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

Article 1112 of the Civil Code, stemming from the reform of contract law, has expressly codified well-established case law principles under which, although the termination of “pre-contractual negotiations” is permitted, it must strictly comply with the requirements of good faith. Only the circumstances surrounding the termination may constitute a fault, not the mere fact of breaking off negotiatio …

Conditions of liability.

Article 1112 of the Civil Code, stemming from the reform of contract law, has expressly codified well-established case law principles under which, although the termination of “pre-contractual negotiations” is permitted, it must strictly comply with the requirements of good faith. Only the circumstances surrounding the termination may constitute a fault, not the mere fact of breaking off negotiations.

Pre-reform case law provides numerous examples of conduct deemed contrary to good faith. Such is the case of the franchisor who, after having given his consent on the principle of a franchise contract and on the technical and financial conditions and the setting-up of it, it refuses to approve it without stating reasons some months before the opening  or who terminates a territorial reservation agreement solely based on the feeling that the candidate is not aligned with his concept or the team . Likewise, a franchisor is deemed to have culpably and negligently broken off negotiations with a candidate in order to punish his refusal to change zones to meet the request of another network member, when the franchisor notifies this decision two months before the store opening and after having sent the franchise agreement and its annex for signature . A franchisor also terminates negotiations in bad faith when the decision occurs—without providing any explanation to the candidate—after having required from him, for more than a year and a half, active involvement in expansion projects as well as three on-site immersions, and having led him to believe that his application had been approved . On the other hand, a franchise applicant who has repeatedly delayed disclosing financial data and attempted to conceal insufficient cash flow and debts to his former network cannot blame the franchisor for breaking off negotiations .

In turn, the applicant franchisee who, after having terminated discussions, carries on the exploitation of an establishment with the customer-base created during the pre-contract test phase, according to a similar concept , or who uses the descriptive elements of the pre-contractual information document provided by the franchisor to create an independent business and position themselves in the wake of the franchisor by copying their ideas and concept , incurs liability. On the other hand, liability is not incurred where there has been no irrevocable commitment in sufficiently defined terms to conclude an agreement and there has only been an agreement in principle  or where the termination does not reflect the candidate's intention to take advantage of the reputation of a well-known chain when launching its business activity but is due to the fact that it became aware of the strict commercial terms imposed by the franchisor . 

Paragraph 2 of Article 1112 specifies that, in the event of fault committed in the termination of negotiations, compensation for the resulting harm cannot be intended to make up for either the loss of benefits expected from the unexecuted contract or the loss of chance to obtain those benefits. Thus, a prospective franchisee who is the victim of a breakdown in negotiations cannot claim compensation for the lost profits of the restaurant he might have opened, but only for the expenses incurred as a result of the franchisor’s fault, which would not have remained at his expense regardless of the outcome of the discussions . Conversely, compensation for the loss of opportunity to contract with a third party is conceivable if the candidate proves the existence of genuine opportunities to negotiate with other franchisors .

Commercial Court of Versailles, 22 June 2001, LawLex200200004945JBJ, upheld by CA Versailles, 27 February 2003, LawLex200300003477JBJ; CA Paris, 25 November 2010, LawLex201000001342JBJ.

CA Toulouse, 1 December 2021, LawLex202100006168JBJ.

CA Nîmes, 1 December 2021, LawLex202100006110JBJ.

CA Versailles, 26 September 2024, LawLex202400007330JBJ.

CA Reims, 1 March 2022, LawLex202200001339JBJ.

CA Nîmes, 17 April 2008, LawLex200800002193JBJ. See, a contrario, CA Rennes, 28 March 2023, LawLex202300004658JBJ, holding that the penalty clause prohibiting the use of processes, know-how, methods, information, and documents provided by the franchisor to the candidate and forbidding collaboration with a competitor for twelve months does not apply where the candidate, having waived integration into the network, initiates a new project eighteen months after the termination of the relationship, with a concept distinct from that of the franchisor.

CA Poitiers, 28 February 2017, LawLex201700000505JBJ.

Cass. com., 18 January 2011, LawLex201100000086JBJ.

CA Douai, 29 June 2011, LawLex201100001379JBJ.

French Distribution Law

360. Conditions of liability.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

360. Conditions of liability.

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

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise