Business Contracts

On the basis of Article 1240 of the Civil Code, the victim of fraud may, independently of the action for invalidity, or simultaneously , claim damages for the harm caused by the fraudulent conduct of his co-contractor (or his accomplice or representative).
Under Article 2224 of the Civil Code, an action for damages arising from fraud is subject to a limitation period of five years from the date on …

Action for damages

On the basis of Article 1240 of the Civil Code, the victim of fraud may, independently of the action for invalidity, or simultaneously , claim damages for the harm caused by the fraudulent conduct of his co-contractor (or his accomplice or representative).

Under Article 2224 of the Civil Code, an action for damages arising from fraud is subject to a limitation period of five years from the date on which the proprietor of a right knew or ought to have known the facts enabling him to exercise it, except in the case of personal injury, where this period is extended to ten years from the date of consolidation of the initial or aggravated damage (Art. 2226), so that it may remain admissible even though the action for invalidity is time-barred.

In a tort claim, the victim may be entitled to a reduction in the purchase price and to additional damages , the calculation and amount of which are left to the discretion of the trial courts . When the victim brings both an action for invalidity and a claim in tort, the perpetrator of fraud may be ordered to pay compensatory damages, in addition to the default damages for bad faith . Thus, according to the Montpellier Court of Appeal, a person who knowingly misleads his co-contractor as to the non-accident status of the vehicle sold owes him compensation for the secondary harm caused by the cancellation of the sale on the grounds of fraud, linked to the loss of the possibility of keeping the vehicle and the resulting involvement in lengthy legal proceedings abroad . Furthermore, in a judgment handed down by its mixed chamber on 9 July 2004, the Court of Cassation ruled that the seller, having committed fraud, could not claim the benefit of an indemnity for occupancy of the premises, in addition to the restitution of his property following the cancellation of the contract of sale. In the Court's view, the enjoyment of the property prior to the annulment of the contract could not be restored to the seller, either in kind or in value, since the sale had never existed retroactively and could therefore have no effect. In addition, the party in good faith to the void sales contract alone may request that the party at fault be ordered to compensate the harm it has suffered as a result of the conclusion of the void contract .

The question of compensable harm for loss of opportunity has arisen when the victim of fraudulent non-disclosure nevertheless chooses to continue with the contract. In such cases, the Court of Cassation has ruled that the only harm that can be compensated is “the loss of a chance not to enter into a contract, or to enter into a contract on more advantageous terms” under the continuing contract. This does not include the loss of a chance to obtain the gains expected from the transaction, which would never have been implemented, whether or not fraud was involved, nor the loss of a chance to conclude a more advantageous contract with another party, once the purchaser has chosen not to seek annulment . In other words, hypothetical damage does not constitute compensable damage .

Lastly, the victim may take action against any third party who contributes to the harm he or she has suffered as a result of the contractual partner's fraudulent maneuvers. In this way, a notary's liability is incurred when he fails to comply with his professional obligations - in particular, to ensure that the construction sold is in good order - and contributes to the damage suffered by the purchaser as a result of the seller's fraudulent conduct .

Cass. 3e civ, 20 December 1995, LawLex200500006060JBJ.

These so-called compensatory damages, insofar as they aim to repair a particular cause of damage, are to be distinguished from the moratory damages, in the event of delay in restitutions following rescission of the contract.

Cass. com. 7 January 1997, LawLex200500005014JBJ.

Cass. com. 4 January 2000, LawLex200500009091JBJ: ordering the seller, who was the perpetrator of the fraudulent maneuvers, to pay statutory interest on the sale price from the date of payment, as well as damages to offset, in particular, interest on loans taken out by the buyer, does not compensate the same harm twice, but is intended to compensate the buyer for the unavailability of the sum unduly paid and for the harm caused by the fraud.

CA Montpellier, 13 February 2014, LawLex201400000402JBJ.

Cass. ch. mixte, 9 July 2004, LawLex200600001739JBJ.

Cass. civ. 1re, 25 March 2010, LawLex201400000720JBJ, followed in the same case by Cass. com., 10 July 2012, LawLex201400000721JBJ holding that the purchaser “having chosen not to request cancellation of the contract, his reparable harm corresponded solely to the loss of a chance to have been able to contract on more advantageous terms”. In other words, the loss of chance to contract applies only to the contract that the victim chose to maintain, and not to the possibility of concluding a more advantageous contract with a third party. See also Cass. com, 21 June 2016, LawLex201600001219JBJ.

See Cass. com. of 24 September 2013, LawLex201300001407JBJ. In this share transfer case, in which the victim of fraudulent non-disclosure preferred to maintain the contract rather than have it rescinded, and claimed damages for the increased value of the sale price resulting from the transferor's fraudulent non-disclosure, the Commercial Chamber, approving the trial courts' rejection of the claim for damages on the grounds that “the maneuver consisting in concealing the negotiations (...) ultimately had no impact on the value of the shares transferred”, held that “the alleged loss of value of the shares was due to the transferor's fraudulent non-disclosure”.

CA Paris, 14 November 2006, LawLex200700000765JBJ.

Business Contracts

136. Action for damages

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

136. Action for damages

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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