Business Contracts

Since the reform of contract law, invalidity has been dealt with in a separate subsection of the Civil Code. Under the terms of Article 1178, paragraph 1, of the Civil Code, a contract which does not meet the conditions required for its validity is invalid. According to Article 1583, for a contract of sale to be valid, the parties must agree on the thing and the price, and for a contract in genera …

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Since the reform of contract law, invalidity has been dealt with in a separate subsection of the Civil Code. Under the terms of Article 1178, paragraph 1, of the Civil Code, a contract which does not meet the conditions required for its validity is invalid. According to Article 1583, for a contract of sale to be valid, the parties must agree on the thing and the price, and for a contract in general to be valid, under Article 1128, the parties must have the capacity to contract and their consent, and the contents must be lawful and certain .

In application of Article 1583, invalidity sanctions the indeterminacy of the price  or of the thing sold. Thus, a sale whose subject-matter has not been previously determined by a technical plan, accepted by the purchaser, which takes into account the configuration of the premises, is void for lack of agreement on the thing sold . Similarly, a mistake concerning the very object of the sale, more specifically the designation of the property sold, will result in the annulment of the sale  , even if inexcusable . 

In accordance with Article 1128, in addition to the buyer's  or seller's lack of legal capacity to contract, the contract of sale is subject to invalidity in the event of the unlawfulness of the object sold. For example, the sale of a plot of land that turned out to be part of the département's inalienable public domain, rather than its private domain, must be invalidated . The same applies to the sale of a file containing personal data, considered to be unmarketable because it had not been declared to the French data protection authority, the CNIL . On the other hand, the transfer of a profession's clientele is not in principle unlawful, and is therefore not liable to annulment on the grounds that it is outside the scope of trade .  

The consent of the parties, when vitiated by a mistake as to the essential qualities of the thing sold, duress , fraud  or fraudulent concealment , also leads to the invalidation of the contract of sale. The seller's failure to comply with his pre-contractual obligation to provide information and advice may also lead to annulment, insofar as it is the cause of a defect in consent .

Article 1178 goes on to state: “Invalidity is declared by the court, unless the parties agree otherwise. The annulled contract is deemed never to have existed. Any services rendered must be returned in accordance with the conditions set out in Articles 1352 to 1352-9. Irrespective of the annulment of the contract, the injured party may claim compensation for the damage suffered under the conditions of ordinary civil law relating to extra-contractual liability” . 

In application of Article 1179, which classifies the invalidity of a contract as absolute, when it sanctions the infringement of a rule designed to safeguard the general interest (ordre public de direction), and relative, when the infringed rule is designed to safeguard a private interest (ordre public de protection), the Court of Cassation has held that actions for invalidity of transfers of shares concluded for an indeterminate or low price, which are intended to protect the private interests of the transferors, fall within the scope of actions for relative invalidity and are time-barred after five years . The same applies to vitiated consent, which, under the terms of Article 1131, is a cause of relative invalidity of the contract. Given its relative nature, invalidity may be invoked by the victim alone, and the vitiated contract of sale may be subject to reconfirmation .

Where the contract of sale is indivisible , i.e. closely related to another contract, its invalidation also entails the voiding of the second contract  (Art. 1186, para. 2, Civil Code).

In the 1804 Civil Code, “a lawful cause in the obligation” was one of the conditions of validity of agreements required, on pain of invalidity, by former Article 1108 of the Civil Code. The reform of contract law removed any reference to the notion of cause, which was ignored in foreign law, including European law, and gave rise to a great deal of litigation and academic debate.

Cass. com. 22 March 2016, LawLex202200000811JBJ.

Cass. 1re civ, 30 September 2010, LawLex201200001273JBJ: fraud is a cause of invalidity of the agreement only if it emanates from the party towards whom the obligation is contracted; Cass. 1re civ, 22 June 2004, LawLex200500007325JBJ; the buyer, the victim of fraudulent tactics on the part of the seller with the sole intention of extracting a large sum of money, is entitled to request the invalidiation of the contract, the fact that the buyer himself acted in the expectation of realizing an unjustified material profit being irrelevant. 

To be a cause for invalidity, fraudulent non-disclosure must be intentional, Cass. com., 10 February 2015, LawLex202200002655JBJ.

Cass. 1re civ, 3 April 2002, LawLex200800001451JBJ: the contract of sale must be declared invalid when the buyer's mistake was caused by the seller's failure to meet his obligation to provide information and advice. Reiterating this principle on the basis of new Article 1112-1 of the Civil Code, See CA Versailles, 3 January 2022, LawLex202200003403JBJ: the invalidity referred to in Article 1112-1, paragraph 3, of the Civil Code can only be imposed when the breach of the pre-contractual obligation to provide information is the cause of a defect of consent, in particular if it has caused a mistake in accordance with Articles 1132 to 1136, or if it constitutes fraudulent non-disclosure within the meaning of Article 1137.

For an application in matters of fraud, see Cass. 3e civ, 29 November 2000, LawLex200400003634JBJ: the seller of a property who not only fails to disclose the prefectoral ban on living in the property sold, but on the contrary declares in the deed of sale that there are no legal or contractual restrictions on its free disposal, commits fraud, which justifies annulment of the sale and the award of damages.

Cass. com. 14 February 1995, LawLex202300006258JBJ.

Cass. 1re, 1 July 1997, LawLex202200006912JBJ: the annulment of the contract of sale of a broadcasting company results in the invalidity of the loan agreement which was concluded on the same day and before the same notary, since this circumstance proves that the two contracts are closely linked and that the parties intended to make the existence of the loan conditional on the implementation of the sale for which it was concluded, so that the two contracts have a single cause.  Cf. Cass. com. 15 March 1994, LawLex202300006258JBJ: unless there is a cause of invalidity directly affecting the leasing agreement, the latter can only be terminated as a consequence of the cancellation of the contract of sale.

Cass. 1re civ, 3 March 2011, LawLex201500001304JBJ.

Cass. 3e civ, 21 May 2008, LawLex202300003433JBJ.

Cass. 3e civ, 16 December 2014, LawLex201500000422JBJ.

Cass. 3e civ, 17 February 2010, LawLex202200008409JBJ, for a party who, not fulfilling the conditions of standing required to exercise his right of pre-emption, concluded a sale, which must therefore be annulled.

Cons. d'Et., 1 March 1989, LawLex202200000990JBJ: the sale of a plot of land which turns out to be part of the département's public domain and not its private domain, must be annulled because it contravenes the principle of the inalienability of the public domain.

Cass. com. 25 June 2013, LawLex202200000410JBJ.

Cass. com. 24 September 2003, LawLex202200000045JBJ.

Cass. 3e civ, 29 April 1998, LawLex202200001275JBJ, specifying that in order to justify the annulment of a contract of sale, duress implies moral constraint such as to deprive the victim of consent.

Business Contracts

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244. What is covered ?

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