Bankruptcy Law

Article L. 622-13 of the Commercial Code sets out the rules relating to the continuation of current contracts. Only contracts in progress on the day of the judgment opening the safeguard procedure fall into this category, whether or not they are useful for the continuation of the debtor's activity.
1) Contract requirement
Article L. 622-13 of the Commercial Code expressly refers only to contracts. …

Definition

Article L. 622-13 of the Commercial Code sets out the rules relating to the continuation of current contracts. Only contracts in progress on the day of the judgment opening the safeguard procedure fall into this category, whether or not they are useful for the continuation of the debtor's activity.

Article L. 622-13 of the Commercial Code expressly refers only to contracts. Thus, membership in a health and maternity insurance scheme for non-agricultural self-employed workers, which is not the result of a contract but of the application of a compulsory legal status, does not fall within the scope of current contracts . Similarly, the affiliation of a lawyer to the National fund for the French bar (Caisse nationale des barreaux français), imposed by the Social Security Code (Code de la sécurité sociale), does not confer on the latter the status of co-contractor of the debtor, subject to the regime of the continuation of ongoing contracts . On the other hand, the relationship between a provident institution and a member company is, in the event of the latter's insolvency proceedings, subject to the general regime of ongoing contracts , since it does not derive from a compulsory legal status, as does membership of an association with a view to providing a substitute income to a company manager . The arbitration agreement, which is independent of the contract to which it relates, and whose purpose is not to create, modify, transmit or extinguish the obligations arising from the contract, does not constitute an ongoing contract whose performance may or may not be required by the receiver .

2) Contract in the course of performance 

Only contracts in the course of performance on the day of the opening judgment are covered by Article L. 622-13. Successive performance contracts, such as a telephone subscription contract , constitute ongoing contracts as long as they continue to produce effects after the opening judgment.

The classification is more complex for contracts concluded immediately but whose performance is deferred in time. A contract may be considered to be in the course of performance when the debtor who benefits from a safeguard procedure remains a creditor of the main obligation of the contract on the day of the opening judgment, whether the contract has not yet been performed , is in the course of performance or has not yet been terminated on that date . Thus, the Court of Cassation considers that a contract that has not exhausted its effects on the day of the judgment opening the safeguard procedure constitutes a contract in progress . This is the case for preliminary contracts, when the acts that characterize their performance have not yet taken place on the day of the opening judgment. A promise to sell, the suspensive condition of which is pending at the time of the opening of the insolvency procedure , or a unilateral promise to purchase, the option of which was exercised after the opening judgment , are contracts in progress. Similarly, a preliminary sales agreement constitutes a contract in progress on the date of the opening of the safeguard procedure if the seller's obligation to deliver the goods, the transfer of ownership, the conditions precedent and the payment of the price have not occurred on that date .

In order to subject the contract of sale to the provisions of Article L. 622-13, it is necessary to verify that the transfer of ownership to the debtor, which constitutes the main obligation of the contract, has not taken place on the day of the opening judgment . A contract for the sale of real estate constitutes an ongoing contract at the time of the opening of the insolvency procedure when, on that date, part of the price remains to be paid, while one of its clauses makes the transfer of ownership conditional on full payment of the price . On the other hand, if the transfer of ownership of an immovable to the debtor took place at the time of the signing of the deed of sale, i.e. before the opening judgment, it is no longer a contract in progress . In addition, a wine reservation agreement concluded before the opening of the buyer's collective procedure constitutes a contract in progress since the sale by weight, account or measure obliges the parties to perform the commitments they have entered into when there is an agreement on the thing and the price . On the other hand, a sale of land that has become perfected as soon as a condition precedent provided for in the parties' agreement is fulfilled, and which occurred before the judgment opening the buyer's insolvency procedure, does not constitute a contract in progress, which may allow the sellers to refuse to execute the notarized document . The date of termination of the contract and transfer of ownership is also taken into account in determining whether a donation constitutes an ongoing contract .

The criterion of the delivery of the thing to the debtor on the day of the opening judgment was also retained by the Court of Cassation to determine whether a loan contract fell under the regime of ongoing contracts. Indeed, the Court of Cassation analyzed the loan contract as a real contract and excluded its status as an ongoing contract when the delivery of the entirety of the funds, a main obligation of the loan contract, had taken place before the opening of the insolvency procedure . Following a reversal of case law, it now considers that a loan granted by a credit professional is not a real contract (contrat réel) which presupposes the delivery of a thing, but a consensual contract . Thus, it does not constitute a contract in progress when, before the opening of the procedure, it is granted by a credit professional . The Court of Cassation even considers that a loan contract which provides for the payment of funds to the borrower in instalments is not an ongoing contract , so that its mere conclusion before the opening of the insolvency procedure means that it is not an ongoing contract. For the same reasons, the classification of a leasing contract as an ongoing contract does not depend on the date of exercise of the purchase option at the end of the lease .

The case law considered that a contract for the sale of movable property, the ownership of which was reserved and the price of which had not yet been paid by the debtor at the time of the opening of the collective procedure, did not constitute an ongoing contract within the meaning of Article L. 622-13 of the Commercial Code . This solution was applied in the context of claims for the reclamation of property and was explained by the desire to ensure that a contract of sale with a reservation of title was not subject to the provisions of Article L. 621-115. This solution was applied in the context of claims for the reclamation of goods and was explained by the desire to exempt a contract of sale with a title retention clause (clause de réserve de propriété) from the provisions of the former Article L. 621-115, paragraph 2, of the Commercial Code, according to which, for ongoing contracts, the time-limit for reclamation is three months from the termination or end of the contract. Article L. 624-9 of the Commercial Code, in force since 1 January 2006, no longer distinguishes between current contracts and other contracts with respect to the starting point of the claim period. While some trial courts (juges du fond) maintain the former solution , the majority now consider that a contract with a title retention clause may constitute an ongoing contract unless ownership of the property was transferred to the debtor before the opening judgment .

3) Usefulness of the contract for the continuation of the activity

Contracts whose effects have not been exhausted before the opening of the collective procedure are classified as ongoing contracts, whether or not they are useful for the continuation of the debtor's activity. Indeed, neither Article L. 622-13 of the Commercial Code, nor the Court of Cassation, make any distinction between contracts necessary for the continuation of the business and others . Nevertheless, some trial courts have been particularly sensitive to the usefulness of the contracts in question, in particular those for telephone subscriptions, the maintenance of which is essential for the continuation of the business activity during the observation period and helps to safeguard the production capacities of the company with a view to drawing up a recovery plan by way of transfer .

Cass. soc., 13 March 1997, LawLex202100003287JBJ (LJ).

Cass. com., 19 December 2018, LawLex202100003288JBJ (LJ).

Cass. com., 3 May 2011, LawLex202100001505JBJ (RJ).

CA Paris, 22 September 2011, LawLex202100005170JBJ (S).

See in particular Cass. com., 22 October 1996, LawLex202100002292JBJ (LJ).

Cass. com., 1 February 2000, LawLex202100003302JBJ (RJ).

Cass. com., 28 February 1995, LawLex202100002295JBJ (RJ) ; 2 March 1999, LawLex202100002296JBJ (RJ) ; 9 April 1991, LawLex202100002291JBJ (RJ).

Cass. com., 2 November 2016, LawLex202100003298JBJ (RJ).

Cass. com., 18 November 1980, LawLex202100003296JBJ (RJ).

Cass. com., 27 March 2007, LawLex202100003300JBJ (LJ).

Cass. com., 13 April 1999, LawLex202100001170JBJ (RJ) ; 2 March 1993, LawLex202200001264JBJ (RJ) ; 9 April 1991, cited above.

Cass. com., 28 March 2000, LawLex202200001412JBJ (LJ) ; Cass. 1re civ., 7 March 2006, LawLex202200001413JBJ.

Cass. com., 28 June 2011, LawLex202100003289JBJ (LJ).

Cass. com., 9 February 2016, LawLex202200001183JBJ (RJ).

Cass. com., 16 June 2004, LawLex202200001184JBJ (LJ).

Cass. com., 26 November 2002, LawLex202100003249JBJ (RJ).

Cass. com., 5 May 2004, LawLex202100002294JBJ (RJ) ; 28 September 2004, LawLex202200001322JBJ (RJ).

See in particular CA Douai, 14 June 2012, LawLex202200001323JBJ (LJ).

CA Pau, 19 September 2017, LawLex202200001327JBJ (RJ).

Cass. com., 19 May 2004, LawLex202100003286JBJ (RJ).

Cass. com., 23 November 2022, LawLex202200010339JBJ (S).

CA Pau, 14 January 2008, LawLex202200001284JBJ (RJ).

Cass. com. 28 June 2017, LawLex202100001118JBJ holding that a management contract entered into but not performed prior to the opening judgment constitutes an ongoing contract.

See in particular. Cass. com. 16 June 2004, LawLex202100002779JBJ (RJ), holding that a contract whose termination was notified to the debtor the day after the opening of its collective procedure constitutes a current contract. See also. Cass. com., 11 April 1995, LawLex202200001277JBJ (RJ) considering that the date of termination of a contract, when it is made by post, is the date of receipt of the letter in accordance with Article 668 of the Code of Civil Procedure.

Cass. com., 20 September 2017, LawLex202100002278JBJ (S).

Cass. com., 11 May 1999, LawLex202100002297JBJ (RJ).

Bankruptcy Law

94. Definition

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