Bankruptcy Law

Article L. 622-13, I of the Commercial Code renders unenforceable against the insolvency proceedings any legal provisions under which the indivisibility, termination or cancellation could result solely from the opening of a safeguard procedure. By virtue of this rule, the application of Article 2003 of the Civil Code, according to which the insolvency of the agent puts an end to the agency, is par …

Unenforceability of legal or contractual obstacles to the continuation of the contract

Article L. 622-13, I of the Commercial Code renders unenforceable against the insolvency proceedings any legal provisions under which the indivisibility, termination or cancellation could result solely from the opening of a safeguard procedure. By virtue of this rule, the application of Article 2003 of the Civil Code, according to which the insolvency of the agent puts an end to the agency, is paralyzed in matters of insolvency proceedings .

Article L. 622-13 directly prohibits resolutory clauses  based on the debtor's cessation of payments or the opening of insolvency proceedings. On the other hand, the courts consider that the implementation of a resolutory clause a few days after the declaration of cessation of payments by a dealer is not irregular when it is not based on the dealer's financial difficulties, of which the grantor was unaware, but sanctions the failure to pay for the vehicles . The clause according to which either party may terminate the contract by simple letter in the event of the opening of insolvency proceedings against its co-contractor is deemed to be unwritten, so that neither party may avail itself of it . Furthermore, the opening of insolvency proceedings does not, in itself, entail the termination of bank loans , although they can always be interrupted by the bank when, during the observation period, the conditions provided for in Article L. 313-12 of the Monetary and Financial Code  are met . Thus, a bank may not terminate an account opening agreement on the basis of pretexts based on organizational impossibility when the bank conceals its intention to cease all financing of the company placed in insolvency proceedings . The prohibition extends to indirect terminations. This is the case for a clause in a loan agreement that allows the bank to escrow the funds in the borrower's accounts, even though there are no outstanding monthly payments or receivables due . The contractual breaches noted before the opening judgment do not make it possible to consider that the contract is no longer in force when the contracting party has neither used its right to terminate nor given the receiver notice to take a decision on its continuation .

The Court of Cassation has extended the scope of Article L. 622-13, I by considering that it prohibits not only resolutory clauses, but also all those which amend the conditions of continuation of an ongoing contract by reducing the rights or aggravating the obligations of the debtor by the sole fact of the opening of insolvency proceedings . This is the case for a clause in a loan contract that provides for a 5% recovery indemnity for the bank when the latter is obliged to recover its debt through legal action, since it imposes additional costs on the debtor solely because it has been placed under saveguard .

Finally, the rule that a resolutory clause cannot be enforced by the mere fact of the opening of insolvency proceedings benefits only the debtor: its co-insured cannot take advantage of it .

Cass. com., 28 June 2017, LawLex202100001118JBJ (LJ).

Cass. com. 2 March 1993, LawLex200005983JBJ (RJ); Paris, 21 March 1997, LawLex200005655JBJ (RJ). - See also Cass. com. 26 May 1992, LawLex202100005162JBJ (RJ).

Cass. com., 14 January 2014, LawLex202100002308JBJ (LJ).

Cass. com., 22 February 2017, LawLex202100002162JBJ (S).

Cass. com., 19 December 1995, LawLex202200001254JBJ (LJ).

Cass. com., 19 March 2002, LawLex200200004695JBJ (RJ).

CA Paris, 14 September 2006, LawLex202200001252JBJ (RJ).

Cass. 1re civ., 6 January 1998, LawLex202200001241JBJ (RJ).

Former Art. 60 L. 24 January 1984, known as the Banking Act.

Cass. com., 1 October 1991, LawLex202100002282JBJ (RJ).

Cass. com., 4 June 2013, LawLex202100002221JBJ (RJ).

Cass. com., 22 January 2020, LawLex202100005176JBJ (RJ).

Cass. com., 9 March 2010, LawLex202200001278JBJ (RJ).

Bankruptcy Law

99. Unenforceability of legal or contractual obstacles to the continuation of the contract

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99. Unenforceability of legal or contractual obstacles to the continuation of the contract

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