Business Contracts

Distribution contracts are bilateral , concluded for valuable consideration  and are consensual . In the absence of any formal requirements, the existence of such a contract can be established even without a written document . During the formation of the contract, the parties must give their free and informed consent, which must not be vitiated, otherwise the contract is null and void . They are a …

Ordinary law of contracts

Distribution contracts are bilateral , concluded for valuable consideration  and are consensual . In the absence of any formal requirements, the existence of such a contract can be established even without a written document . During the formation of the contract, the parties must give their free and informed consent, which must not be vitiated, otherwise the contract is null and void . They are also subject to the pre-contractual duty to provide information set out in Article 1112-1 , resulting from the 2016 reform of contract law.  

Application of the framework agreement provisions governing successive sales has given rise to a number of difficulties, particularly with regard to the setting of price. As contractual relations in this type of contract take place over a relatively long period, it is not possible to define the entire content in advance. The parties therefore only agree on the essential obligations, with the price generally set by reference to the supplier's price list on the day of delivery, to enable constant adaptation to changes in costs, the market and consumer demand. Ignoring this reality, and motivated by a concern to protect the weaker party, French law under the old Article 1129 of the Civil Code  required that the price of goods that the distributor undertakes to purchase exclusively from its supplier, or for a minimum quantity, be determined or capable of being determined in the framework agreement, subject to nullity ; in the absence of such prior determination, case law required that the price be freely discussed and negotiated between the parties at the time of each sale , which was not really practicable . Following fierce criticism from legal writers and in order to stem the cascade of annulments of application agreements, the plenary assembly  of the Court of Cassation, in several rulings on the same day, put an end to this case law. Henceforth, the indeterminacy of the price of subsequent contracts in the framework agreement no longer affects the validity of the latter . The only sanction is abuse in setting the price according to the supplier's price list, which may give rise to termination for breach or damages. The freedom to negotiate the price in accordance with market conditions, and the absence of a dominant or arbitrary position on the part of the supplier, are considered to be evidence of the absence of abuse . Similarly, neither exclusivity , nor the mere reference to the supplier's price list when the distributor is not obliged to apply it , characterize an abuse. 

Ordinance No 2016-131 of 10 February 2016 reforming contract law, the general regime and proof of obligations enshrined this case law in Article 1164 of the Civil Code: “In framework contracts it may be agreed that the price will be fixed unilaterally by one of the parties, subject to the requirement that the latter must provide the reason for the amount if it is challenged. In the case of abuse in setting the price, the court may be asked to award damages and, where appropriate, terminate the contract”. The price may henceforth be set unilaterally, but the party setting the price must be able to justify it, and the setting of the price must not be abusive.

Cass. ass. plén. 1 December 1995, LawLex202000001849JBJ, LawLex202000001850JBJ, LawLex200004345JBJ and LawLex200700000976JBJ; Cass. com. 23 March 1999, LawLex200005193JBJ; 23 February 1999, LawLex200004395JBJ (franchise).

Cass. com, 21 January 1997, LawLex200200005629JBJ.

CA Toulouse, 18 January 1999, LawLex200005168JBJ.

CA Paris, 27 June 1997, LawLex200005029JBJ.

Art. L. 110-3 Commercial Code; CA Colmar, 12 July 2021, LawLex202100004555JBJ, concerning a franchise agreement.

CA Paris, 2 December 2015, LawLex201500001656JBJ: a decisive defect in consent cannot result solely from the discrepancy between the results expected and those actually obtained due to the uncertainties that may affect operations and factors inherent in the franchisee's management; CA Douai, 28 May 2015, LawLex201500000774JBJ: the provision of unrealistic forecasts to inexperienced applicants, who are not in a position to assess their reliability, constitutes a fraudulent tactic justifying the annulment of the franchise agreement; Cass. com, 10 July 2001, no. 98-16.202: an exclusive distributor cannot seek annulment of the distribution agreement on the grounds of fraud, insofar as he would certainly have accepted the contract even without the supplier's over-optimistic forecasts.

Art. 1112-1 Civil Code: "A party who is aware of significant information which is decisive for the other party's consent must inform the other party if the latter is legitimately unaware thereof or has confidence in the other party. However, this duty to inform does not cover the estimation of the value of the service. (..). In addition to the liability of the party who was bound by it, failure to comply with this obligation to inform may result in the annulment of the agreement under the conditions specified in Articles 1130 et seq.

Art. 1129 Civil Code: “ The obligation must have as its object something which is at least definite as to its kind. The amount of the thing may be uncertain, provided it can be determined”. Previously, annulment was pronounced on the basis of Article 1591 of the Civil Code, according to which the sale price must be determined and designated by the parties: See e.g. CA Paris, March 30 1984, LawLex200200004618JBJ, for an application to exclusive purchasing. However, as a framework distribution agreement could not in itself be equated with a sale, insofar as it could create obligations to do and not to do, the Court of Cassation ruled that the application agreements were invalid under Article 1129, See Cass. com., 9 November 1987, LawLex202200002384JBJ.

Cass. com. 11 October 1978, LawLex202200008345JBJ.

Cass. com. 5 November 1991, LawLex200200005867JBJ.

See in particular Cass. com, 5 November 1991, Sté Halles Capone c. Sté Takala, LawLex200005867JBJ.

Business Contracts

55. Ordinary law of contracts

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Les notions juridiques connexes

55. Ordinary law of contracts

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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