Bankruptcy Law

Article L. 622-13, I of the Commercial Code  renders inapplicable to the insolvency procedure any legal provisions by virtue of which indivisibility, termination or resolution could result solely from the opening of the receivership procedure. In particular, this rule has the effect of paralyzing the application of Article 2003 of the Civil Code, according to which the insolvency of the receiver p …

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

Article L. 622-13, I of the Commercial Code  renders inapplicable to the insolvency procedure any legal provisions by virtue of which indivisibility, termination or resolution could result solely from the opening of the receivership procedure. In particular, this rule has the effect of paralyzing the application of Article 2003 of the Civil Code, according to which the insolvency of the receiver puts an end to the mandate .

Article L. 622-13 directly prohibits resolutory clauses  based on the debtor's cessation of payments or the opening of an insolvency procedure. On the other hand, courts have ruled that the implementation of a resolutory clause a few days after a dealer's declaration of cessation of payments is not irregular when it is not based on the dealer's financial difficulties, of which the supplier was unaware, but sanctions the dealer's failure to pay for vehicles . The clause stipulating that either party may terminate the contract by simple letter in the event of the opening of an insolvency procedure against its co-contractor is deemed to be unwritten, so that neither party can rely on it . Furthermore, the opening of an insolvency procedure does not in itself entail the termination of bank loans , although they may still be interrupted by the bank if, during the observation period, the conditions laid down in Article L. 313-12 of the Monetary and Financial Code  are met . Accordingly, a bank may not terminate an account opening agreement on the grounds of organizational impossibility when it conceals its intention to cease all lending to a company placed under insolvency procedure .

The prohibition extends to indirect cancellations. This is the case for a clause in a loan contract that allows the bank to sequester the funds in the borrower's accounts, even though there are as yet no unpaid instalments or receivables due . Contractual breaches noted prior to the opening of the insolvency procedure do not allow the contract to be considered as no longer in force when the co-contractor has neither exercised his right to terminate the contract, nor given the receiver formal notice to take a decision on its continuation .

The Court of Cassation has extended the scope of Article L. 622-13, I, 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 increasing the obligations of the debtor solely as a result of the opening of an insolvency procedure . This is the case for a clause in a loan contract which provides for a 5% recovery indemnity to be paid to the bank when the latter is obliged to recover its debt through legal channels, since it imposes additional costs on the debtor solely as a result of the opening of receivership .

Lastly, the rule that a resolutory clause cannot be enforced simply because an insolvency procedure has been instituted benefits only the debtor: its co-insured cannot take advantage of it .

Applicable to the receivership procedure under art. L. 631-14 C. com.

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

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

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

See by analogy, Cass. com., 22 February 2017, LawLex202100002162JBJ (S).

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

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

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 of the Banking Act of 24 January 1984.

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

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

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

Bankruptcy Law

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

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

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