All of French Company Law: ordinary law of companies and specific regime for different types of companies

Company Law (en cours)

Like any contract, the company contract requires free and informed consent from each of the partners. The theory of vitiated consent implies that the consent necessary for the formation of a company must not be tainted by mistake, fraud, or duress.
Regarding mistake, the law   provides that it only causes invalidity when it is inexcusable and concerns the essential qualities of the performance due …

Validity of consent

Like any contract, the company contract requires free and informed consent from each of the partners. The theory of vitiated consent implies that the consent necessary for the formation of a company must not be tainted by mistake, fraud, or duress.

Regarding mistake, the law   provides that it only causes invalidity when it is inexcusable and concerns the essential qualities of the performance due or those of the co-contractor. This applies to the substantial mistake made by one of the future partners regarding the possibility for the new company to continue the activity of an old company as agreed between the parties .

Regarding fraud, Article 1137 of the Civil Code states that it must result from acts such as fraudulent maneuvers or lies, originating from one of the parties, without which the other would have refrained from contracting or would have done so under substantially different conditions. Fraud is not automatically recognized: the alleged victim must prove it. Indeed, a partner claiming to have been subject to maneuvers that led them to make a capital contribution can only have the contract annulled for fraud if they establish that a management fault was concealed from them . However, it is not enough to establish the existence of fraud to obtain the annulment of the company. It must also originate from the co-contractor. Therefore, a subscription to a capital increase obtained through fraud remains valid towards third-party creditors as long as they are not the source of the maneuvers of which the subscriber was a victim . Fraud is also constituted by the intentional concealment by one of the co-contractors of information crucial to the other's consent. This is referred to as fraudulent concealment. A partner who conceals from a third party their intention to solicit the clientele of the company that previously employed them, thus inducing them to commit, during the company's formation, to make, in addition to their initial contribution, current account payments, commits fraudulent concealment . Similarly, sellers of shares who present a misleading image of their company's results by raising sales prices and fail to provide the buyer with information they hold about the foreseeable collapse of turnover, thus leading them to acquire these shares, are guilty of fraudulent concealment . However, a partner who could have detected undisguised accounting anomalies before subscribing to a capital increase, which do not concern elements crucial to their consent, cannot claim fraud .

Finally, duress is very rarely applied in the case law in practice. In particular, economic duress is excluded when the clauses challenged in the context of a capital restructuring do not appear illegitimate and do not provide the transferee with an excessive advantage .

Cass. com., 8 March 1965, LawLex202200002953JBJ.

Cass. com., 19 June 2001, LawLex202200002931JBJ.

Cass. com., 18 June 1973, LawLex202200003943JBJ.

Cass. com., 23 May 2006, LawLex200700000116JBJ.

Cass. com., 30 March 2016, LawLex202200002651JBJ.

Cass. com., 3 November 2004, LawLex202200002972JBJ.

Cass. com., 11 January 2005, LawLex202200003942JBJ.

Company Law (en cours)

11. Validity of consent

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

11. Validity of consent

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

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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