Business Contracts

The reason for carrying out a transaction classified as an exchange rather than a sale may lie in the desire to avoid a right of pre-emption. Avoiding the classification of a transaction as a sale thus makes it possible to avoid the application of its rules, which, while serving as a reference to those of an exchange, differ in a number of respects. 
Under Article 1707 of the Civil Code , the lega …

Legal regime

The reason for carrying out a transaction classified as an exchange rather than a sale may lie in the desire to avoid a right of pre-emption. Avoiding the classification of a transaction as a sale thus makes it possible to avoid the application of its rules, which, while serving as a reference to those of an exchange, differ in a number of respects. 

Under Article 1707 of the Civil Code , the legal status of an exchange agreement is modelled on that of a contract of sale. However, the legislator has decided to exclude the possibility of rescission for injury for inadequate consideration (lésion) in the case of an exchange . Since rescission for injury punishes an incorrect estimate in setting the price, this exclusion is naturally justified by the fact that, in principle, the exchange does not include a price. It is also consistent with Article 1168 of the Civil Code, as amended by the reform of contract law, which states that equivalence of performance is not a condition of validity of the agreement, except where special laws allow for injury for inadequate consideration .

Since, under Article 1703, an exchange is effected by consent alone, in the same way as a sale, it follows that the consent of the parties or “co-principals” to an exchange agreement is subject to the same requirements as in the case of a contract of sale. Where a condition for the formation of an exchange contract is lacking, the agreement may be declared invalid, the action for invalidity being subject to the five-year limitation period under ordinary law . Under the terms of Article 1112-1, “a party who is aware of information the importance of which is decisive for the consent of the other party must inform him of it if the latter is legitimately unaware of the information or has confidence in the other party”. The duty of pre-contractual information owed by each party may not relate to “an estimate of the value of the service”, and failure to observe it may result in the annulment of the agreement under the conditions set out in Articles 1130 et seq. As in the case of a sale, the parties' consent relates to a thing, which must be lawful and certain. In addition, the theory of vitiated consent  applies to contracts of exchange, which may be declared null and void in the event of mistake , fraud  or duress.

Furthermore, it is clear from the reference in Article 1707 of the Civil Code relating to the exchanges that the rules applicable to the warranty against latent defects in the thing sold are applicable . Consequently, an exchange can be rescinded on the basis of Articles 1641 et seq. of the Civil Code . Where the property exchanged cannot be returned in kind, the other party should be ordered to pay compensatory damages and to return the value of the property exchanged . Article 1646 of the Civil Code provides that if the seller was unaware of the defects in the thing, he will only be liable to pay restitution of the price and reimbursement to the buyer of the costs incurred by the sale. According to the Court of Cassation , since the costs occasioned by the exchange, within the meaning of Article 1646, are expenses directly linked to the conclusion of the agreement, the other contracting party in good faith is not obliged to reimburse the costs of expert appraisal and the immobilization of the exchanged vehicle, which is subject to defects.

The comparable nature of the regime of exchange to that of sale also implies that the obligation of delivery in conformity is imposed on the co-principals . The co-principals must deliver a thing that conforms to the characteristics agreed between the parties at the time of the exchange . Thus, despite the stipulation of a pollution clause in the deed of exchange, the undertaking that exchanged a parcel of land on which it operated a service station for the distribution of fuel, with another undertaking, which resold it to another which, in turn, leased it to a fourth undertaking, incurred liability for non-conformity, on the one hand on a contractual basis, towards the sub-purchaser, and on the other hand in tort, towards the lessee, by delivering a polluted plot of land . In addition, the termination of the contract of exchange for breach of the obligation to deliver goods in conformity with the contract, which in principle implies the return of the goods by each of the parties, may however be settled in damages when, in addition, the co-principal is dispossessed of the goods received in exchange through their resale to a third party . The warranty against dispossession (garantie d'éviction), although adapted, since in the case of an exchange there is no payment of a price, nevertheless applies to exchanges. Under Article 1705 of the Civil Code, a party who is dispossessed of the thing he has received in exchange has the choice of claiming damages or repurchasing the object. As in the case of a sale, the parties may agree to waive this warranty , as this mechanism is not a matter of public policy. As Article 1704 makes clear, if one of the parties to a contract has already received the thing given in exchange, and then establishes that the other party to the contract was not the rightful owner of that thing, he cannot be compelled to deliver the item promised in exchange, but only to return the item received.

Art. 1707 Civil Code: “All the other rules prescribed for contracts of sale also apply to exchanges”.

Art. 1706 Civil Code: “Rescission on the ground of injury for injury does not apply to an exchange agreement”. In this vein:  CA Metz, 8 February 2000, LawLex202200001389JBJ; 11 June 2020, LawLex202200001379JBJ; CA Angers, 28 September 2021, LawLex202100005475JBJ.

Cass. 1re civ. 5 November 2014, LawLex201500001228JBJ.

CA Angers, 14 September 2021, LawLex202100005378JBJ; CA Metz, 11 June 2020, LawLex202200001379JBJ; CA Douai, 4 February 2013, LawLex201300000511JBJ.

CA Angers, 14 September 2021, LawLex202100005378JBJ; CA Douai, 4 February 2013, LawLex201300000511JBJ.

On the distinction in a complex chain of contracts between the original co-principal's obligation to deliver in conformity and the intermediary seller's warranty against latent defects: Cass. 3e civ, 30 September 2021, LawLex202100005513JBJ, specifying that if the fact that the disputed land exchanged, resold and then leased is non-constructible is attributable to the failure of the original co-principal to fulfil his obligation to deliver a product in conformity with that promised in the deed of exchange, to which was attached a report substantiating the notion that the site had been completely cleaned up, for the intermediary seller, it constitutes a latent defect that he is obliged to guarantee, and not a breach of his obligation to deliver as promised, all the more so as the pollution clause, stipulated in the exchange agreement, was not included in the contract of sale.

CA Metz, 11 June 2020, LawLex202200001379JBJ. Cf. Cass. 1re civ., 3 December 2008, LawLex202200001361JBJ, holding that when the exchange has been terminated by mutual agreement, one of the parties to the exchange is not entitled to claim reimbursement of the costs of repairing his vehicle where the breakdown, which occurred the day after the exchange, is not attributable to the other party to the exchange, since, due to the retroactive effect of the termination, each owner must bear the risks of accidental deterioration of the vehicle.

Art. 1168 Civil Code: “In bilateral contracts, lack of equivalence of performance is not a ground of invalidity of the agreement, unless the law provides otherwise”.

Cass. 3rd civ. 18 March 1980, LawLex202200001281JBJ.

CA Douai, 4 February 2013, LawLex201300000511JBJ.

CA Douai, 5 June 2013, LawLex201400001538JBJ; Cass. 1re civ, 5 November 2014, LawLex201500001228JBJ.

CA Angers, 14 September 2021, LawLex202100005378JBJ; CA Chambéry, 12 December 2017, LawLex202200001380JBJ, finding that the vehicle was damaged and had serious defects - which meant that it could not be driven until it had been checked to see whether it was in order - and that one of the co-principals, a mechanic by profession, had concealed the defects at the time of the trade-in, which gave the other party grounds for seeking recission, rather than cancellation, of the contract on the basis of the warranty against latent defects.

CA Chambéry, 12 December 2017, LawLex202200001380JBJ; CA Grenoble, 20 June 2017, LawLex202200001397JBJ, stating that where restitution is impossible following the rescission of the exchange, the value of the property must be returned by the party concerned.

Business Contracts

37. Legal regime

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37. Legal regime

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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