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 owner of a business under lease-management does not have to repurchase the stock at the expiry of the contract where no express provision of the contract says so . In effect, there is no usual practice requiring the lessor to take stock back. This would appear harsh vis-à-vis the lessee who agreed to purchase the stock that existed at the time of conclusion of the contract. Thus, it is advisea …

Taking back stock.

At the end of the contract, the lease-manager must restitute the business. The lease-manager who returns a business without its staff and clientele and does not return the owner's material in the proper working order, must compensate for the owner's operating losses .

Even if the lease-management contract obliges the manager to ensure the maintenance of the business , the lease-manager has no obligation to restitute the business with the same market value as at the beginning of the contract where this has not been stipulated . The obligation which is on the lease-manager is in effect a best-effort undertaking and not a firm promise. The decrease in the market value may be due to causes beyond his control e.g. be the result of increased competition . The decrease in the market value of the business may be asserted against him only if he has committed a breach. Thus, the lease-manager who ceases his commercial activity as soon as the judicial termination of the contract is declared although it has not been provisionally enforced, is liable for the loss of value of the business . On the other hand, losses caused due to the fault of the oil company cannot be offset by the profits generated by the other activities carrried out on the site at the operator's own risk .

Restitution of the business also implies that of the clientele, which is an essential component of the business, even if it has increased by reason of the activity . The lease-manager is however not liable for the losses in value of the clientele, which is a volatile component not related to the material components of a business , unless it has occurred due to his negligence . On the other hand, he must refrain from diverting customers to his own benefit: affixing on the shop window displays that indicate the transfer of the shop to another address in the same avenue , informing customers of the transfer of his commercial department and his order department in other premises while keeping the same phone and fax numbers  are breaches of his obligation to restitute the business. The lease-manager must also return the intangible elements that are inseparable from the exploitation of the business if he is unable to show that those elements are associated with another business running out of the same premises with their own specific clientele .

In addition to the market value of the business, the lessee must return the equipment in good working order  and answers for the losses in value having occurred due to his negligence . Even if the contract expressly obliges him to return the equipment, the owner of the business must bring evidence of his right of ownership thereof .

Lastly, at the expiry of the contract, the owner may obtain the repayment of expenses in respect of restoration of the business only if he justifies having paid for them .

Cass. com., 23 September 2008, LawLex200800001822JBJ.

Cass. com., 27 February 2001, LawLex200200005333JBJ.

CA Aix-en-Provence, 23 March 2000, LawLex200300000562JBJ, upheld by Cass. com., 19 November 2002, LawLex200300000946JBJ.

Cass. com., 14 December 2010, LawLex201000001476JBJ.

Cass. com., 23 September 2008, LawLex200800001822JBJ, upholding CA Aix-en-Provence, 22 March 2007, LawLex200800001910JBJ.

Cass. com., 19 November 2002, LawLex200300000553JBJ.

Cass. com., 15 December 1998, LawLex200200005162JBJ, upholding CA Dijon, 25 June 1996, LawLex200200005582JBJ.

CA Metz, 6 February 1997, LawLex200200005639JBJ.

Cass. com., 19 May 1998, LawLex200200004619JBJ, upholding CA Toulouse, 20 July 1995, LawLex200200005486JBJ.

Cass. com., 19 May 1998, LawLex200200004619JBJ, as regards the setting-up of a limited perimeter for new gas stations which depend on supermarkets.

Cass. com., 6 May 2002, LawLex200200004606JBJ.

CA Paris, 5 December 2018, LawLex201800001920JBJ.

CA Dijon, 24 September 2002, LawLex200300001551JBJ.

CA Paris, 16 June 2000, LawLex200300000719JBJ.

Restitution of the business.

The owner of a business under lease-management does not have to repurchase the stock at the expiry of the contract where no express provision of the contract says so . In effect, there is no usual practice requiring the lessor to take stock back. This would appear harsh vis-à-vis the lessee who agreed to purchase the stock that existed at the time of conclusion of the contract. Thus, it is adviseable to include a clause requiring the lessor to take the stock back on expiry of the contract, even if the lessor has already undertaken to repurchase the initial inventory.

Cass. com., 23 March 1999, LawLex200200005194JBJ, which confirms CA Agen, 10 September 1996, LawLex200200005596JBJ. Contra: CA Paris, 10 June 1992, LawLex200200005927JBJ, where the stock held had merely been "held in deposit" by the lease-manager.

