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Preliminary sales agreement

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Effects of the agency agreement with respect to third parties

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500 Questions - Business Law

According to case law, the promisor who sells to a third party the property that is the subject of a bilateral promise of sale fails to fulfill their commitments to the beneficiary, to whom they owe compensation .
Regarding the third-party purchaser, the courts distinguish between whether they are in good or bad faith. Acquiring a property with knowledge of a prior promise of sale made on the same …

What are the consequences of a sale carried out in breach of the bilateral promise to sell?

Article 1124, para. 1, of the Civil Code defines the unilateral promise of sale as “the contract by which one party, the promisor, grants the other, the beneficiary, the right to opt for the conclusion of a contract whose essential elements are determined, and for the formation of which only the beneficiary's consent is lacking.” According to this text, the promisor unilaterally commits to sell to the beneficiary, who has the right to acquire or not acquire, with the understanding that when the latter exercises the option, the promise contract is formed.

Previously, case law defined the unilateral promise of sale negatively, in opposition to the bilateral promise of sale. Based on the assumption that the promise of sale, which contains reciprocal commitments for each party, has a bilateral character, the Court of Cassation deduced the unilateral nature of a promise of sale from the absence of reciprocal obligations provided in the agreement. However, the existence of reciprocal obligations for the parties does not exclude the classification of a unilateral promise if these obligations are not “regularly symmetrical.” The Court of Cassation now seeks the existence of an obligation to sell imposed solely on the promisor, or excluding any obligation to purchase for the beneficiary, in order to classify it as a unilateral promise .

According to case law, the payment by the beneficiary of an immobilization indemnity of such an amount that it deprives them of their option right and binds them as much as the promisor leads to the reclassification of a unilateral promise as a bilateral promise of sale . However, neither the payment of a security deposit amounting to almost the sale price , nor the substitution option granted to the buyer,  nor the clause excluding the notary's arbitration in case of dispute  have any effect on the bilateral or unilateral nature of the promise of sale.

Advice: In case of a dispute regarding the classification of a promise, demonstrate that a preliminary contract is unilateral only if one or more persons are obligated to one or more others, without any commitment on the part of the latter.

The contract by which the party referred to as the “seller” declares to sell a building to a company referred to as the “buyer,” under the suspensive condition that the latter confirms its definitive intention to purchase within a one-month period, is a unilateral promise of sale, because the condition to which the sale is subject implies that only the party referred to as the seller is bound.

Cass. 3e civ., 21 November 1984, LawLex202100006451JBJ.

The unilateral promise to sell a business that provides for compensation in an amount such that it does not merely compensate for the immobilization of the business for a period of three months, but reflects the buyer's commitment to take possession on the agreed date, must thus be reclassified as a bilateral promise.

Cass. com., 13 February 1978, LawLex202200002402JBJ.

The payment of a security deposit amounting to almost the sale price does not in any way deprive the beneficiary of their right to acquire or not acquire the property, since if they exercise the option, the security deposit is considered a down payment, and if they do not exercise it, this amount is returned to them, so it cannot prejudice the classification of the promise.

Cass. 1re civ., 1 December 2010, LawLex202100006424JBJ.

The promise of sale of a building, concluded with a substitution clause, which includes reciprocal commitments, is a bilateral promise of sale. The fact that the beneficiaries have only accepted the offer of sale while reserving the possibility to acquire the property or have it acquired by a third party is irrelevant, as the substitution clause stipulated in a promise has no effect on the unilateral or bilateral nature of the contract.

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

In a promise of sale, neither the clause that excludes the notary's arbitration in case of a dispute nor the substitution option granted to the buyer affects the synallagmatic or unilateral nature of the promise.

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

What is a unilateral promise of sale?

Like any contract, a unilateral promise to sell  is formed, under the terms of Article 1113 of the Civil Code, by the meeting of an offer and an acceptance .

