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Termination of contract: no need for prior formal notice
12.22.2023
Cass. com., 18 October 2023, No. 20-21.579 (published)
legal issue
Does the unilateral termination of a contract constitute valid termination in the absence of prior notice, even though article 1126 of the French Civil Code provides that termination by notice can only take place, except in emergency situations, after the debtor has been given formal notice to perform his obligations?
The Court’s answer
Yes, when formal notice would be “pointless”.
“Under article 1224 of the French Civil Code, termination may result either from the application of a termination clause or, in the event of sufficiently serious non-performance, from notification by the creditor to the debtor, or from a court decision.
According to article 1226 of the same code, the creditor may, at his own risk, terminate the contract by notice. Except in emergency situations, the creditor must first give notice to the defaulting debtor to comply with its obligations within a reasonable time.
However, such formal notice does not have to be given if the circumstances show that it is in vain. […]
On the basis of these findings and assessments, which showed that the behavior of the director of company X was of such gravity that it had made it manifestly impossible to continue the contractual relationship, the Court of Appeal, which was not required to investigate whether formal notice had previously been given to this company, since it would have been pointless, legally justified its decision.”
Analysis
- This solution represents a departure from the rigidity of article 1126 of the French Civil Code, which requires formal notice and therefore reasonable notice, except in emergencies.
- It is in line with the dual purpose of formal notice under article 1126 of the French Civil Code, namely (i) to inform the debtor of the imminence of a sanction, and (ii) to put the debtor in a position to fulfill his obligations. In other words, if the creditor no longer expects any performance, formal notice to perform within a certain time becomes pointless.
- This ruling is in line with previous case law stemming from the Tocqueville decision (Cass. civ. 1st, 13 October 1998, No. 96-21.485)which admitted unilateral termination of a contract at the risk and peril of one of the parties “without being required to first give its co-contractor formal notice to comply with its obligations, or to characterize a situation of urgency” (Cass. com., July 9, 2019, no. 18-14.029).
- The judgment here relates to the manager’s behavior, preventing the continuation of the contract (“insulting and contemptuous remarks towards one of the employees” and “context of extreme pressure” on a workplace), but could just as easily concern contractual non-performance.
Assessment
While this solution is not new, it does provide a welcomed clarification, counteracting an excessively rigorous approach to unilateral termination by notice. Where the behavior of one of the parties is incompatible with the continuation of the contract, the other party may terminate it immediately, by simple notification, without having to first give formal notice to perform its obligations.
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