Written commercial agreement

Significant imbalance

Sudden termination of established relationships

Competition investigation – French law

Civil competition action

French competition law

Competition investigation – European law

European competition law

Vertical restraints

Distribution law

Liability for defective products

Consumer law

Prohibition of measures having equivalent effect

European business law

Corruption

Compliance

Economic law

Shareholders' agreements

Removal of company directors

Abuse of voting rights

Companies

Action for infringement (counterfeiting)

Rights conferred by the trademark

Patentability

Industrial property

Commercial rent review

Renewal of the commercial lease

Despecialization (change of use)

Commercial leases

Reform of contract law

Reform of the law of special contracts

Preliminary sales agreement

Obligation to deliver goods in conformity

Classification of the contract for services (contrat d'entreprise)

Effects of the agency agreement with respect to third parties

Business contracts

Ongoing contracts

Recovery claims

Court-approved transfer plan

Bankruptcy proceedings

Personal data breaches

White collar crime

Commercial law

500 Questions - Business Law

The unilateral modification of contractual terms is subject to the provisions of Article L. 442-1, II:

modification of the terms of sale and payment by the supplier;
modification of the service provider's remuneration;
significant increase in prices;
reorganization of the network;
cessation of the production of one of the items constituting the main object of the agreement.

To characterize a bre …

Can the unilateral modification of contractual terms be equated with a breach?

Article L. 442-1, II of the Commercial Code sanctions the abrupt termination, even partial, of an established commercial relationship without sufficient written notice. Initially intended to combat the practice of abusive delistings by certain distributors, its very general wording allows its application to all commercial relationships. It legalizes:

the necessity to respect a reasonable notice period within the framework of established commercial relationships;

a considerable extension of the scope of termination of established commercial relationships, which covers almost all professionals.

Special rules providing for notice periods, such as those concerning standard contracts for public freight transport or commercial agency contracts, remain applicable.

Even if it may have seemed legitimate to impose notice in the event of termination of relationships, the evolution of French law on established commercial relationships has proven to be concerning.

The increased protection of contracting parties has had the downside of mandating the continuation of business relationships with partners who are not necessarily the most competitive, under penalty of incurring liability, for long notice periods. The serious fault that allows for dispensing with notice has been interpreted strictly .

This protection has led to the granting of automatic compensation solely due to the failure to comply with the notice period, benefiting partners who have not suffered any damage, as they were able to transition .

The loss of efficiency that resulted was accompanied by other adverse effects. To prevent the risk of being condemned for abrupt termination of established commercial relationships, undertakings have implemented a policy of precariousness in the relationship by continuously launching calls for tenders or stopping relationships with any supplier exceeding a certain dependency rate.

If it is not possible to deprive, even partially, a partner in advance of the right to notice guaranteed by law, however, once the termination is pronounced, it is possible to settle the dispute related to the alleged insufficiency of the notice and to adjust it .

To address some of these concerns, Ordinance No 2019-359 of 24 April 2019, revising Title IV of Book IV of the Commercial Code regarding transparency, restrictive trade practices, and other prohibited practices, introduced a key modification to the regime of terminating established commercial relationships: the responsibility of the party terminating the relationship can no longer be engaged for insufficient notice in the event of a dispute over its duration if an 18-month notice has been given. However, it would have been more judicious to cap compensation in cases of insufficient notice, as the current text might lead litigants to continue demanding notice periods of two to three years if a notice period of less than 18 months is granted.

It would also have been useful to specify that the margin that can be obtained is understood after deducting avoided costs, as the Court of Cassation itself eventually stated . It is also regrettable, since this criterion does not constitute, according to consistent case law, an element for assessing the compensation awarded to the terminated party, that the text does not make retraining a full-fledged criterion in determining the notice period. Finally, the legislator could have asserted that the application of this protectionist measure to contracts subject to French law intended to be executed outside the national territory is not justified.

