Terminating a contract without prior formal notice

Resolving a contract without prior formal notice is sometimes possible!

The French Supreme Court’s ruling of October 18, 2023 introduced a notable exception to the practice of unilateral contract termination.

Traditionally, before rescinding a contract, the creditor must put the defaulting debtor on notice. However, this ruling established that in certain circumstances, if a formal notice proves futile, it is not necessary.

The case involved two companies, the first Calminia, specializing in the cutting and shaping of limestone and marble, and the second Sodileve, a machine maintenance company.

After a disagreement over a maintenance service, relations between the two companies deteriorated.

Sodileve then unilaterally decided not to continue its service and requested payment of the remaining invoices.

The second company contested, arguing that no prior formal notice had been given, as is normally the case under article 1226 of the French Civil Code.

In upholding the decision of the Court of Appeal, the French Supreme Court ruled that the behavior of the manager of the second company, characterized by insulting remarks and an inappropriate attitude, had made it impossible to continue the contractual relationship.

Thus, in this particular context, a prior formal notice would have been unnecessary, so that for the Court of Appeal and the Court of Cassation, the first company was entitled to unilaterally terminate the contract without this formality.

This ruling, while confirming the normal prior requirement for a formal notice, recognizes that in certain exceptional situations, this formality can be dispensed with.

This – new – exception is in addition to that of urgency, already recognized by the Civil Code (article 1226).

The decision illustrates a pragmatic approach, which is not always customary for the Cour de cassation, it must be acknowledged, recognizing that in the case of particularly reprehensible behavior or bad faith, a contract can be unilaterally terminated without giving the debtor the opportunity to remedy his breaches.

In short, this ruling by the French Supreme Court establishes that in exceptional circumstances, where formal notice would prove futile, a creditor may unilaterally terminate a contract without this prior formality.

This decision underlines the importance of assessing the specific context of each case of contractual resolution, thus introducing significant flexibility into French contract law.

But don’t be too hasty, as you’ll need to check each individual case before deciding to unilaterally terminate a contract.

(Court of Cassation, Civil, Commercial Division, October 18, 2023, 20-21.579, Published in the Bulletin)