At the time of the conclusion of the promise, the consent of the parties must be free and informed, in accordance with the pre-contractual duty of information set out in Article 1112-1 of the Civil Code , and not vitiated by error, fraud  or duress, as defined in Articles 1130 et seq.

The unilateral promise foreshadowing the sales contract must contain the essential elements of the final contract, namely the agreement of the parties on the item and the price .

Finally, the promisor who commits, from the conclusion of the promise, to sell, must have the capacity and the power to dispose of their property .

Unlike a simple offer to sell, the unilateral promise to sell is a preliminary contract that contains the essential elements of the final contract, which will be used for the exercise of the beneficiary's option and on the date of which the conditions of validity of the sale, as well as the consent and capacity of the promisor to contract and to dispose of their property, are assessed.

The breach of the pre-contractual duty of information is sanctioned by the liability of the party responsible, but it may lead to the annulment of the promise if it causes a defect in consent, particularly if it results in an error in accordance with Articles 1132 to 1136 or if it constitutes fraudulent concealment within the meaning of Article 1137.

CA Versailles, 6 January 2022, LawLex202200003403JBJ.

The fraudulent concealment by the promisor always makes the beneficiary's mistake excusable when it was decisive in the latter's decision to sign the unilateral promise of sale, so that the beneficiary of a unilateral promise of sale concerning a business is entitled to obtain the annulment of the promise when they relied on the promisor's statements in the promise, which indicated that, to their knowledge, there was no imminent opening of a similar business to the one subject to the agreement, whereas this was not the case.

Cass. com., 13 February 2007, LawLex200700000757JBJ.

The unilateral promise to transfer shares is validly concluded when the price is determinable by reference to the sole amount of equity at a precisely specified date, to the exclusion of any other complementary valuation element.

Cass. com., 3 February 2015, LawLex202300000260JBJ.

Must be annulled, as a prohibited pact on future succession, the unilateral promise of sale concerning a property that the promisor does not own and on which he only has a contingent right, so that he cannot confer an actual right on the beneficiary.

Cass. 1re civ., 7 January 1992, LawLex202300005115JBJ.

What are the substantive requirements for the validity of a unilateral promise to sell?

Pursuant to Article 1172 of the Civil Code, stemming from the reform of contract law, which enshrines the principle of consensualism, the unilateral promise to sell is in principle consensual, like the sales contract it precedes, meaning that the exchange of consents is sufficient to conclude the promise .

As an exception, the formality of the act is necessary for the formation of the unilateral promise in two cases.

First, Article 1589-2 of the Civil Code states: “Any unilateral promise to sell relating to a building, a real estate right, a business, a leasehold right concerning all or part of a building, or the shares of companies referred to in Articles 728 and 1655 ter of the General Tax Code is null and void if it is not recorded by an authentic deed or by a private deed registered within ten days from the date of its acceptance by the beneficiary. The same applies to any transfer concerning said promises that has not been the subject of an authentic deed or a private deed registered within ten days of its date.”

However, except in the case of a possible reclassification, the Court of Cassation recognizes the validity of a unilateral promise to sell, even in the event of non-compliance with the formalism provided for in Article 1589-2, when it is included in an agreement containing a set of reciprocal contractual obligations, as long as there is a necessary dependency link between these various reciprocal obligations, likely to modify the characteristics of the promise . The Court of Cassation recently admitted that a unilateral promise to sell, modified by an amendment, which is part of a broader operation, is not subject to the provisions of Article 1589-2 of the Civil Code, provided that such a dependency link exists.

Regarding the conditions for the application of Article 1589-2, case law considers that it does not follow from this text that the acceptance of a unilateral promise of sale must be made in writing . However, a unilateral promise of sale, recorded in the form of a bailiff's report, is null and void if it does not constitute an authentic act and is only valid as information.

