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 abuse of power covers the scenario in which the agent enters into an act with a third party, in fraud of the rights of their principal. In other words, the agent uses the powers conferred by their principal, not in the interest of the latter, but in their own interest. Thus, an agent of a co-owner at a general meeting who acts against the instructions of their principal is guilty of abuse of p …

What are the consequences for third parties for misuse of powers by an agent?

The performance of the mandate traditionally entails certain consequences for third parties, both for the principal and the agent.

Regarding the principal, Article 1998, para. 1, of the Civil Code, provides that “the principal is bound to fulfill the commitments contracted by the agent, in accordance with the authority granted to them.” It follows from this text, as well as from the principle of agent transparency, that the acts concluded by the agent are deemed to have been concluded by the principal, so that the latter must execute them :

by the effect of representation, the consent of the agent binds the principal ;

the consent of the principal is affected by the same defects that tainted the consent given by their agent acting within the limits of their powers ;

the terms of a contract concluded by the agent within the limits of their authority are binding on the principal ;

service of documents on the agent start the time limits against the principal ;

a third party may enforce against the principal the discharge resulting from payment made into the hands of the agent ;

an admission by the agent is enforceable against the principal when this admission concerns facts that are personal to him and do not exceed the limits of the mandate with which he has been entrusted .

On the agent's side, Article 1997 of the Civil Code states: “The agent who has given the party with whom he contracts in this capacity sufficient knowledge of his powers is not bound by any guarantee for what has been done beyond, unless he has personally submitted to it.” Essentially reiterating these provisions, the new Article 1154, para. 1, of the Civil Code states: “When the representative acts within the limits of his powers, in the name and on behalf of the principal, the latter alone is bound by the commitment thus contracted.”

According to these texts, the agent who acts in accordance with their mandate is not a party to the contract concluded between the principal and their co-contractor:

he cannot, unless otherwise contractually stipulated, be held liable to third parties for the commitments he has made in the name and on behalf of the represented ;

reciprocally, since he is not a party to the contract binding the principal and his co-contractor, the agent cannot bring a contractual liability action against the latter ;

the agent may incur the tortious liability of third parties in the event of wrongful conduct .

Advice: In case of contractual non-performance, take action against the principal.

The performance of contractual obligations entered into by an agent, in the name and on behalf of their principal, is the sole responsibility of the latter, and since joint liability is not presumed, a court of appeal cannot hold a company liable alongside its principal on the grounds that, as an exclusive agent, it must answer for the errors and negligence of its principal.

Cass. com., 9 May 1985, LawLex202200008684JBJ.

A court of appeal cannot pronounce the rescission of a sale for non-conformity of the goods, as long as the buyer's agent has verified and accepted them without reservations.

Cass. com., 12 February 1980, LawLex202200000911JBJ.

The principal cannot, however, invoke the nullity of the contract for fraudulent concealment by the co-contractor, as long as the agent was aware of it at the time of entering into the contract.

Cass. 1re civ., 19 May 1999, LawLex202300011973JBJ.

The stipulations of a contract concluded by the agent are binding on the principal, so that a court of appeal cannot set aside the limitation of liability clause in a transport contract on the grounds that, to enforce such a clause, the carrier should have brought it to the attention of the owner of the goods, even though the carrier had been entrusted with the transport by the owner's agent.

Cass. com., 21 March 1983, LawLex202200009138JBJ.

A court of appeal cannot hold that the lessee, who, having sent complaint letters to the lessor's agent, never sent a formal notice directly and personally to the lessor, so that he cannot claim damages, whereas the formal notice sent to the agent is effective with respect to the principal.

Cass. 3e civ., 5 June 1984, LawLex202300013652JBJ.

The insurer who sends a check to the agent validly discharges their obligation to pay the insurance indemnity to the principal.

Cass. 1re civ., 9 May 1994, LawLex202300013752JBJ.

Without the need for a special mandate, the agent makes an admission, which is enforceable against the principal, when this admission concerns facts that are personal to him and do not exceed the limits of the mandate with which he has been entrusted.

Cass. soc., 12 December 1962, LawLex202300013749JBJ.

A court of appeal cannot therefore order an agent to pay damages to a service provider of its principal, without establishing a tort or quasi-tort committed by the agent, who has no legal relationship with said service provider, in the performance of its mission.

