This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

The ordinance for the reform of contract law has significantly modified the provisions relative to the implementation of termination clauses. Like before, the parties freely set the terms and conditions of the termination. However, new Article 1225 of the Civil Code lays down three formal requirements: the termination clause must specify which commitments, if breached, will result in the terminati …

Prior formal notice and possibility of derogation from terms of resolutory clause.

The ordinance for the reform of contract law has significantly modified the provisions relative to the implementation of termination clauses. Like before, the parties freely set the terms and conditions of the termination. However, new Article 1225 of the Civil Code lays down three formal requirements: the termination clause must specify which commitments, if breached, will result in the termination of the contract; this is subject to the failure to comply with the demands made in the formal demand letter if the parties have not agreed that the contract may be terminated immediately for non-performance; the formal demand letter must, in order to produce its effect, expressly refer to the termination clause. As long as the termination clause is implemented under the conditions provided for in the contract, the termination cannot be abusive  as long as it is in respect of a serious breach of obligations . According to new Article 1226, paragraph 4, the burden of proof of the gravity of the breach giving rise to the termination falls to the beneficiary of the obligation. Two cases must however be distinguished.

Where the termination clause provides for an automatic termination at any time, which it may expressly pursuant to new Article 1225, paragraph 2, no prior notification is required . Formerly, if the non-performance concerned an obligation to refrain from doing something, under the provisions of Article 1145 of the Civil Code a formal notice was not necessary to establish non-performance . This rule has been overturned by the new reform: Article 1231 now provides that unless the failure to perform the contract is definitive, damages are payable only if the party in breach first receives a formal demand enjoining him/her to act within a reasonable period of time, without making a distinction between obligations to act and other types of obligations.

In the event that the termination clause imposes on the parties a prior formal notice obligation, the implementation of the clause without such notification has been held in the past to be a sudden termination . Subsequently, the commercial chamber of the Court of Cassation has accepted that in the event of a serious breach preventing any continuation of the relationship, the gravity of the conduct of one party can justify the unilateral termination by the other party at their own risk despite of the existence of a termination clause and its terms . Under the reformed Civil Code, this solution is only partially accepted. Although new Article 1226 expressly reserves to the beneficiary of the obligation the possibility to terminate the contract by way of formal notice at its own risk, this option, except in cases of urgency, is subject to the obligation to first enjoin the other party to fulfill the obligations at issue within a reasonable period of time. On the other hand, it does not seem to rule out the possibility of terminating the contract at its own risk for causes other than those laid down in the contract and according to terms other than those related to the observance of a prior formal notice obligation . 

This remedy, although realistic, has however been contradicted by a stricter ruling of the third civil chamber of the Court of Cassation, which held that the termination clause is binding on the parties and constitutes a waiver by them to the right to unilaterally terminate the contract in the event of a serious breach . Given this contradiction in the case law, operators should ensure they respect the conditions of form and substance of the termination clauses and only resort to the possibility of unilaterally terminating a distribution contract for a serious breach by the other party if the conditions of the termination clause are not perfectly satisfied in case of absolute necessity  and be aware of the legal risks they may face. A recent decision thus held that the termination of a contract without meeting the requirements of the termination clause, which stipulate prior notice, was unreasonable since it was not based on a sufficiently serious breach . In the drafting of contracts, it is also important to include a general termination clause for serious breaches and more detailed clauses which, because they are non-exhaustive, do not affect the general right to immediately terminate for other serious breaches. Such caution is especially needed because there is an abundance of case law in the field of distribution law where the courts have been particularly strict for contract terminations on the basis of such clauses. Firstly, a contract cannot be terminated by e-mail when it stipulates that it can only be terminated after the sending of a formal notice letter by express delivery, not heeded within a period of thirty days, in the event of a violation of one of its essential terms . It was subsequently held that where a termination clause imposes a letter of formal notice, that notice must clearly order the distributor to comply with its contractual commitments . This is the case where, in the letter preceding the formal notification, the supplier queries the decrease in sales and describes the distributor's conduct as a breach of contract . This is not the case however where the supplier's formal notice letter does not make any specific complaint against the distributor  or does not specify that the failure to pay on the due date will result in the termination of relations . Similarly a formal demand to perform obligations that do not legally bind the supplier has no effect and renders the distributor liable for the termination . The performance of contractual obligations within the time-period fixed by the letter suspends the effects of the resolutory clause . Failing such performance, the creditor states that the contract is terminated . Indeed, the termination will take effect as of right when the supplier has sent a formal notice letter by registered mail enjoining the distributor to comply with his exclusivity obligation, and where on expiry of the contractual one-month period the distributor has failed to comply with the demand and has not contested the breach levelled against him 

Cass. com., 26 March 2002, LawLex200200004656JBJ; CA Paris, 9 July 2020, LawLex202000001756JBJ;
CA Paris, 25 June 2021, LawLex202100004094JBJ.

Cass. com., 9 July 2013, LawLex201300001101JBJ and 25 September 2007, LawLex200700001509JBJ.

CA Paris, 8 March 2017, LawLex201700000474JBJ.

CA Paris, 20 April 2000, LawLex200200004774JBJ.

CA Paris, 9 June 2010, LawLex201000000889JBJ.

CA Paris, 4 October 2012, LawLex201200002107JBJ.

 TGI Paris, 30 November 2004, LawLex200500003793JBJ.

CA Paris, 17 February 2016, LawLex201600000433JBJ.

Cass. com., 17 January 1995, LawLex200200001498JBJ.

CA Rennes, 14 December 2012, LawLex201300000008JBJ.

CA Paris, 8 March 1996, LawLex200200005549JBJ: a termination clause for outstanding payments is validly implemented without prior summons of the dealer where it includes a conventional exemption from that formality; Cass. com., 2 March 1999, LawLex200200005186JBJ: the implementation of a clause enabling a termination which is “automatic, at any time” in case of outstanding payments is not subject to prior formal notice to the dealer; Cass. com., 8 October 2003, LawLex200300003741JBJ: the obligation to perform the contract in good faith requires a supplier to obtain explanations from its distributor before terminating the contract, where the termination is based on a non-final criminal conviction against the distributor, upholding CA Paris, 31 January 2001, LawLex200200005331JBJ.

CA Paris, 29 May 1992, LawLex200200005925JBJ.

T. com. Paris, 22 February 1999, LawLex200200004731JBJ; CA Paris, 20 April 2000, LawLex200200004774JBJ; 17 October 2001, LawLex200400003464JBJ; CA Colmar, 20 January 2016, LawLex201600000216JBJ.

Cass. com., 4 February 2004, LawLex201000000956JBJ; 10 February 2009, No 08-415; 1 October 2013, No 12-20.830; Cf., Cass. 1re civ., 24 September 2009, No 08-14.524.

CA Paris, 28 February 2024, LawLex202400001953JBJ.

Cass. com., 9 October 2013, No 12-23.379.

CA Versailles, 20 October 2015, No 14-06812, Alès Poids Lourds v Mercedes Benz France, Lawlex 201500001321JBJ: an authorized repairer contract may be terminated without the sending of a formal notice even if the contract requires it, when it is not materially possible to remedy the alleged breach.

CA Paris, 16 May 2018, LawLex201800000743JBJ.

French Distribution Law

118. Prior formal notice and possibility of derogation from terms of resolutory clause.

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118. Prior formal notice and possibility of derogation from terms of resolutory clause.

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Les décisions de justice citées dans ce paragraphe :

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