Business Contracts

In addition to being determined or capable of being determined, the price of the thing sold must be both genuine and realistic (réel et sérieux). Under the terms of Article 1169 of the Civil Code, resulting from the reform of the law of obligations, “an agreement for valuable consideration is void where, at the time of its formation, the consideration agreed for the benefit of the party making the …

Genuine and serious price

In addition to being determined or capable of being determined, the price of the thing sold must be both genuine and realistic (réel et sérieux). Under the terms of Article 1169 of the Civil Code, resulting from the reform of the law of obligations, “an agreement for valuable consideration is void where, at the time of its formation, the consideration agreed for the benefit of the party making the commitment is illusory or derisory”.

However, it may be tempting for parties to a sale to conceal part of the actual price for tax purposes, in violation of the provisions of new Article 1202, paragraph 2, of the Civil Code , which declares “null and void any agreement whose purpose is to conceal part of the price, when it relates to a sale of real estate, a transfer of a business or clientele, a transfer of a right to a lease, or the benefit of a promise to lease relating to all or part of an immovable property and all or part of the balance of an exchange or division comprising immovable property, a business or clientele”. A bill of exchange purporting to be drawn in settlement of additional work, but which in reality represents the concealed part of the sale price of a house , is thus liable to incur invalidity. In such a case, according to the Court of Cassation, the concealment of part of the sale price of a building entails the invalidity of the secret agreement without affecting the validity of the overt agreement, whether or not the two agreements are indivisible . In order to conceal a gift, a seller may also set a derisory sale price: the apparent seller, in reality the donor, is driven by a charitable intention towards the apparent buyer, in reality the donee. The animus donandi can be deduced from the low price or, for example, from the fact that the apparent seller will remain in the property until his death . In such a case, the sale cannot be annulled for lack of a serious price, but may be re-characterized as a disguised gift if the deed complies with the formal requirements legally applicable to the sale under the guise of which it is made . 

In principle, a sale for a token amount  is null and void. A sale of shares for a nominal price of one euro cannot be valid on the grounds that the parties have chosen, in an uncontested contractual framework, a method of determining the value of the shares, the result of which has been that the shares have a negative value, since it is up to the court to determine whether the sale price of the shares determined by applying the aforementioned method is of a genuine nature . However, according to case law, the low sale price is not sufficient to render the deed of transfer invalid, and it is necessary to ensure that the deed or the contractual whole of which it forms part does not contain any other consideration or advantages for the seller, and does not require the purchaser to perform more material obligations . However, the Court of Cassation is less rigorous in its assessment of the price of sales taking place in the context of insolvency proceedings, when accompanied by other commitments on the part of the transferee .  In particular, it considers that the serious nature of the sale price of a plot of land, which forms part of an indivisible contractual package comprising the sale of premises, equipment and the assumption of debts, must be assessed in the light of the overall scheme of the contract .

However, the sale of an item at a very low price is not necessarily synonymous with a derisory or illusory price.  Thus, the transfer price of shares set at their nominal value is not considered negligible when, at the date of the transfer, the company’s business relied solely on the transferee’s business network and depended heavily on a strong intuitus personae, insofar as the transferee had outsourced administrative tasks from the accounting firms he co-managed by subcontracting them to the company . The genuine and serious nature of the sale price must not be confused with the value of the asset sold, so that the court is under no obligation to determine the real value of the item sold, provided it was transferred in return for a price that is not derisory .

As a general rule, the price is assessed on the basis of the amount stipulated by the parties, irrespective of the specific terms of payment. According to the Court of Cassation , a derisory price must be disregarded when the sale has been agreed for a significant amount, even if the price may prove to be injurious . In other words, an injurious price (prix lésionnaire) exists, even if it is inadequate, unlike a derisory price (prix dérisoire), which is equivalent to no price at all. Consequently, the sale cannot be annulled for absence of price , but can be resolved insofar as it falls within the scope of a “prix lésionnaire”. A transfer of shares carried out for a price lower than the value of the securities may, moreover, be annulled if the price is derisory, since the principle of free price determination by the parties does not preclude nullity for a negligible price . On the other hand, a price cannot be considered derisory when four separate chartered accountants have considered it to be serious .

Like the failure to determine a price, the failure to provide a serious price is sanctioned by relative invalidity .

Article 1202, paragraph 2, of the Civil Code essentially reiterates former Article 1840 of the General Tax Code, which has now been repealed.

Cass. 3rd civ. 25 June 1985, LawLex202200000097JBJ.

Cass. com., 24 January 2024, LawLex202400002090JBJ.

CA Angers, 26 September 2023, LawLex202300012418JBJ.

Cass, 3e civ, 29 April 1998, LawLex202200000103JBJ.

Cass. 1re civ, 20 February 2008, LawLex202200001623JBJ, considering that the agreement which, providing that “the sale is made and accepted for a price of around [EUR 9150], which has been converted, by mutual agreement between the parties, into an obligation on the part of the purchaser towards the vendor, to guarantee the latter two weekly walks in the Ardèche department, to provide him with the necessary clothing, and generally to follow up his correspondence, it being understood that in the event of admission to a hospice or hospital, this obligation would cease only in respect of the two weekly walks, and generally to provide for his correspondence”, constitutes an agreement of sale, which can therefore be rescinded for breach of contract, and not an agreement to provide food, as it does not impose on the purchaser the obligation to provide for the seller's subsistence.

CA Limoges, 11 April 2024, LawLex202400003249JBJ.

Cass. com. 13 December 2011, LawLex202200000118JBJ.

Cass. com, 22 March 2016, LawLex202200000811JBJ.  Before the reform of the law of obligations, the sale at a derisory price was traditionally sanctioned by absolute invalidity, See Cass. com., 23 October 2007, LawLex202200000096JBJ: the sale agreed without a serious price is rendered null and void which, being based on the absence of an essential component of this agreement, is considered absolute.

Cass. mixt., 12 June 1981, LawLex202200000937JB.

Cass, 3e civ, 7 April 1976, LawLex202200000936JBJ.

Cass. 1re civ. 27 October 1993, LawLex202200000100JBJ, stating that gifts made under the cover of transactions for valuable consideration are valid when they meet the conditions of form required for the constitution of the instruments which they purport to be, the rules to which they are subject in substance being those specific to gratuitous transactions.

Cass. com, 23 October 2007, LawLex202200000096JBJ; 22 March 2016, LawLex202200000811JBJ.

Cass. com., 7 June 2011, LawLex202200000935JBJ. Cf. Cass. com., 3 January 1985, LawLex202200000933JBJ: this is not the case when the transfer of shares was agreed for a price left to the arbitration of a third party, who considered that the shares were worthless, and the price paid as a result was symbolic.

Cass. com., 16 June 1998, LawLex202200000934JBJ.

Cass. 3e civ. 3 March 1993, LawLex202200000104JBJ.

Business Contracts

20. Genuine and serious price

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20. Genuine and serious price

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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