The breach by a party of the objectives clause does not constitute a sufficiently serious fault to justify an immediate termination of commercial relations, even in the presence of a termination clause to that effect.

Cass. com., 5 April 2018, LawLex201800000568JBJ.

In the event of insufficient notice given in the context of an ordinary termination, the ousted partner may receive compensation corresponding to the number of months of missing notice, without consideration of their retraining or the absence of actual harm.

Cass. com., 9 July 2013, LawLex201300001090JBJ.

The partners may, when the termination is finalized, agree on the terms of the termination and/or settle on compensation, despite the mandatory public policy provision of Article L. 442-1.

Cass. com., 16 December 2014, LawLex201400001505JBJ.

The main damage resulting from the abrupt nature of the termination is assessed based on the expected gross margin, which is the difference between the expected turnover excluding tax and the variable costs excluding tax not incurred during the insufficient notice period. This difference may still be reduced, if applicable, by the portion of fixed costs not incurred due to the decrease in activity resulting from the termination during the same period.

Cass. com., 28 June 2023, LawLex202300008431JBJ.

What is the regulatory context?

The provision does not explicitly concern any particular type of relationship, so case law has extended its application to numerous fields:

contracts for work and services, such as IT service provision;

relations between a broker and its client  ;

relations between an association of commercial co-owners of a shopping center and a security services provider .

While Article L. 442-1, II resulting from the Ordinance of 24 April 2019 refers, as the party responsible for the termination, to “any person carrying out production, distribution, or service activities” former Article L. 442-6, I referred to “ any trader, industrialist, or person registered in the trades register.” Under that provision, the following had been considered to fall within the scope of former Article L. 442-6, I, 5 of the Commercial Code as parties responsible for the termination:

an agricultural cooperative (even where it carried on a nonprofit activity, provided that it engaged in a production, distribution, or service activity);

a mutual insurance company (in its relations with auto body repairers);

certain associations (where they engage in an activity as a producer, merchant, industrial operator, service provider, or artisan, and the claimant invokes this against them) .

The new wording of Article L. 442-1, II should not call these solutions into question insofar as the reference to “ any person carrying out production, distribution, or service activities ” permits a broad interpretation .

The scope of victims was even broader, and the protection of former Article L. 442-6-I, 5 of the Commercial Code had been granted to:

In its new wording, Article L. 442-1, II does not further define the status of victims of the termination. Accordingly, the prior case law solutions should not be called into question.

Advice: Do not assume that prior notice is only required in business-to-business or distribution relationships.

An economic interest grouping that enters into a partnership with a broker to market insurance products in return for the payment of commissions carries out commercial acts that require it to give reasonable notice within the meaning of Article L. 442-1, II of the Commercial Code.

CA Paris, 20 December 2023, LawLex202400000076JBJ.

An association of co-owners maintains, despite its civil-law nature, a commercial relationship with a fire safety services company, which falls within the scope of Article L. 442-1, II of the Commercial Code, where the contract entered into has the exclusive purpose of providing services for the needs of its members' commercial activity.

Cass. com., 28 June 2023, No 21-16.940 LawLex202300008431JBJ.

An association such as the French Red Cross, which carries out substantial service-provision activities through its healthcare establishments and its food distribution, home assistance, and training programs, falls, in its relations with a graphic designer, within the scope of the provisions of Article L. 442-1, II of the Commercial Code.

Paris Judicial Court, 10 November 2023, LawLex202300014475JBJ.

A co-owners' association, despite its civil nature, maintains a commercial relationship with a company providing fire safety services, which falls within the scope of Article L. 442-1, II of the Commercial Code, where the contract entered into has as its sole purpose the provision of services for the needs of its members' commercial activity.

Is the prohibition of sudden terminations of established commercial relationships limited to distribution?

