Business Contracts

Fraud, by act or omission, requires, in addition to proof of the material element manifested by the conduct of its perpetrator, a moral element, constituted by the intention to deceive the co-contracting party .
The intention to deceive is not to be confused with the intention to harm, which implies the desire to cause damage , and implies bad faith . According to the courts, bad faith on the part …

Intent to deceive

Fraud, by act or omission, requires, in addition to proof of the material element manifested by the conduct of its perpetrator, a moral element, constituted by the intention to deceive the co-contracting party .

The intention to deceive is not to be confused with the intention to harm, which implies the desire to cause damage , and implies bad faith . According to the courts, bad faith on the part of the sellers has been characterized when, despite the buyer's insistence, they have delayed communicating the accounts of the business, the subject matter of the sale, and have provided the buyer with incorrect figures . Similarly, the buyers' intention to deceive is established when they concealed from the seller the fact that they were being placed under compulsory liquidation, and led the seller to believe that they were solvent by handing over a cheque . Deception may consist in inducing the mistake that vitiated consent, or in benefiting from it. For example, a buyer who, by virtue of his position as mayor and his participation in town council meetings, had full knowledge of the current revision of the land-use plan, and in particular of the fact that the property purchased was going to be built on, but who neglected to disclose to the seller the progress of this revision procedure and its foreseeable consequences on the price of the property, committed a breach of his obligation to contract in good faith and committed fraud .

When fraud takes the form of a series of deliberate tactics (or maneuvers), in particular falsification, deception or lies, intentional misconduct can easily be characterized. The seller's intention to deceive as to the falsified mileage on the odometer and the origin of the vehicle sold can thus be deduced from his deliberate intention not to provide the buyer with the documents required to register the vehicle, notably the certificate of sale, and his reluctance to provide the identity of its previous owner . However, intent to deceive is more difficult to establish in cases of fraudulent non-disclosure, since mere silence cannot be equated with fraud . Because of these evidential difficulties, courts have tended to focus on the obligation to inform, since failure to comply with this obligation almost invariably results in conviction for fraudulent non-disclosure, without actually characterizing the intentional element . To put an end to this tendency, the Court of Cassation ruled that a breach of a pre-contractual obligation to provide information, even if it were established, would not suffice to constitute fraudulent non-disclosure, unless the intentional nature of the breach and a determining mistake caused by it were also established . Since then, the Court has regularly reiterated the need to establish intent in the case of fraudulent non-disclosure . However, the Court of Cassation recently ruled that transferee companies which, following an audit report drawn up at their request, discovered that the transferee company's results were in deficit at the end of the financial year, were not entitled to seek annulment of the transfer on the grounds of fraud, in the absence of proof of an intent to deceive, insofar as the transferors, who had accepted the principle of an accounting audit prior to the transfer, sent the requested documents to the chartered accountant, and there was nothing in the file to establish that the undertaking being transferred was in a state of suspension of payments prior to the transfer, or that the transferors could have been aware of this state of affairs .

CA Toulouse, 16 May 2022, LawLex202300003628JBJ.

CA Nîmes, 10 October 2013, LawLex201400000413JBJ.

Cass. com, 27 October 2009, LawLex202200002103JB; 10 February 2015, LawLex202200002655JBJ, noting that a court of appeal cannot, in order to declare the invalidity of the transfer of a business, hold that the transferor committed fraudulent non-disclosure with regard to the transferee, without establishing the intentional nature of this non-disclosure.

Cass. com. 21 April 2022, LawLex202200003343JBJ.

Cass. 3e.civ., 27 mars 1991, LawLex200500006064JBJ, holding that by concealing from the original seller of a plot of land his intention to resell while already in talks with a potential buyer, an intermediary purchaser does not commit a fraudulent maneuver, unless he shows bad faith by concealing from him the revision of the land use plan, likely to increase the value of the land.

CA Grenoble, 5 November 1991, LawLex200500008599JBJ.

CA Aix-en-Provence, 31 October 2006, LawLex200700000762JBJ.

Cass. 3e civ, 29 January 2013, LawLex202300003157JBJ. See Also, Cass. 3e civ., 11 September 2012, LawLex202300003304JBJ, holding that the municipality, beneficiary of a promise to sell a plot of land, which failed to inform the promisor of a plan to adopt a local urban development plan having a direct impact on the value of the land, was guilty of fraudulent non-disclosure and breach of good faith, so that the promise to sell must be annulled.

CA Basse-Terre, 14 March 1994, LawLex200600001572JBJ.

Cass. civ. 1re, 12 November 1987, LawLex200500006059JBJ, which reiterates the need to characterize the intention to deceive, in order to establish the existence of fraudulent non-disclosure.

Cass. civ. 3e, 21 February 2001, LawLex200500005940JBJ.

Cass. com. 28 June 2005, LawLex200600002444JBJ.  See also Cass. com. 27 October 2009, LawLex202200002103JBJ, rejecting an appeal court's decision not to investigate whether the purchaser had been misled by the information in the company's balance sheet concerning the composition of the company's assets, and whether the fraudulent non-disclosure imputed to the transferors, assuming it had been established, had not led him to enter into commitments that he would not have made had he known the exact situation.

Business Contracts

133. Intent to deceive

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

133. Intent to deceive

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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