Business Contracts

Pursuant to Article 1137 of the Civil Code, fraud is the act of one contracting party in obtaining the consent of the other by means of maneuvers, lies or the intentional concealment by one of the contracting parties of information he knows to be decisive for the other party . It is generally committed by the seller, but can also be committed by the buyer .
According to the Court of Cassation, fra …

Fraudulent maneuver or omission

Pursuant to Article 1137 of the Civil Code, fraud is the act of one contracting party in obtaining the consent of the other by means of maneuvers, lies or the intentional concealment by one of the contracting parties of information he knows to be decisive for the other party . It is generally committed by the seller, but can also be committed by the buyer .

According to the Court of Cassation, fraud necessarily presupposes the existence of artifice, fraud, falsehood or deception, but is not the result of the mere insistence of one party on convincing the other . 

Moral coercion or duress does not constitute fraud, in the absence of maneuvers intended to provoke a mistake likely to vitiate the consent of the other party . On the other hand, the transferee's mistake as to the value of the target's shares, caused by a tactic on the part of the transferor who intentionally concealed the latter's financial situation, may justify the annulment of the deed of transfer on grounds of fraud . Similarly, a real estate developer, who was aware of the saturation of the rental market at issue, and his agent, who, despite the difficult local economic situation, assured the purchasers of a safe and profitable investment in the short term, in the sole interest of making the transaction profitable, thus made false statements which went beyond the accepted need to promote the product offered for sale, were guilty of fraudulent maneuvers which caused the purchasers to err as to the profitability of their acquisition, and which justify the annulment of the contract of sale for fraud .

If the supplier's overstatement of the qualities of the item sold does not go beyond what is customary in commercial practice, and does not relate to an essential characteristic of the item, this does not justify annulment of the sale . On the other hand, fraud may be constituted by actions intended to create a false appearance, such as the production of false documents, concealments and adulterations, particularly in used vehicle transactions, falsification of type and serial number, deception on the odometer, or the sale of a vehicle presented as first-hand when it had already been owned by several persons .  Thus, a seller who falsely certifies in writing that the vehicle being sold is “first hand” and has never been involved in an accident, and who falsifies the contractual warranty card in order to substantiate his statements in the eyes of the buyer, is guilty of fraudulent maneuvers . On the other hand, the existence of such maneuvers cannot be inferred from a simple change in the make of the equipment on the day of delivery, once the undertaking has accepted this change by signing a new purchase order .

The most common form of fraud remains the lie: a lie, even if not supported by external acts, can constitute fraud . An untrue answer by the seller to the buyer's repeated requests concerning the presence of Sargasso seaweed, with the intention of deceiving the buyer, constitutes grounds for invalidity of the sale on the grounds of fraud . Fraud can therefore be inferred from an untruth contained in the deed of sale  , a notice  , documentation , a sales advertisement , an invoice or a purchase order . For example, the owner of leased premises and the transferor of a bar-brasserie business who, by mentioning only in the deed of sale a noise impact study implemented two years earlier and the subsequent installation of a sound pressure limiter, dispensed with informing the transferee undertaking of the existence of a much more recent legal expert report, which found that the building was not designed for this type of activity, that the transferred establishment did not comply with current noise standards, and that the insulation work carried out was insufficient to limit noise at source, misled the undertaking . Similarly, a seller who, at the time of the transaction, issues a receipt for the down payment in the name of a Polish undertaking which does not exist, while stating that the vehicle was put on the road in 1989 instead of 1985, commits fraud likely to result in the cancellation of the sale . On the other hand, mere vagueness does not constitute fraud. The expression “2nd generation equipment”, which in the seller's mind corresponds to reconditioned equipment, but which could just as well mean that the equipment is new, but of an earlier generation, cannot be taken to imply the existence of a deliberate deception aimed at misleading the buyer as to the nature of the equipment and inducing him to contract . On the other hand, a lie expressed orally is just as constitutive of fraud as one committed in writing .