As the concept of a commercial relationship presupposes at least the habitual execution of commercial acts, real estate civil companies and agricultural civil companies are not authorized to invoke the provisions of Article L. 442-1, II. Regulated professions whose status prohibits them from engaging in commercial activity are excluded from protection by case law:

This exclusion seems illogical, as the commercial relationship is interpreted by case law more as a business relationship than as the exercise of commercial acts in the strict sense. Furthermore, the evolution of regulations is moving towards allowing certain regulated professions, such as accountants and lawyers, to partially engage in commercial activities.

However, apart from these ancillary activities, the Court of Cassation ruled in favor of excluding accountants from the scope of Article L. 442-1, II .

Nor do the text's provisions apply to persons whose activity is outside the competitive sector, such as professional unions , social insurance funds, or public undertakings acting within the scope of their public service mission .

The Paris Court of Appeal recently ruled that, lacking legal personality, a group of companies is not able to contract or engage in an established commercial relationship within the meaning of the provisions of Article L.442-1, II of the Commercial Code .

Article L. 442-1, II of the Commercial Code is not applicable to the relationships between a group of companies and an industrial property consultant, who practices a profession incompatible with any commercial activity, whether exercised directly or through an intermediary.

Cass. com., 1 December 2021, LawLex202100006104JBJ.

Accountants cannot invoke the provisions of Article L. 442-1, II of the Commercial Code in the context of the termination of relationships involving non-ancillary services.

Cass. com., 10 February 2021, LawLex202100000469JBJ.

Unlike ancillary activities, such as legal, administrative, or tax support, which may have a commercial nature, the primary accounting activity carried out by a chartered accountant does not fall under the provisions of Article L. 442-1, II of the Commercial Code relating to the sudden termination of established commercial relationships.

CA Paris, 13 April 2023, LawLex202300005683JBJ.

A professional union that does not operate in the competitive sector is not required to comply with the deadline provided by Article L. 442-1, II of the Commercial Code.

Judicial Court of Paris, 23 March 2015, LawLex201500000550JBJ.

Article L. 442-1, II of the Commercial Code cannot be enforced against a State acting within the scope of its public authority prerogatives.

CA Paris, 14 March 2019, LawLex201900000359JBJ.

Article L. 442-1, II of the Commercial Code does not apply to the termination of a contract that falls within the scope of the Public Procurement Code and has the nature of an administrative contract.

CA Nancy, 27 October 2015, LawLex201600001675JBJ.

The existence of a single economic entity or a single business stream cannot be upheld when the companies belonging to a group are distinct legal entities that engage in different activities and are connected to the client by separate contracts that are subject to separate negotiations.

CA Paris, Pôle 5 ch. 4, 10 September 2025, No 23/04880 LawLex202500007783JBJ.

Are certain professions excluded from protection?

The courts have endeavored to contain the expansion of the scope of the article, even in the presence of a commercial relationship, when the notice period has been set by the legislator or the regulatory authority. Thus, the following do not fall under Article L. 442-1, II of the Commercial Code:

commercial agents, for whom Article L. 134-11 of the Commercial Code expressly sets the notice period based on the duration of the contract ;

public transport of goods carried out by subcontractors insofar as subcontracting refers to the Loti law, which generally provides for shorter notice periods ;

internal relations within a cooperative ;

commercial leases, on the grounds that it would not be an activity of production of goods or provision of services ;

the relations between a banker and their client in the event of a termination of banking facilities, which are governed by the Monetary and Financial Code .

Article L. 442-1, II of the Commercial Code does not apply to the termination of relations between a commercial agent and their principal.

Cass. com., 18 October 2017, LawLex201700001747JBJ.

In the absence of a written contract between the carrier and its subcontractor, the termination of contractual relations is governed by the standard contract applicable to public road transport of goods carried out by subcontractors and not by Article L. 442-1, II of the Commercial Code.

Cass. com., 25 September 2019, LawLex201900001140JBJ.

Article L. 442-1, II of the Commercial Code, which establishes a tortious liability, does not apply within the framework of commercial relations for public road transport of goods carried out by subcontractors when the standard contract established by the LOTI, which provides for the notice periods for termination, governs, in the absence of contractual provisions, the relations between the subcontractor and the transport operator.

Cass. com., 4 October 2011, LawLex201100001572JBJ.

The exclusion of a cooperative member by the cooperative does not fall within the scope of Article L. 442-1, II of the Commercial Code, but under the law of 10 September 1947. Cass. com., 8 Feb. 2017, LawLex201700000289JBJ.

The conditions under which the links between a cooperative society of retail traders and an associate may cease are governed by the legal provisions specific to cooperatives and do not fall under those of Article L. 442-1, II of the Commercial Code. Cass. com., 16 May 2018, LawLex201800000752JBJ.

Cf. The provisions of Article L. 442-1, II of the Commercial Code apply when it is a matter of assessing not the social link between a cooperative of retail traders and a cooperative member, but the conditions of the termination of the business relationship between them, as long as special texts do not govern the issue of notice.

CA Paris, 6 November 2019, LawLex201900001348JBJ.

Article L. 442-1, II, which only concerns the activities of production of goods or provision of services, does not apply to a commercial lease.

CA Paris, 27 January 2017, LawLex201700000179JBJ.

Article L. 442-1, II of the Commercial Code does not apply to the termination or non-renewal of credit granted by a credit institution to an undertaking, operations exclusively governed by the provisions of the Monetary and Financial Code.

Cass. com., 25 October 2017, LawLex201700001719JBJ.

Do certain relationships subject to a special regime fall outside the scope of Article L. 442-1, II of the Commercial Code?

The law on sudden termination of established commercial relationships appears to have influenced the reform of contract law resulting from Ordinance No 2016-131 of 10 February 2016, in its version following the ratification law of 20 April 2018, with some provisions coming into force on 1 October 2016 and others on 1 October 2018.

New Article 1211 of the Civil Code indeed provides that “when the contract is concluded for an indefinite duration, each party may terminate it at any time, subject to compliance with the contractually agreed notice period or, failing that, a reasonable period.” Victims of terminations of indefinite duration contracts excluded from the protection of Article L. 442-1, II of the Commercial Code can therefore find protection in ordinary law for contracts concluded after 1 October 2016, unless a contractual notice period is stipulated.

Is the protection likely to apply under the ordinary law of contractual relations?

Commercial partners must maintain a direct relationship to fall under Article L. 442-1, II. Indirect relationships are therefore excluded between:

subcontractor and project owner (intermediary contractor) ;

manufacturer and sub-reseller (intermediary distributor) .

However, the interposition of a third party does not necessarily prevent the applicability of Article L. 442-1, II when:

the manufacturer is in direct contact with the victim;

the presence of the intermediary is only temporary;

the third party has direct dealings with the victim and claims compensation as an indirect victim of the breach .

In the latter case, the solution is questionable because it creates a cascading liability system that severely undermines the legal certainty of undertakings, exposing them to the risk of being sued by all subcontractors or suppliers of the ousted partner. The case law, after excessively extending the scope of Article L. 442-1, II, has returned to a stricter assessment of the concept of direct relationship. Thus, a wholesaler who has never ordered products from a company belonging to the same group as its supplier cannot be in a commercial relationship with the latter. Similarly, there are no direct relationships between an importer and a carrier, which excludes the grievance of sudden termination of established commercial relationships.

The question of who is liable for the termination also arises when its author belongs to a group of companies. The Court of Cassation is reluctant to engage the joint liability of members of the same group .

The Court of Cassation sets two conditions for the joint liability of the parent company: it must have solely made the decision to notify the termination, and the subsidiaries, wholly owned, must be deprived of autonomy in managing the relationship .

The undertaking that has worked for two companies of the same group cannot claim the existence of a single relationship when there is no unique decision-making center specific to them, they do not operate in the same market, offer differentiated products, and are linked to it by separate contracts that they have individually terminated, even if they act concurrently.

