Bankruptcy Law

Article L. 641-11-1, I of the Commercial Code renders unenforceable against the insolvency procedure any legal provisions by virtue of which indivisibility, termination or rescission could result solely from the opening of court-supervised liquidation procedure. In particular, this rule has the effect of paralyzing the application of Article 2003 of the Civil Code, according to which the insolvenc …

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

Article L. 641-11-1, I of the Commercial Code renders unenforceable against the insolvency procedure any legal provisions by virtue of which indivisibility, termination or rescission could result solely from the opening of court-supervised liquidation 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 mandatary puts an end to the mandate . 

Article L. 641-11-1 directly prohibits resolutory clauses based on the debtor's cessation of payments or the opening of an insolvency procedure . Consequently, the clause whereby either party may terminate the contract by simple letter in the event of the opening of an insolvency procedure against the other party is deemed to be unwritten, so that neither party may rely on it . On the other hand, the courts consider 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 licensor was unaware, but sanctions the dealer's failure to pay for vehicles . Furthermore, the opening of an insolvency procedure does not, of itself, entail the termination of bank loans , although these can always be interrupted by the bank if, during the provisional maintenance of the business, 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 if it conceals its intention to cease all lending to a company placed in receivership . 

The prohibition extends to indirect terminations. This is the case for a clause in a loan contract which allows the bank to sequester the funds in the borrower's accounts, even though there are as yet no unpaid instalments or claims due . Furthermore, contractual breaches noted prior to the opening ruling do not allow the contract to be considered as no longer in progress when the co-contractor has neither exercised his right to terminate the contract, nor given the receiver formal notice to decide on its continuation . 

The Court of Cassation has extended the scope of Article L. 641-11-1, I, considering that it prohibits not only resolutory clauses, but also all those which modify the conditions of continuation of an ongoing contract by diminishing the debtor's rights or aggravating his obligations by the mere fact 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 finds itself obliged to recover its claim through legal channels, since it imposes additional costs on the debtor solely as a result of her placement in an insolvency procedure . 

Lastly, the rule that a resolutory clause cannot be enforced by the mere fact of the opening of court-supervised liquidation procedure only benefits the debtor: its co-insured cannot take advantage of it .

Cass. com., 28 June 2017, LawLex202100001118JBJ (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., 14 January 2014, LawLex202100002308JBJ (LJ).

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

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

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

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

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

Former art. 60 of the French Banking Act of 24 January 1984.

See by analogy, 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

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

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

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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