News May 2021: Beware of clearly notifying the termination notice period of an established relationship in the event of recourse to a call for tenders.
Reminder: According to article L.442-1 - II of the French Commercial Code (former article L 442-6, I, 5 °): “Any producer, trader, or service provider shall be held liable and obliged to make good the damage caused by abruptly breaking off an established business relationship, even partially, without prior written notice commensurate with the duration of the business relationship and consistent with the minimum notice period determined by the multi-sector agreements in line with standard commercial practices. (...)”
If it is commonly acknowledged that the systematic recourse to the call for tenders characterizes the precariousness of a relationship (avoiding therefore the qualification of an established commercial relationship - see again recently the judgment of April 15, 2021 commented in our April 2021 News ), the notification of a call for tenders, terminating an established commercial relationship, must comply with certain requirements, to avoid any liability for sudden termination of established commercial relationship. The decision of the Commercial Chamber of the Court of Cassation of May 27, 2021 aims at reminding such formalism.
What to remember: Pursuant to this decision, the call for tenders does not exempt the launching party which from notifying its partner in advance of the date of termination of the established commercial relationship if its application would not be retained.
- Cour de cassation (Supreme Court), Commercial Chamber, May 27, 2021, No 19-18.301
Both companies Mr Bricolage and Tôleries du Sud Ouest (“TSO”) were bound by a close relationship for 17 years. In early 2013, the parties signed a framework product marketing contract for an indefinite period providing that the contract may be terminated with 9 months' notice for commercial relations lasting more than 10 years.
On May 27, 2013, the company Mr Bricolage expressed in writing its intention not to continue the contractual relation with TSO under the previous conditions, by resorting to a call for tenders for 2014. The commercial relations then ended on September 10, 2015, after the company Mr Bricolage granted additional timelines to TSO. Still, TSO considered itself as the victim of a sudden termination of an established relationship for more than 17 years and considered that the notice given by Mr. Bricolage was not sufficient to allow it to redeploy its activity.
The Paris Court of Appeal (Paris Court of Appeal, pole 5 - chamber 4, March 27, 2019, No 16/21943) considered that the notice period had started to run as of May 27, 2013, ie. the day on which Mr Bricolage informed TSO that it was launching a call for tenders. Given the duration of the relationship and the time necessary to allow TSO to redeploy its activity, the Court of Appeal decided to set the notice period at 12 months, expiring on May 27, 2014. Therefore, the Court of Appeal considered that the termination by Mr. Bricolage was neither sudden nor abusive since TSO was granted, in practice, with a longer notice period since the termination was effective on September 10, 2015.
The Supreme Court overturns the decision of the Paris Court of Appeal, considering that the notification of May 27, 2013 - which merely announced the use of the call for tenders - could not be regarded as a termination letter of a commercial relationship, since it failed to indicate precisely the effective ending date of the notice period. Consequently, without this mention, the notice period could only start from the date on which the partner was notified of the rejection of his application (which has the effect of postponing the effective end of the relationship).
What lessons in practice?
When the announcement of the call for tenders is also intended to notify the termination of the established commercial relationship, it is important to mention in writing, in this letter, the contemplated duration of the notice period and the effective end of such notice period in the event that the partner's application is rejected. Failing this, the notification of the launch of the call for tenders shall not be regarded as a termination letter in compliance with the requirements of Article L.442-1-II of the Commercial Code.
Sarah Temple-Boyer Ambre Boyer
Lawyer Legal Intern