Cass. 3e civ., 16 May 1977, LawLex202200009593JBJ.

A travel agency, when mandated to organize a trip, is a third party to the transport contract concluded between its client/principal and the carrier, so it does not have the standing to bring an action for liability against the carrier based on a breach of the transport contract's stipulations.

Cass. 1re civ., 22 June 2004, LawLex202300013650JBJ.

Even if he is not liable for the commission, the purchaser whose wrongful behavior caused the real estate agent to lose it, through whom he was put in contact with the seller who had mandated him, must, on the basis of tort liability, compensate this real estate agent for his loss.

Cass. ass. plén., 9 May 2008, LawLex202300013745JBJ.

What are the consequences of the proper performance of the agency agreement for third parties?

When the agent contracts in his or her own name, while having declared to act on behalf of their principal, the agency contract is executed imperfectly, without representation, meaning it is valid between the principal and the agent, but does not produce effects with respect to third parties, of whom the agent is the sole contracting party.

The agent, who acts in their own name with a third party, becomes the direct contractual debtor of the latter, except for their recourse against the principal . Thus, when a lease contract has been signed solely by a real estate agency, without any mention of the name of the owner of the rented apartment, and the tenants only became aware of this name after the production, upon injunction during the proceedings, of the management mandate concluded between the owner and the agency, the said agency is the debtor of the landlord's obligations towards the tenants, without prejudice to recourse against its principal .

Advice: In case of contractual non-performance, bring action only against the agent.

The sender who deals with a carrier, without informing them that they are acting on behalf of the recipient for whom they have received a mandate to this effect, is personally obligated to the carrier. Cass. com., 31 March 1981, LawLex202300013736JBJ.

The agent who acts in their own name with a third party becomes the debtor of the latter, except for their recourse against the principal. Thus, when the lease contract was signed solely by the real estate agency, without any mention of the name of the owner of the rented apartment, and the tenants only became aware of this name after the management mandate concluded between the owner and the agency was produced upon court order during the proceedings, the agency is the debtor of the landlord's obligations towards the tenants, without prejudice to recourse against its principal.

Cass. 1re civ., 17 November 1993, LawLex202200009984JBJ.

What are the effects for third parties of exercising a mandate without representation?

According to established case law, the agent is personally liable to third parties for torts or quasi-torts that they may commit to their detriment in the performance of their mandate.

The demonstration of an agent's fault, external to their mandate, is not required by case law to engage their own liability . However, it must constitute a tortious fault with respect to the third party .

The tortious or quasi-tortious fault of the agent may consist of either an omission or a positive act. Thus, the real estate professional who fails to inform buyers of apparent defects affecting the property sold through their intermediary incurs liability based on Article 1240 of the Civil Code . In contrast, the failure to search for latent defects that may affect the property they are tasked with selling does not constitute, for the agent company, a fault towards the buyer that would incur their non-contractual liability .

The agent is liable to third parties harmed by torts or quasi-torts committed on their own initiative, but also on the orders of the principal .

The contractual fault of an agent towards their principal can thus be classified as an extracontractual fault towards a third party, provided that it also constitutes a violation of a general obligation of prudence and diligence.

Cass. com., 17 June 1997, LawLex202300013739JBJ.

When the only fault that can be attributed to a maritime insurance broker is a breach of their duty to advise the shipyard that appointed them, this fault, which only their principal can complain about, is not such as to engage their tort liability towards the shipowners who are clients of their principal.

The agent, in his capacity as a real estate professional, could not have been unaware of the apparent defects affecting the building sold through his intermediary, so by failing to inform the buyers of their existence, he breached his duty to advise and incurred liability towards them based on Article 1240 of the Civil Code.

Cass. 1re civ., 18 April 1989, LawLex202300013699JBJ.

It is not the responsibility of the general agent, as the insurer's representative, to verify the accuracy of the insured's statements regarding the declared value of the property, nor to warn them about the consequences of an inaccuracy that they have no reason to suspect. Therefore, the claim for damages filed against them by the insured, for breach of their duty to advise, must be dismissed.

Cass. 1re civ., 1 February 2000, LawLex202300013701JBJ.