The identification of partners is crucial in the event of a restructuring. After ruling out the possibility of considering the existence of established commercial relationships for the entire duration of dealings with successive acquirers of a commercial partner, case law has recognized that if an acquirer assumes certain obligations of its predecessor through an amendment, it can be considered as continuing the commercial relationship initially established with a distributor . The same applies when the contract signed by a new supplier stipulates that it cancels and replaces previous agreements concluded between the client and the third party, and the subject of these contracts is identical.

In order to set limits on the extension of the duration of commercial relationships by taking over the seniority of successive owners of a business that has been subject to one or more transfers, case law now requires that the transferee of the business has expressed their intention to continue the initial commercial relationship established with the commercial partner as a condition for taking over the seniority .

The concept of an established commercial relationship being economic in nature and not legal, the successive changes of managers at the head of the ousted company remain without influence on the application of Article L. 442-1, II. Thus, when two service providers with the same activity, the same address, and the same manager succeed each other over time without any interruption, the commercial relationship initially established between the client and the first continues with the second.

Advice: Do not assume you are exempt from the rules with regard to notice in non-formalized relationships.

The client who terminates the contract binding them to a service provider does not incur liability towards the latter's subcontractors, in the absence of direct relations with them.

Cass. com., 21 June 2017, LawLex201700001109JBJ.

Article L. 442-1, II of the Commercial Code is not applicable between a manufacturer and a distributor when the latter has maintained commercial relations only with the importer of the contractual products.

Cass. com., 3 November 2004, LawLex200400002730JBJ.

In the absence of a direct relationship with the supplier, a third party to a distribution contract, who de facto ensures its execution over part of the granted territory, cannot, on the basis of Article L. 442-1, II of the Commercial Code, claim to be a victim of the termination notified to the distributor.

Paris, 20 November 2019, LawLex201900001409JBJ.

The third party to an established commercial relationship, indirectly harmed by the termination, may seek compensation based on tort liability law.

Cass. com., 6 September 2011, LawLex201100001450JBJ.

The termination of established commercial relations between a French service provider and its Thai client cannot be attributed to the French parent company of the latter, which constitutes a separate legal entity.

Cass. com., 7 May 2019, LawLex201900000630JBJ.

Lacking legal personality, a group of companies cannot enter into a contract, nor constitute a commercial partner within the meaning of Article L. 442-1, II of the Commercial Code.

Cass. com., 16 October 2019, LawLex201900001237JBJ.

The fact that establishments under a brand have a legal personality distinct from that of the network head does not exclude the possibility that the latter may be held liable for a termination of commercial relations that it effectively imposed on them.

Cass. com., 22 June 2022, LawLex202200003355JBJ.

Since the subsidiaries and franchisees had no autonomy in the decision to establish commercial relationships with a supplier and then to terminate them, the Court of Appeal was able to hold the network's parent company liable.

Cass. com., 5 July 2016, LawLex201600001291JBJ.

By taking over certain obligations of its predecessor through an amendment, the new supplier continues the commercial relationship initially established with the distributor.

Cass. com., 29 January 2008, LawLex200800000158JBJ.

The transferee of a business who has not expressly indicated their intention to continue the relationships established between the transferor and a service provider is not required to assume the notice obligation that results from these relationships, taking into account their duration.

Cass. com., 15 September 2015, LawLex201500001126JBJ.

The mere continuation of an undertaking's activity, following the acquisition of its assets, with its client, according to the same volumes and the same products, is not sufficient to demonstrate the common intention of the parties to continue the previous commercial relationship.

Cass. com., 19 October 2022, LawLex202200009007JBJ.

Who are the parties involved in the relationship?

Article L. 442-1, II of the Commercial Code does not define the concept of a relationship. The case law, to determine its established nature, looks for the existence of a business flow, exchanges between the parties, and notes the importance of the turnover.

The application of Article L. 442-1, II only requires a customer relations, a situation arising from habit (a series of purchases from the supplier), regardless of any contract in the legal sense of the term. The absence of a written document , a framework contract , exclusivity , or a revenue guarantee are irrelevant to the classification.