Lying by omission also falls within the scope of Article 1137 of the Civil Code. Fraudulent omission (réticence dolosive) may in effect be constituted by the silence of a party concealing from his co-contracting party a fact which, had it been made known to, would have prevented the latter from contracting. Although Article 1137 does not require a mistake as to the essential qualities of the thing sold  but only a mistake which is decisive for the victim's consent, in practice, intentional concealment often relates to an essential quality of the thing sold, such as, in the case of a vehicle, its accident history  or its age , or, in the case of a building, whether it is uninhabitable due to termite infestation  or a prefectoral ban on habitation , or whether it lacks a drinkable water supply . Fraudulent non-disclosure may also concern failure to comply with safety  or conformity  requirements. For example, by failing to inform the acquiring undertaking of the provisions of the building's co-ownership by-laws prohibiting businesses likely to cause nuisance to other co-owners through noise or odors, that the consequences of contravening these provisions would be disastrous, and that the deliberation of the general meeting of co-owners of 11 May 1989 indicating that the activity of consuming ready-made meals was tolerated only on condition that no customers were received on the premises after 8 p.m., the transferee demonstrated fraudulent concealment . Similarly, a professional vendor who fails to inform the purchaser of the consequences of installing an engine that does not have the same characteristics as the original engine, which can only result in a lack of type-approval and therefore an inability to drive, is guilty of fraudulent non-disclosure . Wrongful concealment can also concern information relating to the profitability of a purchase . For example, the seller of a business who is aware of the opening of a new bakery close to his own, but fails to inform the buyer, is guilty of fraudulent non-disclosure.

Since it is difficult to characterize a wrongful omission, the courts sometimes refer to the obligation to contract in good faith, considering that the requirement of loyalty in the conclusion of an agreement applies all the more stringently when the person guilty of fraudulent concealment is a businessperson . However, the failure of the seller - whether professional  or layman  - to meet his or her obligation to provide information is the basis preferred by the courts for establishing the offense of fraudulent non-disclosure . However, the Court of Cassation  has ruled that a breach of a pre-contractual obligation to provide information, assuming that it has been established, is not sufficient to constitute fraudulent non-disclosure, unless it is also established that the breach was intentional, and that it caused a decisive mistake  .

CA Toulouse, 16 May 2022, LawLex202300003628JBJ.

Cass. 3e civ, 15 November 2000, LawLex200500006061JBJ, holding that a buyer who keeps the seller in the dark about his capacity as a frontman and the richness of the composition of the soil of the plot of land sold, commits fraud.

Cass. civ. 3e, 6 November 1970, LawLex201400000741JBJ; CA Montpellier, 13 February 2004, LawLex201400000402JBJ.

Cass. civ. 3e, 16 June 2022, LawLex202200003135JBJ.

Cass. civ. 3e, 29 June 2000, LawLex200400003634JBJ, upholding CA Paris, 4 June 1998, LawLex200500004217JBJ : the seller of lots forming an apartment who does not disclose to the purchasers the prefectoral ban on living in the property, but instead declares that there are no legal restrictions on the use of the property sold, sheltering behind the absence of any mention of habitability in the planning certificate to justify this misstatement, even though the certificate concerns the entire building and not each individual lot, is guilty of fraud.

CA Amiens, 1 April 2010, LawLex201200001274JBJ : the seller who provides the buyer with a notice falsely stating that the self-propelled vehicle sold complies with road regulations is providing misleading information that justifies annulment of the sale on the grounds of fraud, insofar as the fact that the vehicle has not been approved by the former DRIRE (Direction Régionale de l'Industrie, de la Recherche et de l'Environnement) has led to a refusal to insure the vehicle, and therefore to its roadworthiness, which is essential for the buyer, an agro-entrepreneur.

Cass. com., 24 May 1994, LawLex200500005941JBJ: the fact that the seller's representative provides documentation presenting the item sold as having qualities very different from those actually observed, and promises additional assurances that the seller is in reality unable to provide, constitutes a fraudulent maneuver decisive of the buyer's consent.

CA Versailles, 10 June 2010, LawLex201200001423JBJ.

CA Paris, 26 November 1993, LawLex200500006873JBJ: the untruthful indication on the order form of a 1990 model year for a vehicle sold from 24 May 1989, reinforced by the postponement of the formalities for issuing the vehicle registration document to a date after 1 July 1989, constitutes a fraudulent maneuver on the part of the seller, intended to cause a mistake as to the material qualities - the vehicle's model year - likely to vitiate the consent of his co-contracting party.

Cass. com., 1 March 2017, LawLex202200002434JBJ.

CA Douai, 28 October 2013, LawLex201400000411JBJ.

CA Montpellier, 19 November 2013, LawLex201400000339JBJ.

Cass. com. 2 June 1981, LawLex200500006157JBJ, having held that, in the absence of artifice, fraud, lies or deception, the buyer's repeated attempts to convince his future co-contractor to sell him his business cannot justify a request for annulment of the sales agreement, upholding CA Paris, 3 May 1979, LawLex200500009157JBJ. 

CA Toulouse, 24 October 2012, LawLex201400000448JBJ: the seller, who, verbally, in order to sell his pasta-making equipment, falsely claims that registration with the Trade Register is not necessary, nor is compliance with specific hygiene standards more restrictive than those to which his co-contractor is already subject as a seller of foodstuffs, is guilty of fraudulent maneuvers.