A court of appeal cannot dismiss the liability action of the bare owner of a building, directed against the property manager responsible for its rental management on behalf of the usufructuaries, for having concluded a commercial lease without her consent, by attributing the false status of owners to the usufructuaries, on the grounds that the agent was allegedly obliged by the formal instructions of his principals, when the professional agent is required to verify the exact status of the principal he engages in a legal act and is personally liable to third parties harmed by the offenses or quasi-offenses he may commit, either spontaneously or even on the instructions of the principal, in the performance of his mission.

Cass. 1re civ., 13 October 1992, LawLex202300012067JBJ.

What are the remedies available to third parties in the event of faulty execution of the mandate?

Beyond the fault, the fraudulent maneuvers or silence of the agent obviously engage their liability towards third parties. But can the latter seek compensation from the principal due to the fraud of their agent?

The case law has been hesitant on this point. In principle, according to the Court of Cassation, the tortious or quasi-tortious fault of the agent does not engage the principal's liability on this basis, unless a fault is personally attributable to them . This is the case when the principal was aware of the misleading information communicated by the agent and benefited from it . However, the Court of Cassation had also admitted, on the basis of fraud, that the fraudulent maneuvers of the seller's representative, who is not a third party to the contract, engage the liability of the represented party . In 2021, the Court of Cassation revised this case law: the principal's liability can only be engaged, due to the fraud of their agent, for a fault, within the meaning of Articles 1240 and 1241 of the Civil Code .

The preliminary draft reform of contract law, in its Article 2009, proposes, however, to reverse this solution by providing that “the principal is liable for the fraud or duress of their agent, committed to the detriment of the third-party co-contractor.” According to the drafters of the preliminary draft, the fraud committed in the execution of their mandate by the agent, who acted within the limits of their powers, must be attributed to the principal because the agent represented them.

The victim of the agent's fraud in the execution of their mandate may also seek annulment of the agreement based on Articles 1137 and 1178, para. 1, of the Civil Code .

Advice: Favor an action in tort liability against the agent, and only bring proceedings against the principal if a tort is attributable to the latter.

The tortious or quasi-tortious fault of the agent does not engage the liability of the principal; the latter can only be held liable under Article 14-1 of Law No 75-1334 of 31 December 1975 if they have personal knowledge of the subcontractor's presence on the site.

Cass. 3e civ., 15 April 2021, LawLex202200008690JBJ.

The principal real estate civil company is liable to the purchasers, third parties in good faith, for the fraud committed by its agent in the execution of its mandate, as long as it is not demonstrated that the latter exceeded the limits of their representative powers and that the company was aware of the misleading information communicated by the agent to potential buyers and benefited from it.

Cass. 3e civ., 29 April 1998, LawLex202300002311JBJ.

The fraudulent maneuvers of the architect, representative of the seller, who is not a third party to the contract, engage the liability of the represented party, without it being possible to reproach the notary, in the presence of the precise and detailed certificate provided by the latter, for failing, to the detriment of the buyer, in his duty to inform regarding the irregularity of the work carried out in the basement of the chalet.

Cass. 3e civ., 5 July 2018, LawLex202200009557JBJ.

If the principal is contractually liable for damages resulting from the non-performance of commitments made by their agent within the limits of the conferred mandate, the agent's fraud in the exercise of their mandate only engages the principal's non-contractual liability if the principal has personally committed a fault, which the victim must establish.

Cass. mixte, 29 October 2021, LawLex202100006463JBJ.

To declare inadmissible the claim for annulment due to fraud of the video surveillance rental contract, a court of appeal cannot hold that fraud is a cause for annulment only if it originates from the party with whom the obligation is contracted, and that this would not be the case here because the fraudulent maneuvers allegedly came from the representative of another company, which was not called to the case, without investigating whether this company, whose representative was the sole contact for the claimant and had the claimant sign the rental contract on behalf of the lessor, acted as an agent of the lessor, from which it would result that the maneuvers attributed to the representative would, if proven, be enforceable against the lessor.

Cass. com., 13 December 2016, LawLex202200009152JBJ.

What are the remedies available to third parties in the event of fraudulent execution of the mandate?

The abuse of power covers the scenario in which the agent enters into an act with a third party, in fraud of the rights of their principal. In other words, the agent uses the powers conferred by their principal, not in the interest of the latter, but in their own interest. Thus, an agent of a co-owner at a general meeting who acts against the instructions of their principal is guilty of abuse of power .

Acts concluded by an agent who has misused their powers bind the principal with respect to third parties acting in good faith, from whom they cannot seek compensation, even if the principal can, of course, take contractual liability action against their representative .

Since the ordinance of 10 February 2016, the Civil Code governs representation within the ordinary law of contracts. According to the current Article 1157 of the Civil Code: “When the representative misuses their powers to the detriment of the represented party, the latter may invoke the nullity of the act performed if the third party was aware of the misuse or could not have been unaware of it,” specifying that “misuse of power refers to a representative who acts within the limits of their powers but uses them for a purpose other than that agreed upon or provided by law.”

The Court of Cassation made an initial application of the provisions of Article 1157 of the Civil Code, while affirming, with reference to Article 1998 of the Civil Code, that even when the agent misuses their powers to the detriment of the principal, the commitments made by the agent towards a third party bind the principal, unless the third party was aware of the misuse or could not have been unaware of it .

Advice: Establish that the agent acted in their own interest and not in the interest of the principal in order to compel the latter to fulfill the commitments made in their name.

The trustee does not have the authority to prevent the representative of a co-owner at a general meeting from casting a vote contrary to the instructions expressed in their mandate, so the principal is not admissible to seek redress against them on this basis.

Cass. 3e civ., 8 September 2016, LawLex202200009334JBJ.

On the other hand, the obligations contracted as a result of a fraudulent concert between the third party and the agent are unenforceable against him.

Cass. 3e civ., 29 November 1972, LawLex202300013711JBJ.

Even when the agent abuses their powers to the detriment of the principal, the commitments made by the agent towards a third party bind the principal, unless the third party was aware of the abuse or could not have been unaware of it.

Cass. 1re civ., 29 March 2023, LawLex202300004686JBJ.

Within the Civil Code, the consequences of an agent's exceeding authority were initially provided only by Article 1998, para. 2, which states that the principal is bound to perform the commitment made by the agent beyond the powers granted to them “only if they have expressly or tacitly ratified it.” Then, in 2016, the reform of contract law introduced general provisions on representation within the Civil Code, including Article 1156, which governs the exceeding of authority (as well as the lack of authority) under a regime different from that established by case law pursuant to the provisions of Article 1998.

The abuse of authority raises the question of the scope of the mandate conferred on the agent . To clear up any doubts that the third party may have about the scope of the representative's powers, the reform of contract law introduced an inquiry action in Article 1158.

Regarding the regime of ultra vires, it has been consistently held, pursuant to Article 1998, that in the event of an excess of authority, the principal is not bound by the commitments made by their agent . However, the principal remains bound for everything that has been executed in accordance with the mandate .

However, the case law has been hesitant regarding the sanction for exceeding authority. It has considered that when the agent exceeded their authority by acting in concert with a third party in bad faith, the principal could seek annulment of the act . But the question of the nature of the annulment, whether absolute or relative, affecting it arose: the case law opted for a relative annulment, thus only invocable by the principal . The courts have also sometimes held the unenforceability of the act performed by the agent beyond the limits of their authority .

Henceforth, Article 1156 of the Civil Code provides: “An act performed by a representative without authority or beyond their authority is unenforceable against the principal, unless the contracting third party legitimately believed in the reality of the representative's authority, particularly due to the behavior or statements of the principal. When the third party was unaware that the act was performed by a representative without authority or beyond their authority, they may invoke its nullity. The unenforceability or nullity of the act can no longer be invoked once the principal has ratified it.”

In case of doubt about the agent's authority, it is prudent to resort to the interrogatory action provided for in Article 1158 of the Civil Code. Several decisions have indeed rejected the existence of an apparent mandate by holding that the person claiming the existence of such a mandate could have, before contracting with the alleged representative, questioned the principal on the basis of Article 1158 of the Civil Code (Nîmes, 31 March 2021, No 19/00710; Chambéry, 27 Feb. 2024, No 21/01237; Judicial Court Paris, 30 Apr. 2024, No 21/12339).