Where  there has been a regular and stable financial flow between two companies from 2012 to 2017, a commercial relationship is established so that the partner can legitimately believe in its continuation, even in the absence of a written contract.

CA Paris, 1 March 2023, LawLex202300003083JBJ.

A commercial relationship, characterized by regular orders for 30 years, notably through the systematic redirection of requests concerning a department, with systematic or even exceptional discounts on prices, demonstrates a continuous, stable, and habitual nature even in the absence of a framework agreement between the parties.

CA Paris, 7 September 2022, LawLex202200006919JBJ.

The steady, stable, and habitual flow of orders for computer equipment and services between the parties, which represents a turnover that increased from 233,000 euros in orders to more than ten million euros over five years, characterizes the existence of established commercial relations, even in the absence of a commitment on business volume or granted exclusivity.

CA Paris, 25 June 2021, LawLex202100004092JBJ.

A commercial relationship characterized by a succession of occasional orders between 1992 and 2017, involving substantial amounts, is an'established' relationship even in the absence of a guaranteed volume of business.

CA Paris, 5 February 2020, LawLex202000000190JBJ.

What is a "relationship"?

A relationship is considered established when it extends over time. Relationships of a few months are not sufficient to characterize an established relationship.

The following factors are particularly decisive:

An economic concept rather than a legal one, the concept of an established commercial relationship may concern a succession of relationships:

fixed-term contracts, even if they exclude tacit renewal ;

The Court of Cassation considers that the use of tenders is likely to destabilize the relationship when it is systematic, even if the usual service provider is always selected . However, the Paris Court of Appeal adopts a position that creates legal uncertainty because sometimes it aligns with the solution of the Court of Cassation, and other times it considers that the continuous renewal of contracts over a long period or their systematic renewal indicates the stability of the relationship .

Advice: Use of calls for tenders will often, but not necessarily, allow you to avoid the application of the law on sudden termination.

A relationship limited to one month and one week does not have an established character, even if the parties intended to make it long-term.

CA Paris, 29 Nov. 2023, LawLex202300014172JBJ.

The signing of fixed-term contracts for one year that are not tacitly renewable forms an established commercial relationship when the renewals have occurred without difficulties for six consecutive years.

Cass. com., 23 June 2015, LawLex201500000835JBJ.

A succession of occasional contracts may be sufficient to characterize an established commercial relationship within the meaning of Article L. 442-1, II of the Commercial Code when they pertain to the same subject matter.

Cass. com., 6 September 2016, LawLex201600001407JBJ.

The company that ended a business relationship in 2016, which had been in place since 1996 and subject to annual tender procedures since 2010, does not incur liability, as the introduction of a contingency does not establish a legitimate belief in the continuity of this relationship, which has become precarious.

Cass. com., 11 January 2023, LawLex202300000666JBJ.

A commercial relationship, which, although lasting several years, was characterized by the systematic use of a tendering procedure, does not have the stability required by Article L. 442-1, II of the Commercial Code.

Cass. com., 18 October 2017, LawLex201700001743JBJ.

An uninterrupted commercial relationship of eleven years is considered established even if the service provider did not have any exclusivity and was regularly reminded of its competition with other agencies.

CA Paris, 31 March 2023, LawLex202300004939JBJ.

What is an established relationship?

The termination can sometimes take the form of delisting without sufficient notice to allow the ousted partnerto reposition itself.

Whether total or partial, sudden termination is sanctioned. Partial termination is characterized when orders significantly decrease, unless this decrease is justified by financial difficulties or a decline in the client's activity (economic crisis exception) . The loss of revenue must be significant for the partner .

Advice: Be alert to any signs any intention of partial or total delisting.

500 Questions - Business Law

48. Can the unilateral modification of contractual terms be equated with a breach?

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48. Can the unilateral modification of contractual terms be equated with a breach?

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