Business Contracts

According to Article 1589 of the Civil Code: “A promise of sale is deemed to be a sale when both parties have given their mutual consent to the subject matter and the price”. Unlike a unilateral promise, the conclusion of a bilateral pre-contract implies that the two parties have exchanged their mutual consent, without the expression of their consent being deferred in time. Once concluded, the bil …

Classification

According to Article 1589 of the Civil Code: “A promise of sale is deemed to be a sale when both parties have given their mutual consent to the subject matter and the price”. Unlike a unilateral promise, the conclusion of a bilateral pre-contract implies that the two parties have exchanged their mutual consent, without the expression of their consent being deferred in time. Once concluded, the bilateral promise is directly binding, since in principle, the parties' agreement on the item and the price is sufficient to form the sale.

While an agreement stipulating that the parties agree on the subject matter, the price and the transfer of ownership, subject only to the non-exercise of their right of pre-emption by the tenants of the property, constitutes a bilateral promise of sale , the identification of a bilateral promise sometimes poses difficulties. In order to make this classification, the courts first looked for a reciprocal commitment between the parties . They then ruled that an agreement concerning reciprocal obligations only constitutes a bilateral promise of sale if those obligations are duly reciprocated, and if the undertaking to sell is matched by a correlative commitment to buy . According to the Court of Cassation, a promise to sell a business which provides for an indemnity of such an amount that it does not simply constitute compensation for the three-month tie-up of the business, but expresses the buyer's commitment to take possession on the agreed date, and in which the parties have clearly indicated their respective intentions to provide for rescission in the event of the buyer's failure to obtain the requested loan, as well as the possibility for each of them to withdraw by waiving or doubling the deposit, is a bilateral promise to sell . Thus, a unilateral promise of sale which stipulates that the beneficiary definitively' undertakes to purchase the property as soon as the obligations incumbent on the promisor have been fulfilled, before a certain date, must be reclassified as a bilateral promise, thus depriving the beneficiary of any right of option .

The courts also consider that the exchange of a unilateral promise of purchase and a unilateral promise of sale effectively implements a bilateral promise of sale deemed to be a binding sale, provided that the two reciprocal promises have the same subject and are expressed in the same terms . Thus, like a bilateral promise of sale, a unilateral promise of purchase and a unilateral promise of sale, both stipulated in identical terms and both relating to a transfer of 1,150 shares, constitute a sale, once the parties have agreed on the subject matter and the price, the agreed time-limits were for payment, and those agreements were not subject to any conditions attaching to the purchasers' obligations, so that the latter could not rely on the sellers' failure to notify them of their intention to sell the remaining shares as a defense . On the other hand, before the reform of contract law came into force, the Court of Cassation had refused to reclassify unilateral promises of sale and purchase stipulated in the same terms between the parties as bilateral promises of sale, on the grounds that the sale could not be considered as complete, when at the date of these reciprocal acts, the promisor had withdrawn before the beneficiary of the unilateral promise of sale had exercised the option, so that this withdrawal precluded a mutual meeting of minds to sell and purchase . However, this position is no longer valid, since Article 1124 now sanctions the revocation of a unilateral promise of sale, before the option is exercised, by specific performance of the agreement, so that the meeting of the parties' reciprocal intentions to sell and acquire is no longer excluded in such circumstances.

On the other hand, according to the Court of Cassation, the conclusion by the parties of a bilateral promise of sale which is binding upon them, by agreeing on the subject matter and the price, subsequent to the acquisition of the invalidity (nullité) of a unilateral promise of sale granted between them, cannot be deduced from their correspondence, which can only be considered by reference to the invalid promise and necessarily express the consent already given by the beneficiary .

Finally, the Court of Cassation considers that the substitution option stipulated in a promise has no effect on the unilateral or bilateral nature of the agreement. The fact that the beneficiaries have merely accepted the offer to sell, while reserving the right to acquire the property or have it acquired by a third party, is immaterial . The Court of Cassation reiterated its position, specifying that in a promise of sale, neither the right of substitution granted to the purchaser, nor the clause excluding arbitration by the notary in the event of a dispute, has any effect on the bilateral or unilateral nature of the promise .

Cass. 3e civ. 10 November 1982, LawLex202300003174JBJ.

Cass. com. 9 November 1971, LawLex202100006420JBJ.

Cass. 3e civ, 4 July 2007, LawLex202100006434JBJ.

Cass. com, 8 November 1972, LawLex202200002087JBJ, specifying that even if a private deed which stipulates a forfeit payable by the seller in the event of non-compliance with the promise, and an indemnity in the event that the buyer does not exercise his option to purchase, is bilateral in nature, it does not constitute a bilateral promise to sell, since it provides for obligations that are not strictly equivalent, in that the indemnity payable by the beneficiary to compensate for the tie-up of the promisor's property during the agreed time-limit is exclusive of any coercion to purchase in a roundabout way, and in no way alters the beneficiary's freedom to choose.

Cass. com. 13 February 1978, LawLex202200002402JBJ.

Cass. 3e civ, 23 January 1991, LawLex202100006448JBJ.

Cass. com, 16 January 1990, LawLex202100006418JBJ; 27 September 2017, LawLex202300003681JBJ. See also Cass. 3e civ, 26 June 2002, RTD civ. 2003, 77.

Cass. com. 16 January 1990, LawLex202100006418JBJ, cited above.

Cass. com. 14 January 2014, LawLex202300003492JBJ.  See. Cass. com, 13 September 2011, LawLex202300004036JBJ: a court of appeal cannot hold that the sale is completed by the signing of unilateral promises of purchase and sale binding the parties, since the offer of the promisor was irrevocable in the absence of a provision in the promise of sale authorizing its withdrawal before a certain date and the beneficiary exercised the option within the stipulated time, whereas the exercise of the option by the beneficiary, subsequent to the withdrawal of the promisor, excludes any mutual meeting of intentions to sell and to acquire, so that the compulsory implementation of the sale cannot be ordered [Editor's note: this solution is no longer relevant since the reform of contract law, as the revocation of a unilateral promise of sale during the time given to the beneficiary to opt out does not prevent the formation of the promised agreement].

Cass. 3e civ, 3 February 1993, LawLex202100006131JBJ.

Cass. 3e civ, 28 June 2006, LawLex202100006398JBJ.

Business Contracts

90. Classification

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90. Classification

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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