Advice: To ensure the extent of the agent's powers before concluding an act, bring the statutory inquiry action provided for in Article 1158 of the Civil Code.

The agent, who, having received a power of attorney for the purpose of administering an estate, limited to acts of management strictly necessary for its preservation, leases it, exceeds their mandate.

Cass. 1re civ., 18 November 1964, LawLex202300013712JBJ.

A loan taken out in the name of a company being formed by a partner-manager cannot be considered as concluded under a valid mandate, which can only be issued to a partner or a non-partner manager, so it does not bind the guarantor who cannot guarantee the debt of a person other than the intended debtor.

Cass. 1re civ., 2 October 2002, LawLex202200003650JBJ.

The applicants are only bound to the bank under their mortgage surety commitment, limited to the sole property described in the deed, without being bound by clauses exceeding the given mandate.

Cass. 1re civ., 26 January 1999, LawLex202200008852JBJ.

The agent, who, having received a power of attorney for the purpose of administering an estate, limited to acts of management strictly necessary for its preservation, exceeds their mandate by leasing it, does not bind their principal with respect to the lessee with whom they have fraudulently acted in concert.

Pursuant to the combined provisions of Articles 1984 and 1998 of the Civil Code, irregularities affecting the conventional representation of a party, whether due to the nullity of the mandate, an excess or absence of authority, are sanctioned by the relative nullity of the act performed on behalf of the represented party, who alone may request it.

CA Nancy, 27 January 2022, LawLex202300008845JBJ.

The principal has a claim for unenforceability of the transfer of shares carried out by their agent by exceeding the powers of their general management mandate.

Cass. com., 11 March 2014, LawLex202300013715JBJ.

What happens to third parties when the agent acts beyond the powers conferred on them by their principal?

Before the 2016 contract law reform, the absence of representative authority of the agent was not addressed by the Civil Code. According to the provisions of Article 1998 of the Civil Code, the principal must fulfill the commitments made by the agent in accordance with their mandate, without being bound, unless ratified, by actions taken beyond it—which addresses the scenario of exceeding authority. However, this text does not provide for the agent's lack of authority. It is under Article 1998 that courts most often sanctioned this irregularity in representation by nullity, before Article 1156 was adopted following the 2016 reform.

According to case law, the absence of authority of the agent challenged the validity of the act performed by the latter . Regardless of the holder of the action for annulment, the act carried out without authority was devoid of effects with respect to all . By analogy to the exceeding of authority, case law allowed the principal to ratify what had been done without a mandate .

Henceforth, Article 1156 of the Civil Code sanctions the absence of authority by the unenforceability of the act against the represented party, unless the contracting third party legitimately believed in the reality of the representative's powers. In this case, the contracting third party may invoke the nullity of the act, knowing that unenforceability, like the nullity of the act, can no longer be invoked once the represented party has ratified it.

There is, however, in matters of negotiable instruments, an exception to the nullity or unenforceability of an act performed without a mandate, which leads the agent to fulfill their commitments towards third parties . Article L. 511-5 of the Commercial Code indeed provides: “Anyone who signs a bill of exchange as a representative of a person for whom they did not have the authority to act is personally obligated by the bill and, if they have paid, has the same rights as the purported principal would have had. The same applies to a representative who has exceeded their authority.”

Advice: Argue that the irregular act has been tacitly ratified so that its unenforceability can no longer be claimed by the principal.

The nullity of a contract (or the lapse in the case of a promise) due to the absence of authority of the agent, which is relative, can only be requested by the represented party.

Cass. 2e civ., 13 June 2013, LawLex202200008891JBJ.

Even if the request for annulment of the promise of sale made without her consent by her husband on a jointly owned property is personally initiated by the wife, the sole holder of the action, the annulment nonetheless produces its effects in the relations between the husband and the purchaser.

Cass. 1re civ., 11 January 1983, LawLex202200002181JBJ.

Irregularities affecting the conventional representation of a party to a notarial act, particularly due to the absence of authority of the person representing them in the notarial act, as they are not a notary clerk contrary to the terms of the power of attorney, are sanctioned by the relative nullity of the act performed on behalf of the represented party, who alone may request it, unless they ratify what has been done for them outside or without a mandate, under the conditions of Article 1998, para. 2, of the Civil Code.

