Certain companies can benefit from the provisions of the Consumer Code

Consumer law was designed to protect consumers from abuses that could be committed by professionals. In the common language and imagination, the consumer is necessarily a physical person. And yet, French legislation has long recognized the application of certain provisions of the Consumer Code (for example, article L.132-1 of 1993 on unfair contract terms) to legal entities.

 

In 2016, Ordinance no. 2016-301 introduced a preliminary article into the Consumer Code defining the non-professional. A non-professional is “any legal entity that does not act for professional purposes”. He differs from a “professional” who acts for purposes relating to his commercial, industrial, craft, liberal or agricultural activity.

 

The non-professional is thus a legal entity purchaser acting outside his or her own sphere, and it is easy to understand why he or she should benefit from special protection.

But more surprisingly, the law also extends the application of certain provisions of the Consumer Code to relations between two professionals both acting in the course of their commercial activity.

This is the case of article L.221-3 of the aforementioned Code, which stipulates that the articles of the French Consumer Code relating to the obligation to provide pre-contractual information for off-premises contracts, and relating to the right of withdrawal for distance or off-premises contracts, are applicable to relations between professionals, provided that the subject of the contract does not fall within the scope of the customer’s main activity, and that the number of employees does not exceed five.

 

It was against this backdrop that the French Supreme Court (Cour de Cassation) ruled on April 13 [1] on a case involving a pharmacy that had entered into a telephony contract with a service provider. Three days later, she asked to exercise her right of withdrawal.

The Court’s reasoning is in two stages:

  • (i) has the contract been concluded off-site?
  • (ii) had the pharmacy acted outside the scope of its principal activity in order to benefit from the right of withdrawal?

 

On the first point, the Court noted that the telephony provider’s sales agent had come to the pharmacy’s premises to conclude the contract, after having arranged a meeting by telephone. She concludes that the contract between the pharmacy and the telephone company is an off-premises contract.

On the second point, the Court censured the reasoning of the Court of Appeal, which had ruled in favor of the absence of a right of withdrawal.

The Court of Appeal had considered that the contract in question had been entered into for the needs of the pharmacy’s professional activity, since the contract stipulated that ” the lessee […] certifies that the contract is directly related to his professional activity and subscribed for the needs of the latter. “.

However, the Cour de cassation criticized the Court of Appeal for failing to investigate not whether the contract was related to the pharmacy’s professional activity, but whether or not the contract in question fell within the scope of the pharmacy’s principal activity. This is despite the fact that we might reasonably have thought that a telephony contract would necessarily fall within the scope of a pharmacy’s core business if it was concluded for the purposes of that business.

It doesn’t matter if it’s a necessary accessory, says the High Court, what counts is examining the core of the corporate object of the legal entity. This decision calls for a distinction to be made between professional activity and principal activity.

 

The solution may come as a surprise, but this decision is not an isolated one. It is in line with recent Court of Cassation case law. In two rulings of August 31, 2022, the Court had already ruled that :

  • In an off-premises contract between two professionals, the lessee may raise the nullity of the contract on the grounds that the lessor failed to provide information on the right of withdrawal [2];
  • A doctor who books a hotel room to take part in a medical congress is not acting for professional purposes, as the accommodation contract is not part of his professional activity [3].

 

As can be seen, case law has interpreted the provisions of the Consumer Code in a protective manner, and in particular the link between the contract in question and the professional client’s field of activity. This gives rise to solutions that may seem counter-intuitive at first glance.

Two lessons can be drawn from all this:

1. You are a client company with five or fewer employees: Know your rights and know that you can benefit, to a certain extent, from the protection afforded by the provisions of the Consumer Code, even when it comes to contracts that are necessary for your business.

2. You are a service provider: if you are a corporate customer with no more than five employees, make sure you comply with the provisions of the French Consumer Code, in particular the pre-contractual information requirements when contracting with companies that do not have the same economic activity as you, and for whom the contractual relationship is not at the heart of their corporate purpose.

 

[1] 1st Civil Court, April 13, 2023, No. Y 21-23.312

[2] 1st Civil Court, August 31, 2022, no. 21-10.075

[3] 1st Civil Court, August 31, 2022, no. 21-11.097

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