competing rights by virtue of deeds or rulings subject to the same obligation to publish, or who have registered liens or mortgages. They are also unenforceable, if they have been published, when the deeds, judgments, liens or mortgages invoked by these third parties have been previously published .  There is an exception to this principle. Third parties cannot rely on it if they themselves were charged with publishing the competing rights.

Initially, the Court of Cassation took the view that acquiring a property with knowledge of its previous transfer to a third party constituted a fault, and ruled out the possibility of the second purchaser availing itself of the rules governing land registration . In effect, the Court held that the second purchaser was acting in bad faith in acquiring the property in full knowledge of the facts  . However, it held that a private deed of sale, which is not subject to publication, could not be validly invoked against a purchaser of the same property who had produced a subsequent authentic deed of acquisition from the same person , since the conflict between successive purchasers had to be settled, by virtue of the principles of land registration, through the first priority rights of publication of the deed of acquisition, unless it could be proved that the second purchaser had knowledge of the first sale . The courts were required to ascertain whether the deed of the second sale had effectively realized a binding sale, and whether, at the date of the deed, the second purchaser was aware of the first sale . In effect, in the absence of knowledge of the second sale, bad faith was ruled out . The Court of Cassation then returned to the question of bad faith. It established the principle that an unpublished bilateral promise of sale is not enforceable against a second purchaser of the same property who has had his title deed published, even if he was aware of the sale . The second purchaser's bad faith is irrelevant, since the unpublished promise cannot be enforced against him or her .

On the contrary, Article 1198, paragraph 2, of the Civil Code, as amended by Ordinance No 2016-131 of 10 February 2016, places the purchaser's good faith at the heart of the system. It stipulates that when two successive purchasers of rights over the same property hold their title from the same person, the one who was the first to publish his title deed in authentic form in the real estate register is preferred, even if his right is subsequent, provided he is in good faith. In its latest rulings, however, the Court does not seem to have complied with the provisions of the text, as it continues to declare the sale of an unpublished plot of land unenforceable against third parties, and in particular the second purchaser, without it being necessary to ascertain whether he was aware of the existence of competing rights  .

In the case of successive sales of tangible property, the person who first took possession of the property is considered to have priority, under the terms of article 1198, paragraph 1, of the Civil Code, even if his right is subsequent, provided he is acting in good faith . Otherwise, the adage prior tempore, potior jure (first in time, greater in right.) will apply. The solution is also enshrined in Article 2276, according to which, in the case of movable property, possession is equivalent to title, and which authorizes a person who has lost or from whom something has been stolen to claim it for three years from the date of the loss or theft, against the person in the possession of whom he finds it. Only possession without vitiation by the sub-purchaser himself, or by another person, vests title in the sub-purchaser, which is an obstacle to the claim .

For intangible assets such as industrial property rights , the transfer is enforceable only after publication with the Institut National de la Propriété Industrielle. By virtue of Article 1865 of the Civil Code, the transfer of shares is enforceable against third parties only after completion of specific formalities and publication in the Trade and Companies Register . On the other hand, certain intangible assets, such as the assignment of receivables , are not subject to any publication formalities.

For a recent example, see Cass. 3e civ. 8 February 2023, LawLex202300008420JBJ.

CA Versailles, 8 March 2022, LawLex202300008759JBJ.

Cass. 3e civ, 4 October 2018, LawLex202200002716JBJ.

This article reproduces, in a different formulation, the position taken in former Article 1141 of the Civil Code, which provided that “If the thing which one is obliged to give or deliver to two persons successively is purely movable, the one of the two who has been put in real possession of it is preferred and remains the owner, even if his title is later in date, provided however that possession is in good faith”.

Cass. com, 11 May 1993, LawLex202200000593JBJ, holding that the enforceability of a retention of title clause against third parties is not subject to a publication requirement; 5 March 1996, LawLex202100001721JBJ.

See in particular Art. L. 714-7, para. 1, IP Code, for the assignment of a trademark, which specifies that it is enforceable, prior to registration, against third parties who acquired rights after the date of the assignment and who were aware of the assignment at the time of acquisition of such rights, or Art. L. 613-9, para. 1, IP Code, for a patent, which also stipulates that the assignment is enforceable against third parties who acquired rights after the date of this act but were aware of it at the time of acquisition of these rights.

Civil Code, Art. 1865: "The transfer of shares must be recorded in writing. It is enforceable against the undertaking in the form provided for in Article 1690 or, if the bylaws so stipulate, by transfer to the undertaking's registers.

It is enforceable against third parties only after completion of these formalities and after publication in the Trade and Companies Register".

Civil Code, Art. 1323: “Between the parties, the transfer of a present or future claim takes place on the date of the deed. It is enforceable against third parties from that moment. In the event of a dispute, proof of the date of the transfer lies with the transferee, who may prove it by any means”.

Cass. 3e civ, 30 January 1974, LawLex202200000150JBJ; CA Rouen, 12 January 2011, No 09/04254

Cass. 3e civ., 10 November 1982, LawLex202300003174JBJ, which emphasized that when the sale of a building had been executed in breach of the rights of the beneficiary of a bilateral promise of sale previously entered into, it was appropriate to set aside the rules of land registration, which make it enforceable against third parties, and to allow the beneficiary's action for rescission of the disputed sale and enforcement of the promise.

Cass. 3e civ, 13 March 1974, LawLex202300008418JBJ.

Cass. 3e civ. 28 May 1979, LawLex202200002715JBJ.

Cass. 3e civ, 22 May 1990, LawLex20220000000913JBJ.

Cass. 3e civ, 4 January 2006, LawLex202200002724JBJ.

Cass. 3e civ. 10 February 2010, LawLex202200000148JBJ,

Cass. 3e civ, 19 June 2012, LawLex202200002570JBJ; 12 January 2011, LawLex202200000149JBJ.

146. Sale of real estate and movable property