Bankruptcy Law

Article L. 622-13 of the Commercial Code, applicable to the receivership procedure by virtue of Article L. 631-14, defines the regime for the continuation of current contracts. The only contracts in this category are those that are still being performed on the day of the opening of the receivership procedure, whether or not they are useful for the continuation of the debtor's business.
1) Contract …

Definition

Article L. 622-13 of the Commercial Code, applicable to the receivership procedure by virtue of Article L. 631-14, defines the regime for the continuation of current contracts. The only contracts in this category are those that are still being performed on the day of the opening of the receivership procedure, whether or not they are useful for the continuation of the debtor's business.

Article L. 622-13 of the Commercial Code refers only to contracts, so that membership of a health and maternity insurance scheme for non-agricultural self-employed workers, which is not the result of an agreement but of the application of a compulsory legal status, does not fall within the scope of current contracts . Similarly, a lawyer's membership of the National Fund for the French bar (Caisse nationale des barreaux français), required by the Social Security Code, does not confer on the latter the status of co-contractor of the debtor, who is subject to the regime governing the continuation of current contracts . On the other hand, in the event of an insolvency procedure, relations between a provident institution and a member company , or membership of an association designed to provide a replacement income for a company manager , are subject to this regime, insofar as they do not derive from a compulsory legal status. 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 fall within the scope of Article L. 622-13. Contracts with successive performance, such as a telephone subscription contract , are contracts in progress, as they continue to produce effects after the opening judgment. The classification is more complex for contracts entered into immediately, but whose performance is deferred in time. A contract may be considered to be in progress when the debtor undergoing receivership remains the creditor of the characteristic performance on the date of the opening judgment, whether the contract has not yet been performed , is in the process of being performed or has not yet been terminated on that date . The Court of Cassation thus considers that a contract which has not exhausted its effects on the day of the opening judgment constitutes a contract in progress . This is the case for pre-contracts, where the deeds required for their execution have not yet been executed on the day of the opening judgment. For example, a promise to sell whose suspensive condition is pending at the time of the opening of the insolvency procedure  or a unilateral promise to purchase whose option has been exercised subsequent to the opening judgment  are contracts in progress. Similarly, a provisional sale agreement constitutes a contract in progress on the date of the opening of the insolvency procedure, provided that the seller's obligation to deliver the goods, the transfer of ownership, the conditions precedent and the payment of the price have not occurred by that date .

In order to make a contract of sale subject to the provisions of Article L. 622-13, it is necessary to verify that the transfer of ownership to the debtor, which is the characteristic feature of the contract, has not taken place on the date of the opening judgment . A contract for the sale of real estate constitutes a contract in progress at the time of the opening of the insolvency procedure when, at that date, part of the price remains to be paid, even though 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 a property to the debtor takes place at the time of signature of the deed of sale, i.e. before the opening of the insolvency procedure, it is no longer a contract in progress . Furthermore, a wine reservation agreement concluded before the buyer's insolvency procedure were opened 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 agreement on the item and the price . On the other hand, the sale of a plot of land which has become perfected as soon as a condition precedent provided for in the parties' agreement has been fulfilled, and which took place prior to the judgment opening the buyer's insolvency procedure, does not constitute a contract in progress, which may enable the sellers to refuse to sign the notarial deed . The date of conclusion of the contract and transfer of ownership is also taken into consideration when determining whether a donation constitutes a contract in progress .

The Court of Cassation also applied the criterion of delivery of the goods to the debtor on the day of the opening judgment to determine whether a loan contract fell within the scope of ongoing contracts. Indeed, the Court of Cassation analyzed the loan contract as a real contract, and ruled out its status as a contract in progress when the delivery of the entirety of the funds, a service characteristic of the loan contract, took place prior to the opening of the insolvency procedure . Following a change in case law, it now considers that a loan granted by a credit professional is not a real contract, which presupposes the delivery of a thing, but a consensual contract . A loan does not constitute a contract in progress when, prior to the opening of the procedure, it is granted by a credit professional . The Court of Cassation considers that this is the case even if the contract provides for the payment of funds to the borrower in instalments , so that its mere conclusion prior to the opening of the insolvency procedure means that it does not fall within the scope of an ongoing contract. For the same reasons, the classification of a leasing contract as a contract in progress does not depend on the date of exercise of the purchase option at the end of the lease , but rather on the date of its conclusion.

Case law also held 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 when the insolvency procedure were opened, did not constitute a contract in progress within the meaning of Article L. 622-13 of the Commercial Code . This solution, which was applied in the context of claims for the reclamation of goods, was explained by the desire to exempt contracts of sale with a retention-of-title clause from the provisions of the former Article L. 621-115(2) of the Commercial Code, according to which, for ongoing contracts, the reclamation period is three months from the termination or expiry of the contract. Article L. 624-9 of the Commercial Code, in force since 1 January 2006 and applicable to receivership by reference to Article L. 631-18, no longer distinguishes between current contracts and other contracts, with regard to the starting point of the claim period. While some courts maintain the former solution , the majority consider that a contract with a retention-of-title clause may constitute an ongoing contract, unless ownership of the asset was transferred to the debtor prior to the opening judgment .

3) Usefulness of the contract for business continuity

Contracts whose effects have not been exhausted prior to the opening of the insolvency procedure is governed by the current contract regime, whether or not they are useful for the continuation of the debtor's business. 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 debtor's business and other contracts . Nevertheless, some courts have shown themselves to be particularly sensitive to the usefulness of the contracts in question, in particular those for telephone subscriptions, the continuation of which is essential to the continuation of commercial activity during the observation period and helps to safeguard the company's production capacities with a view to drawing up a receivership plan by way of sale .

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

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 (LJ).

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

Cass. com. 28 June 2017, LawLex202100001118JBJ (LJ), holding that an agency 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 has been notified to the debtor the day after the opening of its insolvency procedure constitutes a contract in progress. See also. Cass. com. 11 April 1995, LawLex202200001277JBJ (RJ), holding that the date of termination of a contract, when effected by post, is that 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

364. Definition

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