Substitution clauses in promises to sell are unenforceable […].

Substitution clauses in promises to sell are unenforceable if they do not strictly comply with the conditions set out in the contract.

Cass. 3rd Civil Court, February 8, 2023, no. 21-24.443

In its ruling of February 8, 2023, the French Supreme Court (Cour de cassation) requires strict compliance with the conditions set out in promises to sell, for the application of substitution clauses.

 

1. The legal framework

A unilateral promise is defined by article 1124 of the French Civil Code as a contract by which one party, the promisor, grants the other, the beneficiary, the right to opt for the conclusion of a contract whose essential elements are determined, and for the formation of which only the beneficiary’s consent is required.

 

Furthermore, article 1103 stipulates that contracts take the place of law for those who have made them.

 

2. The facts

In this case, a unilateral promise to sell a property was granted by an SCI to a second company. The contract provided for a beneficiary substitution option, subject to notification to the promisor by registered letter with acknowledgement of receipt, or acceptance in the deed of sale.

Following the promisor’s refusal to formalize the sale by deed, a third company, invoking a substitution in the rights and actions of the beneficiary, sued the promisor to obtain an order under penalty to sign the deed.

The promisor then raised the objection that the third company lacked standing to sue.

The Court of Appeal ruled out the claim for regularization of the sale by the substituted purchaser on the grounds of failure to comply with the conditions for application of the clause, i.e. notifying the promisor or obtaining his signature on the deed of sale.

She maintains that the fact that the notary prepared this deed with the mention of the substituted buyer, and that he notified the promisor of this, is inoperative with regard to the contractual requirements, which were not respected.

 

3. The opinion of the Court of Cassation

The Cour de cassation rejected the appellant’s decision, taking a strict view of the conditions for applying a substitution clause in a promise to sell. If these conditions are not met, the clause will be rendered unenforceable against the promisor, even though he was aware of the third-party purchaser’s intention to take over the rights of the beneficiary.

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