Like the legal transfer of employment contracts from the owner of the business to the lease-manager when placing the business under lease management , on expiry of the lease-management agreement, the lessor of the business  must continue the contracts of employment without distinction between the employees attached to the business at the time of the conclusion of the lease agreement and those hired by the lessee . Where a change takes place in the legal position of the employer, in particular by estate, sale, merger, conversion of the business, incorporation of the company, all the contracts of employment ongoing on the day of the change remain between the new employer and the staff of the undertaking (Labor Code, Article L. 1224-1). However the lessor does not have to continue the contracts ongoing at the time of the termination of the lease-management contract where they are fake contracts  or where the essential components of the business have been transferred to another place  or where the business has become unexploitable and the fact that there are offers to purchase - which can be explained merely because there are equipment or stocks remaining - does not show that the business has a customer base or that it is still able to operate . The same applies when, at the time of the restitution of the business, there is no equipment regardless of the cause and no customers regardless of the rate of traffic .

In case of redundancies, a distinction must be made between several cases. The lease-manager under judicial liquidation assumes alone the burden of dismissals where the lease-management contract has not been terminated . The owner of the business takes on the burden thereof where the contract has been terminated and the activity has not fully disappeared . The purchaser of a business formerly operated under a lease-management agreement must continue the contracts of employment of the employees dismissed without real and serious cause before the expiry of the lease-management contract .

Lastly, the former lease-manager who misappropriates the clientele and continues the activity in another place must pay compensation to employees who are dismissed following the disappearance of the business .

Cass. soc., 18 December 2000, No 98-41.178.

See as regards a lessor who is himself a lease-manager: Cass. com., 24 September 2002, LawLex200300000571JBJ, which confirms Cons. prud'h., Reims, 20 June 2000, LawLex200300000660JBJ.

Cass. com., 19 November 2002, LawLex200300000946JBJ, which confirms CA Aix-en-Provence, 23 March 2000, LawLex200300000562JBJ.

Cass. soc., 6 November 1991, No 90-41.600.

CA Aix-en-Provence, 16 December 1999, LawLex200200004408JBJ: the owner of a business does not have to take back a fully fictitious contract of employment concluded between his former lease-manager and the latter's concubine.

Cass. com., 9 June 1983, LawLex200200004649JBJ.

Cass. soc., 20 March 2001, No 99-41.392; 14 March 2012, No 11-12.883; Cass. soc., 17 December 2013, No 12-22.167.

Cass. soc., 9 July 2019, LawLex201900001031JBJ.

Cass. soc., 7 February 1989, LawLex200200005735JBJ.

Cass. soc., 11 May 1999, LawLex201000000735JBJ and 30 November 2010, LawLex201000001335JBJ,which specifies that insofar as the business is still in operation, the termination of the lease-management contract following the insolvency proceedings of the lease-manager implies the return of the employment contracts to the lessor .

Cass. soc., 22 March 2002, LawLex200200004632JBJ, quashing CA Aix-en-Provence, 14 December 1999, LawLex200200004170JBJ.

Continuation of contracts of employment.

Pursuant to Article L. 144-9 of the Commercial Code, the end of the lease-management agreement renders immediately payable all debts relating to the exploitation of the business contracted by the lease-manager during the contract. The due date starts on the day of the publication within fifteen days in the form of excerpts or notice of the end of the lease-management contract in a legal announcements journal (Commercial Code, Article R. 144-1). 

The lessor may, in addition, be the creditor of the lessee, for example as a supplier. Where he has entered the payment of supplies on the debit side of the lease-manager's account, his receivable arises at the time of the opening of the account, even if it is due only at the time of the termination of the contract. Thus, the bank which has stood joint guarantor of the lease-manager for all acknowledgements of debt resulting from the liquidity facilities granted by its supplier for a one-year period cannot be released from its obligation by reason of the lapsing of its commitment where the termination of the lease-management contract takes place after that time-period. It is liable for the debts having arisen out for the whole duration of validity of its commitment, even if they are due only after its expiry. By reason of the autonomy of the duration of the guarantee compared with the duration of the main debt, the guarantor will however be bound to guarantee only the temporary balance of the account up to the amount fixed when its commitment expired .

Cass. com., 8 October 2003, LawLex200300003820JBJ, as regards the lease-manager of a gas station who benefited from a supplier credit from the lessor of the business, the purpose of which was oil supplies payable at the end of the period.

French Distribution Law

552. Taking back stock.

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552. Taking back stock.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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