Cass. 1re civ., 2 July 2014, LawLex202300008264JBJ.

The partner who signs a bill of exchange in the name of the company, without having the authority to do so, personally commits to third parties.

Cass. com., 29 March 1977, LawLex202300004686JBJ.

What are the consequences for third parties of the agent's lack of authority?

Article 1998 of the Civil Code provides that the principal cannot be held liable for actions taken beyond the mandate by the agent, unless the principal has expressly or tacitly ratified them. Article 1156 further states that “the unenforceability as well as the nullity of the act [carried out in the absence of authority or in excess of the agent's powers] can no longer be invoked once the represented party has ratified it.”

The scope of ratification is therefore broad. According to case law, irregularities affecting the conventional representation of a party, whether due to the nullity of the mandate, an excess or absence of authority, can be ratified by the principal. Furthermore, ratification by the represented party is possible even when the agent who exceeded their mandate declared they were acting in their own name .

The principal's intention to ratify the irregular act must be manifested by a positive and unequivocal act . The assessment of the facts and circumstances that reveal a ratification by the principal of the acts performed by the agent falls under the sovereign power of the trial courts . Thus, when a dismissal letter has been signed on behalf of the human resources director and the dismissal procedure completed, the mandate to sign the dismissal letter had been ratified . Conversely, there is tacit ratification, according to the courts, when the principal neither disavows the agent nor contests their acts . Tacit ratification can also result from the voluntary execution of the contract by the party that was irregularly represented . Furthermore, ratification is not subject to the conditions required for the confirmation of a void act .

The ratification by the principal of the act contracted in their name by the agent has the effect of binding them to their co-contractor . Conversely, the liability of the third-party cocontracting party can no longer be invoked by the principal once he has adopted as his own the act concluded by his agent . Ratification by the principal of the act performed by the agent takes effect retroactively as of the date of the ratified act, irrespective of whether the acts of performance occurred before or after the ratification .

Advice: Invoke a tacit ratification of the irregular act to compel the principal to honor the commitments made on their behalf.

An author may ratify the contract concluded by their publishing house, which, having only been mandated to settle the terms of reissuing their work, contracted with another publishing company, both in its own name and in the name of the author/principal.

Cass. 1re civ., 28 April 1980, LawLex202300002332JBJ.

There can be no ratification of a subscription of shares when the letters sent by the principals to their agent demonstrate that at no time did they express their intention to ratify an act about which they have always expressed doubts, or even their opposition.

Cass. 1re civ., 6 February 1996, LawLex202200008525JBJ.

The heated discussion between the seller and his agent, leading to police intervention, as well as the latter's refusal to return the vehicle keys, exclude any ratification by the principal of the auction of the vehicle below its reserve price.

Cass. 3e civ., 25 June 1996, LawLex202300013716JBJ.

A court of appeal cannot hold that the dismissal letter, which does not specify the identity of the person signing the termination letter, is tainted with substantive irregularities that deprive the dismissal of any real and serious cause because it does not allow verification that said person is acting within the undertaking and had been authorized to do so by the employer, when it follows from the fact that the letter was signed on behalf of the human resources director and the dismissal procedure was completed, that the mandate to sign the dismissal letter was ratified.

Cass. soc., 10 November 2009, LawLex202200007130JBJ.

In exercising its sovereign power, a court of appeal was able to infer from the existence of personal ties between the individual concerned and her husband, the manager, and her children, the partners of the company renting the real estate she owns, from her community of interest with them, as well as from her perfect knowledge of the situation, revealed both by tax declarations and by the location of the business at the same address as the couple's home, that, given her silence for more than two years, the wife intended to ratify the commercial lease granted by her husband on her own property.

Cass. 1re civ., 17 May 1993, LawLex202100002627JBJ.

The applicants cannot seek annulment for lack of authority of the person representing them in the notarized act, since they have received the funds, taken possession of the property, benefited from tax advantages, collected the rents, and started repaying the loan, and thus, they have ratified the mandate and the disputed loan agreement.

Cass. 1re civ., 15 October 2014, LawLex202200008839JBJ.

A court of appeal cannot declare null a writ of seizure and sale on the grounds that the loan agreement was signed by a notarial secretary without any authority, and that the ratification of the disputed mandate by the borrowers is not established, even though they received the funds and repaid the loan for several years, as there is no evidence that they were aware of the defect affecting the act and intended to remedy it, whereas ratification can be tacit and result from the voluntary performance of a contract by the party who was irregularly represented, without being subject to the conditions required for the confirmation of a void act.

Cass. 1re civ., 17 December 2015, LawLex202300008226JBJ.

The commitment made by a partner on behalf of a limited liability company in formation, which has been ratified by a mandate established subsequently but given by the partners before the registration of the company, results in the company assuming these commitments.

Cass. com., 1 July 2008, LawLex202200003798JBJ.

The liability of the bank holding the account on which transactions are carried out, without authorization by the account holder's spouse, is not engaged if the account holder has ratified them, even tacitly, in accordance with the rules of mandate.

Cass. com., 17 November 2015, LawLex202300008557JBJ.

A court of appeal may find that the reservations expressed by the manager during the company's general meeting, which concerned the validity of the power of attorney given by one partner to another, were lifted by a subsequent letter in which the principal ratified all the decisions made by their agent following this meeting, including the decision to dismiss the manager, without giving retroactive effect to the contested dismissal.

Cass. 3e civ., 20 December 1971, LawLex202200009653JBJ.

When is ratification by the principal possible?

The apparent agency agreement is an illustration of the theory of appearance, a creation of judicial origin, which is equivalent to a quasi-contract, in the sense that it causes an apparent factual situation to produce legal effects similar to those of a contract.

The apparent agency contract requires the application of closely intertwined conditions: the legitimate belief of the contracting third party in the appearance of a mandate, knowing that, according to case law, the legitimate nature of this belief requires circumstances, to which the principal is not completely unrelated, allowing the third party not to verify the agent's powers.

What are the conditions for the application of apparent agency agreements?

The face value or appearance doctrine (théorie de l'apparence), aimed at protecting the third party who has legitimately mistaken the signatory's status as an agent, applies primarily when the appearance of agency has been caused by deceit or trickery. The person who claims the false status of an agent or pretends to be one misleads the contracting third party, who cannot then be blamed for not having verified the extent of their powers .

The belief of the third-party contractor in the appearance of representation generally results from circumstances, which may be objectively misleading, in which the disputed act was concluded  and must be assessed at the date of the conclusion of the act.

The existence of prior contractual links , a usual practice  or established over time  have been recognized by case law as facilitating the contracting third party's belief in the appearance.

Sometimes, the contracting third party may be a victim, without any scheme, of a misleading appearance . However, their belief is no less legitimate if the circumstances allowed them not to verify the agent's authority.

Among these circumstances are, according to the courts, the functions of the alleged agent, which may justify the contracting third party's belief in the existence or scope of their powers. The function of mayor  or lawyer  of the agent has thus allowed the courts to uphold the existence of apparent authority. The same applies to the function of notary , subject to contrary stipulations , or unless the disputed act was drawn up by a notary with the assistance of a colleague, as in such circumstances, both public officers are then required to verify their respective powers .

Professional practices can also be the source of the third party's legitimate belief in the apparent authority of the agent .

The existence of family ties between the principal and the alleged agent may also legitimize the third party's belief in the appearance of a mandate . However, the mere existence of family ties between the principal and the pseudo-agent , and even more so an appearance of kinship , is, in itself, insufficient to establish the existence of an apparent mandate.

Other circumstances, on the contrary, render the third party's belief in the appearance of a mandate inexcusable. According to the Court of Cassation, an abnormal situation , which, in principle, prompts any contracting party to exercise caution or, at the very least, to inquire, excludes the legitimate belief of the third party in the appearance . Furthermore, the courts assess more harshly the legitimate belief of the contracting third party when they have the status of a professional .

The employee of a company engaged in business brokerage, who informed the contracting third party, for whom he was the sole contact, that he was acting on behalf of the company by using the term “we” to refer to it and ending his messages with the words “For the company...”, must thus be considered an apparent agent.

Cass. com., 9 March 2022, LawLex202200003960JBJ.

500 Questions - Business Law

460. What are the consequences for third parties for misuse of powers by an agent?

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460. What are the consequences for third parties for misuse of powers by an agent?

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