Cass. com., 14 November 1995, LawLex202300003158JBJ, holding that the transferors of a business who failed to inform the transferees of the ongoing litigation between them and the owners of the premises concerning the very existence of the right to the lease, an essential element of the business transferred, were guilty of fraudulent non-disclosure, without which the purchasers would not have contracted, so that the sale must be annulled for fraud.

CA Agen, 2 November 2010, LawLex201200001523JBJ.

Cass. civ. 1re, 19 June 1985, LawLex200500006106JBJ.

Cass. civ. 3e, 14 March 2006, LawLex200600001986JBJ, holding that the seller of a building is guilty of fraudulent non-disclosure when he limits himself to listing a negative parasite diagnosis in the deed of sale, even though he is aware that the building in question was infested by termites 10 years previously and had been treated twice.

CA Paris, 4 June 1988, LawLex200500004217JBJ.

Cass. civ. 3e, 10 February 1999, LawLex200500006062JBJ.

CA Toulouse, 13 February 2008, LawLex201200000983JBJ, ruling that a professional vendor who sells a mobile home while dissimulating the fact that this vehicle and the structures attached to it do not meet the safety and compliance standards of the campsite where they are located, commits fraud, justifying the annulment of the sale.

Cass. civ. 3e, 7 November 2006 LawLex200700000461JBJ: the seller commits fraud when he conceals from the purchaser material modifications - namely, a lowering of the ceiling - likely to render the premises, the subject-matter of the sale, unfit for the commercial purposes (as a pharmaceutical dispensary) for which they were intended.

Cass. com, 6 January 2021, LawLex202200002536JBJ. Also see, Cass. 3e civ, 7 April 2015, LawLex202300003313JBJ, overruling a court of appeal, which, after noting that the minutes of the general meeting of the disputed building referred to a situation predating the sale by 18 months and that the sellers had endeavored to conceal from the purchaser the level of noise pollution coming from the bar by sending an sms to its manager so that he would reduce the intensity of the sound to a minimum during visits, considered that the purchaser could not have been unaware that, by acquiring the apartment, he was exposing himself to the risk of noise pollution from the bar on the first floor, and dismissed his claims for annulment of the sale and payment of damages, whereas it should have investigated whether the purchaser would actually have acquired the apartment in the absence of such tactics.

Cass. com. 10 July 1995, LawLex200500005937JBJ: in this case, provoking a scandal within an undertaking in order to obtain an acknowledgement of debts is a matter of duress, not fraud.

CA Caen, 18 November 2008, LawLex201200001530JBJ.

CA Saint-Denis de la Réunion, 24 April 2019, LawLex202200002616JBJ.

Cass. 3e civ, 29 January 2013, LawLex202300003157JBJ, holding that the buyer, who, through his position as mayor and his participation in town council meetings, had full knowledge of the ongoing revision of the land use plan and in particular of the fact that the property purchased was going to become constructible, but who refrained from disclosing to the seller the state of 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 liability for fraud.  See previously Cass. 3e civ, 11 September 2012, LawLex202300003304JBJ.

CA Colmar, 7 September 2006, LawLex200700000758JBJ.

Cass. 3e civ, 10 February 1999, LawLex200500006062JBJ.

Cass. com, 28 June 2005, LawLex200600002444JBJ; see also CA Aix-en-Provence, 30 October 2012, LawLex201400000447JBJ: failure to meet a pre-contractual obligation to provide information is not sufficient to constitute fraud on the grounds of non disclosure, as the professional's malicious intent to deceive his client must be established.

The distinction between the fraudulent non-disclosure and the breach of the pre-contractual duty to inform under Article 1112-1 of the Civil Code, resulting from the reform of contract law, according to which "the party who is aware of information the importance of which is decisive for the consent of the other must inform the latter of this fact if, the latter is legitimately unaware of this information or has confidence in it, may also seem tenuous, but fraudulent non-disclosure requires an intention to deceive, which is not required per se - although it is not excluded - in the context of the pre-contractual information obligation, the scope of which is limited to agreements subject to pre-contractual negotiation.

Cass. com, 12 May 2015, LawLex202300000491JBJ.

Cass. 3e civ, 12 October 2017, LawLex202300003328JBJ.

Cass. com. 13 December 1994, LawLex200500005942JBJ.

CA Toulouse, 27 November 2018, LawLex201800001868JBJ.

CA Lyon, 15 February 2001, LawLex200500006133JBJ.

CA Paris, 16 March 2018, LawLex201800000483JBJ.

Business Contracts

132. Fraudulent maneuver or omission

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

132. Fraudulent maneuver or omission

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise