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

In accordance with general contract law, the termination of the lease-management agreement may be decided by the court where one of the parties fails to meet his/her obligations (Civil Code, Article 1224, formerly 1184). A partial non-performance is sufficient for the termination to be ordered where that obligation was decisive when concluding the contract .
The lessor's non-compliance with his ob …

Non-performance of the contract.

In accordance with the traditional case law based on Article 1134 paragraph 4 of the Civil Code (now Article 1104) , the parties to an open-ended contract may put an end to it without reason, insofar as they comply with the terms and conditions of termination under the contract, such as notice, and do not abuse the right to terminate . Where the contract has a fixed term, a termination at the time of its renewal is governed in principle by the provisions of the contract. Non-renewal of the contract may however be subject to the rules on notification of procedural instruments . Lastly, the parties may set forth an automatic termination clause which causes the end of the contract to depend on the occurrence of an uncertain event such as the disappearance of the premises in which the business is operated. The implementation of that termination clause is only subject to the occurrence of the event stipulated and is not dependent on any contractual breach .

The lessor of the property may refuse to renew the lease. He must in that case pay the evicted lessee compensation for eviction equal to the harm caused by the non-renewal which includes, inter alia, the market value of the business (Commercial Code, Article L. 145-14). Until payment of the compensation, the lessee has a right to remain in the premises under “the terms of the expired lease contract” (Commercial Code, Article L. 145-28). Although he is not a party to the commercial lease, the lease-manager may remain in the premises until the lessee of the property has received the eviction compensation. In effect, the refusal to renew the lease does not constitute, for the lease-manager, legitimate grounds for unilateral termination of the contract . In his capacity as third party, he cannot claim payment of the compensation for eviction which is owed only to the lessee of the property, even if the refusal to renew harms him . Likewise, the occupancy compensation owed to the lessor in return for the fact that the lease-manager remains in the premises is still borne by the lessor of the business . The lessor of the business cannot require the lease-manager to compensate for the harm resulting from the appropriation of his clientele in shops located nearby, where the eviction compensation paid by the lessor of the premises following the termination of the lease has compensated for that loss .

The lease-management agreement may also stipulate automatic termination in case of termination of the lease on the premises in which the business is operated. This condition is not potestative since the termination of the lease exclusively depends on the will of the owner of the property who is a third party to the lease-management contract . Furthermore, where it takes place in compliance with the provisions of the contract, the reason for the termination does not have to be given nor does it have to be justified by legitimate grounds .

On the other hand, the initiation of a judicial reorganization procedure does not bring to an end the on-going lease-management contract . Likewise, where there is no consent between the owner of the business and the liquidator, the placement under judicial liquidation of the manager does not entail the early termination of the lease-management agreement .

Cass. com., 10 November 2009, LawLex200900003321JBJ, which quashes and annuls CA Paris, 11 September 2008, LawLex200900003513JBJ, in a case where the amount of the fee had increased by 25%.

Cass. com., 30 May 2000, LawLex200200005309JBJ, which underlines that the courts should have looked at whether the parties had not wished to subject the termination of the contract to the rules provided for the notification of procedural instruments.

Cass. com., 7 February 1989, LawLex200200005735JBJ.

Cass. com., 5 October 2004, LawLex200400002407JBJ upholding CA Basse-Terre, 22 October 2001, LawLex200400002659JBJ: premises destroyed by a hurricane. 

Cass. com., 24 March 1998, LawLex200200005109JBJ which quashes and cancels CA Paris, 20 February 1996, LawLex200200005537JBJ. See also Cass. com., 24 September 2003, LawLex200300003550JBJ: where it is not otherwise stipulated in the real estate lease agreement, the non-renewal of the lease does not affect the tacit renewal of the lease-management agreement, which lasts as long as the lessor of the business has a right to remain in the premises.

Cass. 3e civ., 26 September 2001, LawLex200200004729JBJ which quashes and annuls CA Bourges, 30 November 1999, LawLex200200004696JBJ.

Cass. com., 21 January 1998, LawLex200200005092JBJ.

Cass. com., 24 September 2003, LawLex200300003550JBJ which quashes and annuls CA Versailles, 19 September 2000, LawLex200300003655JBJ.

Cass. 3e civ., 22 November 1995, LawLex200200005509JBJ upholding CA Colmar, 2 February 1993, LawLex200200005972JBJ.

Cass. com., 10 November 2009, LawLex200900003321JBJ.

Cass. com., 28 January 2004, LawLex200400000368JBJ.

Refusal to renew or termination of the lease.

In accordance with general contract law, the termination of the lease-management agreement may be decided by the court where one of the parties fails to meet his/her obligations (Civil Code, Article 1224, formerly 1184). A partial non-performance is sufficient for the termination to be ordered where that obligation was decisive when concluding the contract .

The lessor's non-compliance with his obligation to deliver the thing leased (Civil Code, Article 1719) characterizes a non-performance which justifies termination. This is the case for the failure to provide a license for a drinking establishment which is an essential element of a discotheque or “bar-restaurant” business . However, the owner of a business does not breach his obligation to deliver when he gives the lease-manager premises incapable of being exploited where the latter, who is aware of the need to bring the premises into line with requirements, has undertaken to take them on as they are .

The non-payment of the fee by the lease-manager also justifies the termination of the contract . On the other hand, the refusal by the lease-manager to accept a 25% rise in the amount of the fee cannot be a basis for termination .

Cass. com., 2 July 1996, LawLex200200005586JBJ, which quashes and cancels CA Rennes, 10 February 1993, LawLex200200005974JBJ.

Cass. com., 2 July 1996, LawLex200200005586JBJ, which quashes and cancels CA Rennes, 10 February 1993, LawLex200200005974JBJ; Cass. com., 30 June 1998, LawLex200200005136JBJ, which confirms CA Paris, 23 January 1996, LawLex200200005528JBJ.

See, as regards premises which cannot be operated and where the lease-manager, who is aware of the need to render them compliant, had undertaken to take them on in their current state, Cass. com., 17 December 2002, LawLex200300000547JBJ which refuses to hold both parties responsible for a termination.

Cass. com., 15 May 1990, LawLex200200005784JBJ, which confirms CA Grenoble, 7 January 1988, LawLex200200005711JBJ.

CA Paris, 11 September 2008, LawLex200900003513JBJ.

French Distribution Law

550. Non-performance of the contract.

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550. Non-performance of the contract.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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