Then, Article L. 290-1 of the Construction and Housing Code provides: “Any promise of sale concerning the transfer of a building or a real property right, whose validity exceeds eighteen months, or any extension of such a promise bringing its total duration to more than eighteen months is null and void if it is not recorded by an authentic act, when it is granted by a natural person.” According to the Court of Cassation, this text applies to any promise of sale, whether classified as unilateral or bilateral.

Advice: Verify that, by exception, the unilateral promise to sell does not require certain formalities under penalty of nullity.

In the case of a unilateral promise to sell, only the promisor commits to selling, while the beneficiary does not undertake any obligation to buy, so that the authentic deed of sale following a unilateral promise to sell is not a reiteration of sale, but the realization of it.

Cass. 3e civ., 19 January 2022, LawLex202300002048JBJ.

The promise to sell included in a transaction is not subject to the provisions of Article 1589-2 of the Civil Code, as it is merely an element of the transaction, which itself is an agreement stipulating interdependent reciprocal commitments and having res judicata authority between the parties.

Cass. com., 24 February 2006, LawLex202300002521JBJ.

The real estate agent, beneficiary of a unilateral promise to sell concerning a building, who extensively advertises it in the press, thereby demonstrates acceptance of the promise.

Cass. 3e civ., 24 February 1976, LawLex202100006118JBJ.

What are the formal requirements for making a unilateral promise to sell?

The conclusion of a unilateral promise to sell first irrevocably binds the promisor.

In accordance with the provisions of Article 1124 of the Civil Code, resulting from the reform of contract law, the unilaterally binding promise contract, once validly formed, definitively commits the promisor to sell to the beneficiary.

Previously, the Court of Cassation refused to sanction the withdrawal of the offer by the promisor, before the option was exercised by the beneficiary, through specific performance, now provided for under the new Article 1124 of the Civil Code. The Court of Cassation considered that, as long as the beneficiary had not declared the acquisition by exercising the option, the promisor's obligation to sell constituted only a best-efforts obligation, which could be resolved into damages, so that the exercise of the option, subsequent to the promisor's withdrawal, excluded any meeting of the reciprocal intentions to sell and acquire, and therefore, any forced completion of the sale.

However, the spirit of the contract law reform is entirely different. Instead of referring to the “withdrawal of the promisor” in paragraph 2 of Article 1124, the legislator uses the term “revocation of the unilateral promise” to emphasize that the promise contract is validly formed by the mere meeting of the promisor's offer to sell and the beneficiary's acceptance of their right to opt, regardless of the exercise of the option itself. In other words, by concluding the promise, the promisor consents to both the promise and the sale, while the beneficiary consents only to the right to opt (or not) for the conclusion of the proposed contract. Bound by the conclusion of the promise contract, the promisor is definitively and irrevocably obligated, so that in case of non-performance, they must be compelled to perform.

Returning to its case law, the Court of Cassation has established the irrevocable commitment of the promisor .

Next, the unilateral promise to sell results in the beneficiary's acceptance of an option right.

The consent of the promisor and the beneficiary to the unilateral promise of contract does not entail the same rights and obligations. The uniqueness of the unilateral promise pre-contract, once concluded, indeed results in the obligation it imposes on the promisor to sell to the beneficiary, while the latter is only granted the right to choose (or not) to conclude the projected sales contract.

It follows, on the one hand, that the classification of the unilateral promise of sale is incompatible with an agreement between both parties on the projected contract, as in the case of a bilateral promise of sale, and on the other hand, that the consent of the beneficiary is the only element missing for the contract of sale to be formed .

Advice: In case of a dispute related to the withdrawal of the offer by the promisor, check the date of conclusion of the promise, as the provisions of the Ordinance of 10 February 2016 reforming contract law are not applicable to contracts entered into prior to its entry into force, the withdrawal of the offer, in such a case, results in an award of damages.

The promisor signing a unilateral promise to sell is definitively obliged to sell from the moment of this promise and cannot retract, even before the option period offered to the beneficiary begins, unless otherwise stipulated.

Cass. 3e civ., 15 March 2023, LawLex202300004003JBJ.

The unilateral promise is the contract by which one party, the promisor, grants the other, the beneficiary, the right to opt for the conclusion of a contract whose essential elements are determined, and for the formation of which only the beneficiary's consent is lacking.

CA Rennes, 31 January 2023, LawLex202300002154JBJ.

What effects does the conclusion of a unilateral promise to sell entail?

Unless otherwise stipulated, the exercise of the option is in principle not subject to any particular form or modality . Therefore, the promisor who has been orally informed by the notary of the exercise of the option cannot contest the completion of the sale. Conversely, when it has been stipulated that the exercise of the option must be formalized by a registered letter with acknowledgment of receipt, the mere receipt of sums of money issued by the promisor cannot constitute the exercise of the option.

The beneficiary's consent to the sale, by exercising the option, must, however, occur within the period stipulated in the promise, unless it has been conventionally extended . Sometimes, the exercise of the option is subject to the fulfillment of a condition before a certain date. Also, when a unilateral promise of sale stipulates that the option must be exercised within the month of the fulfillment of the suspensive conditions unless waived, the sale cannot be perfected before the fixed day. If, in general, the unilateral promise of sale stipulates an expiration term, it may exceptionally happen that the parties have not provided for anything. Given the prohibition of perpetual commitments, the option must then be exercised within a reasonable time .

Advice: Be sure to include an option period in the promise to sell to prevent any disputes.

The acceptance of a promise to sell is in principle not subject to any formality, unless otherwise stipulated, so that when it is stipulated that the exercise of the option must be materialized by a registered letter with acknowledgment of receipt, the mere receipt of sums of money issued by the promisor cannot constitute the exercise of the option.

Cass. 3e civ. 7 January 1987, LawLex202300002028JBJ.

A court of appeal cannot hold, without violating the parties' agreement, that the exercise of the option, which occurred after the deadline, was done in accordance with the requirements of the disputed unilateral promise on the grounds that the promisor had granted an extension of the option period, when the preliminary contract only provided for a contractual extension in the event that the promisor had not sent the beneficiary the documents necessary for the preparation of the authentic deed of sale.

Cass. 3e civ., 8 October 2003, LawLex202100006108JBJ.

Even in the absence of a fixed term for the promise, a unilateral promise of sale is subject to lapse if the option has not been exercised within a reasonable time, considering the intent expressed by the parties at the time of signing the agreement.

Cass. com., 27 January 2021, LawLex202300004465JBJ.

How can the beneficiary of a unilateral promise of sale exercise their option right?

By exercising the option, the beneficiary of the unilateral promise agrees to conclude the sale .

By the unilateral promise to sell, the promisor grants the beneficiary the right to opt for the conclusion of the sales contract whose essential elements are determined. Once the option is exercised, the sale must be executed according to the conditions provided in the promise.

The sales contract being consensual in nature, the exercise of the option by the beneficiary is generally sufficient for its formation, pursuant to Article 1589, para. 1, of the Civil Code, which states that a promise of sale is equivalent to a sale when there is mutual consent of both parties on the item and the price. The option is thus validly exercised after the death of the promisor or their judicial liquidation, as long as, within the framework of a unilateral promise of sale, the promisor definitively consents to sell. However, a court of appeal cannot give effect to the beneficiary's consent expressed after the expiration of the period during which the promisor was committed, to declare the sale perfect on the grounds that the beneficiary exercised the option by suing the promisor for specific performance of the sale, whereas a promise of sale is only equivalent to a sale when there is mutual consent of both parties on the item and the price.

Pursuant to Article 1217 of the Civil Code, the party to whom the commitment has not been performed, or has been imperfectly performed, may pursue specific performance of the obligation or cause the rescission of the sales contract and/or seek compensation for the consequences of the non-performance.

Even if the breach of the terms of the unilateral promise to sell most often originates from the promisor, who, despite the exercise of the option, refuses to sell to the beneficiary, so that the sanction for non-performance often lies in the forced execution of the sale , it can also be attributable to the beneficiary. To justify the award of damages to the promisor to whom the beneficiary had concealed information likely to significantly increase the value of the property sold, the Court of Cassation stated that the authentic deed of sale following a unilateral promise to sell is not a reiteration of the sale, but its execution, and that, therefore, it is at the date of the execution of the sale that the loyalty, good faith, and sincerity of the contracting parties must be assessed .

Advice: Stipulate a penalty clause in favor of the beneficiary of the promise to further compel the promisor to fulfill their commitment to sell.

The unilateral promise to sell becomes a valid sale (vente parfaite) as soon as the beneficiary of this promise, within the allotted time, has expressed, by informing the promisor, their intention to acquire the item under the proposed conditions.

Cass. 2e civ., 21 December 1970, LawLex202300005537JBJ.

The sale is deemed valid upon the expiration of the contractually set period for the promisor to implement the unilateral promise of sale he has granted on his business, as long as the beneficiary has exercised the option.

Cass. com., 14 June 1982, LawLex202200002085JBJ.

When, on the date marked by the signing of the authentic deed under the conditions provided by the unilateral promise of sale, the meeting of the minds of the seller/promisor and the buyer/beneficiary occurred regarding an occupied real estate property, sold as such, while between the acceptance of the promise and the exercise of the option, the beneficiary had obtained from the tenant in place a commitment to vacate the apartment, the concealment of the release of the premises, likely to significantly increase the property's value, demonstrates the beneficiary's lack of loyalty, good faith, and sincerity, thereby entitling the promisor to compensation.

What are the effects of the exercise of the option by the beneficiary of a unilateral promise to sell?

The beneficiary of the unilateral promise of sale is free to give or withhold consent to the sale by exercising the option. Therefore, the abandonment of their option right cannot be reproached, nor can it establish a right to compensation for the benefit of the promisor .

That being said, the option right granted to the beneficiary by the promisor is often for consideration. The unilateral promise of sale then stipulates the payment of an “immobilization indemnity,” which generally represents 10% of the sale price, payable either upon the conclusion of the promise or at the expiration of the option period. If the beneficiary exercises the option, the indemnity will constitute an advance on the price; otherwise, it will remain due to the promisor , unless otherwise stipulated.

The indemnity, which may be set by the parties based on the duration of the immobilization of the property, can be judicially reduced if the beneficiary of the promise anticipates renouncing the sale. According to the Court of Cassation, the stipulation of an immobilization indemnity in favor of the promisor does not constitute a penalty clause, as long as the beneficiary of a unilateral promise to sell is not obliged to purchase.

Advice: To avoid any dispute regarding the option fee, include a clause specifying exactly which party is entitled to it in the event the option is not exercised.

The beneficiary of a unilateral promise of sale does not commit any fault by refusing to acquire the property.

Cass. 3e civ., 26 September 2012, LawLex202300002087JBJ.

The immobilization indemnity stipulated in a unilateral promise of sale, as acquired by the promisor in the event of failure to complete the sale, constitutes the price of the exclusivity granted to the beneficiary of the promise.

Cass. 1re civ., 5 December 1995, LawLex202200000592JBJ.

What are the consequences of the beneficiary's waiver of the right to exercise an option in a unilateral promise to sell?

If the beneficiary can freely waive the option, they may, in certain circumstances, be deprived of the ability to exercise their right, either due to the lapse of the promise, because a third party has been substituted, or because the promisor has sold the property to a third party, in violation of the unilateral promise.

The lapse, governed by Articles 1186 and 1187 of the Civil Code, sanctions the disappearance of one of the essential elements of the contract, subsequent to its formation. The unilateral promise of sale is subject to lapse:

when its beneficiary has allowed the period to lapse for exercising the option ;

when it provided for specific conditions regarding the exercise of the option that were not met ;

when it was concluded subject to the fulfillment of a suspensive condition and the condition fails.

On the other hand, neither the death of the promisor  nor their judicial liquidation  renders the unilateral promise of sale void.

Sometimes, the beneficiary may substitute a third party, provided that the unilateral promise of sale allows it. Once the substitution has taken place, the beneficiary can no longer, in principle, exercise their option right . However, the beneficiary of a unilateral promise of sale, even after having used the option to substitute another person, who has not exercised the option, may do so themselves, as long as the option period has not expired and the substituted beneficiary has withdrawn their acceptance.

According to case law, the fact that the beneficiary of a promise of sale substitutes a third party does not constitute an assignment of claim. Furthermore, even if this mechanism resembles the assignment of contract, the Court of Cassation considers that it does not entail the obligation to fulfill the formalities provided for in Article 1690 of the Civil Code required to make an assignment of contract enforceable against third parties. However, the draft reform of the law on special contracts plans to depart from case law, in a new Article 1591, which will state that “the exercise [of a substitution option] has the effects of an assignment of the promise contract.”

Finally, it happens that the promisor, although irrevocably bound by the unilateral promise of sale he has made to the beneficiary, breaches the promise by selling the same property, subject of the promise, to a third party. Such a breach has consequences for both the beneficiary and the third party, which differ depending on whether the latter is in good or bad faith.

According to Article 1124, para. 3, of the Civil Code, the contract concluded in violation of the unilateral promise with a third party who was aware of its existence is void. It follows that:

the promisor who sells to a third party the property, subject of a unilateral promise of sale previously granted, breaches the promise made to the beneficiary and owes compensation for the loss of opportunity to acquire the disputed property;

the beneficiary is entitled to invoke against the third party to the promise either the fault to which the latter would have been associated, or the fault for which he would have been guilty by agreeing to acquire the property which he knew was the subject of a previously granted unilateral promise of sale;

the third party acting in good faith, that is, who was unaware of the existence of a prior promise, cannot be held liable for damages;

the sale made with a third party to the promise, in good faith, remains valid and enforceable against the beneficiary of the prior promise, a third party to said sale .

Advice: In case of sale in violation of the promise, take action against the promisor but also the third party, by invoking their bad faith.

The unilateral promise of sale became void when the option was exercised only after the expiration of the period stipulated in the promise.

Cass. 3e civ., 17 March 2016, LawLex202300005718JBJ.

A unilateral promise of sale became void upon the expiration of the contractual duration of the promisor's commitment due to the beneficiary's default, as the latter had not, in accordance with the provisions of the deed, exercised the option with the effective payment of the price by the date on which the deadline set for the signing of the authentic deed expired.

Cass. 3e civ., 21 October 2014, LawLex202300002516JBJ.

The death of one of the promissors does not render the unilateral promise of sale void, as long as they had committed to maintaining their offer until a later date.

Cass. 3e civ., 10 December 1997, LawLex202300002489JBJ.

The judicial liquidation of the promisor has no effect on the promise of sale he made while he was in control of his assets, and does not deprive the beneficiary of the right to exercise the purchase option.

Cass. com., 7 March 2006, LawLex202200000591JBJ.

The substitute who exercised the option of a unilateral promise to sell a building and concluded the sale can no longer substitute the original beneficiaries of the promise, which, by the effect of exercising the option, has ceased to exist.

Cass. 3e civ., 19 December 2001, LawLex202300002776JBJ.

The sale to a second purchaser of a building that was the subject of a previously granted unilateral promise of sale is enforceable against the beneficiary, provided it is not established that the purchaser was complicit in the actions of the promisor and acquired the disputed property with knowledge of the existence of said promise, and that the optional publication of the promise, a mere informational measure for users, cannot take precedence over the mandatory, even subsequent, publication of the deed of sale.

Cass. 3e civ., 20 February 1979, LawLex202300003070JBJ.

When is the beneficiary of a unilateral promise of sale deprived of their option right?

According to Article 1589 of the Civil Code: “A promise to sell is equivalent to a sale when there is mutual consent of both parties on the item and the price.” Unlike the mechanism of a unilateral promise, the conclusion of a preliminary bilateral promise (promesse synallagmatique) agreement requires that both parties mutually exchange their consent without any delay in the expression of their consent. Once concluded, the bilateral promise directly produces its effects, as in principle, the agreement of the parties on the item and the price is sufficient to form the sale.

To determine whether an agreement qualifies as a bilateral promise to sell, the courts first looked for a reciprocal commitment between the parties. They then held that an agreement involving reciprocal obligations constitutes a bilateral promise to sell only if those obligations are strictly symmetrical and the commitment to sell is matched by a corresponding commitment to buy . The courts also consider that the exchange of a unilateral promise to buy and a unilateral promise to sell constitutes a bilateral promise of sale equivalent to a definitive sale, as long as the two reciprocal promises have the same object and are stipulated in the same terms.

Finally, the Court of Cassation considers that the substitution option stipulated in a promise has no effect on the unilateral or synallagmatic (bilateral) nature of the contract .

Advice: Emphasize the reciprocity of the parties’ obligations to demonstrate that the promise is bilateral.

The unilateral promise of sale must be reclassified as a bilateral promise when it stipulates that the beneficiary is definitively committed to acquiring as soon as the obligations imposed on the promisor have been fulfilled before a certain date, thus depriving the said beneficiary of any option.

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

Thus constitutes a bilateral promise of sale the promise of sale of a building, concluded with the option of substitution, which includes reciprocal commitments, the fact that the beneficiaries have only accepted the offer of sale while reserving the possibility to acquire the property or have it acquired by a third party being irrelevant.

What is a bilateral promise to sell?

The bilateral promise to sell (promesse synallagmatique de vente), which contains the essential elements of the sale, is formed by the meeting of an offer and an acceptance through which the promisor and the beneficiary express their intention to contract.

As with any contract, the following are necessary for its validity: the consent of the parties, their capacity to contract, and a lawful and certain content. The parties must therefore comply with the pre-contractual duty of information, a mandatory public policy provision, provided for in Article 1112-1 of the Civil Code , and express consent free from error , fraud , or duress, in accordance with Articles 1130 to 1144.

For the bilateral promise to be validly formed and the sale perfected, the consent of the parties must also pertain to the item and the price, which must be determined or determinable, insofar as the preliminary contract includes the essential elements of the future sales contract .

Concluding a bilateral promise also implies being able to dispose of the property, the object of the promise.

Finally, the said property must be legally transferable to be conveyed.

A breach of the pre-contractual duty to inform cannot be attributed to the promisor unless the ignorance, by the beneficiary of the bilateral promise of sale, of the information—a ventilation issue—which she claims to have been deprived of, is legitimate. This is not the case when the latter, before signing the promise of sale, visited the basement apartment in question five times with different people, so that she could have noticed the particularity of the premises and should have been alerted to the level of humidity in the dwelling.

CA Riom, 19 October 2021, LawLex202100006138JBJ.

A promise of sale must be annulled on the grounds of error regarding essential qualities, and the clause whereby the buyers agree to endure easements, whether apparent or not, continuous or discontinuous, must be declared unenforceable against them, as they would not have purchased the property had they known that the usable area offered for sale was nearly ten percent less than what they intended to acquire and that they would have to bear a risk of eviction.

Cass. 3e civ., 15 February 2006, LawLex202300005126JBJ.

The property dealer who refrains from revealing to prospective buyers that the dormer windows of the building, which is the subject of the bilateral promise of sale, had been the subject of a certificate of non-compliance, the importance and legal consequences of which, as a professional seller, he could not be unaware, is guilty of fraudulent concealment, solely to induce them to contract.

CA Orléans, 18 December 2006, LawLex200700000763JBJ.

Pursuant to Article 1583 of the Civil Code, the promise constitutes a sale as soon as the parties have agreed on the price and the item, even if the item has not yet been delivered, nor the price paid.

Cass. 3e civ., 18 February 2009, LawLex202100006408JBJ.

What are the substantive validity conditions of a bilateral promise to sell?

Consensualism is the principle in matters of sale pursuant to the supplementary provisions of Article 1583 of the Civil Code. The mere exchange of consents between the parties to the bilateral promise regarding the item and the price is generally sufficient to conclude the preliminary contract of bilateral promise of sale, and constitutes the formation of the sales contract, knowing that the formation of the sales contract generally results in the transfer of ownership, as well as custody and risks.

However, there are exceptions of a jurisprudential and legal nature.

The rule of Article 1583 not being a mandatory public policy provision, the courts consider that a promise of sale is equivalent to a sale when the parties have given their consent on the item and the price, unless it results from the circumstances or the stipulations of the promise that the parties intended to delay the formation of the sales contract until the determination of these terms.

The law also provides for the formality of promises referred to in Article L. 290-1 of the Construction and Housing Code, according to which “any promise of sale concerning the transfer of a building or a real property right, whose validity exceeds eighteen months, or any extension of such a promise bringing its total duration to more than eighteen months is null and void if it is not recorded by an authentic act, when it is granted by a natural person.” The courts ensure compliance with these provisions aimed at “protecting the promisor who immobilizes their property for a long period.”

On the other hand, bilateral promises of sale are exempt from the registration formality provided for in Article 1589-2 of the Civil Code, which only applies to unilateral promises of sale.

Advice: In case of a desire to deviate from the principle of consensualism of the promise, expressly specify that the completion of such and such formality delays the formation of the sales contract.

By way of derogation from Article 1583, a bilateral promise of sale is only considered a sale on the day of the signing of the notarial deed, when all the documents signed, either separately or simultaneously by the parties, only mention a sale on the day of the signing of the authentic deed and mere intentions to sell and acquire.

Cass. 3e civ., 17 July 1997, LawLex202200002072JBJ.

The bilateral promise of sale concluded between the parties constitutes a sale, as long as it does not appear from this contract that they have made the formality of reiteration by notarial act a condition for the formation of the sale.

Cass. 3e civ., 10 September 2013, LawLex202300004675JBJ.

What are the formal requirements for a bilateral promise to sell to be valid?

In terms of a promise to sell, unless otherwise stipulated, the expiration of the period set for the reiteration of the sale by authentic deed grants each party  the right either to seek specific performance of the sale or to request rescission and/or compensation for their loss, provided that the fact justifying the exercise of this action can only consist of the party entitled to this right being aware of the refusal of their co-contractor to fulfill their main obligation to sign the authentic deed of sale.

On the other hand, when the promise to sell was concluded under the suspensive condition of obtaining a loan, which was not fulfilled, the beneficiary does not commit a fault in the performance of their contractual obligations by allowing the final deadline for reiteration to pass without contacting the promisor.

If the failure to reiterate the promise by authentic act has caused damage to a third party, the latter is entitled to take tort action .

Advice: To protect against the other party's failure to fulfill its commitments, stipulate a penalty clause in case of default by the latter.

When the sale has not been reiterated by authentic deed, only the beneficiary of a bilateral promise of sale has standing to seek the restitution of the security deposit paid in execution of the contract, even if the sum was paid by a third party.

Cass. 3e civ., 29 May 2013, LawLex202100006416JBJ.

500 Questions - Business Law

424. What are the consequences of a sale carried out in breach of the bilateral promise to sell?

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424. What are the consequences of a sale carried out in breach of the bilateral promise to sell?

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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