December 2023 News – Case Study: BEWARE OF PRECONTRACTUAL INFORMATION IN A B2B RELATIONSHIP: when best is the enemy of good.
- Context and legal background
An interesting case (Com. October 18, 2023) from the French Supreme Court (Cour de Cassation) outlines the impact of precontractual information disclosed by a (distribution or franchise) network promoter to his distributors, and the liability resulting therefrom.
- Case roots: The distributor is facing bankrupt and is placed under winding-up proceedings. He sues the network promoter he belongs to for indemnification, blaming him for breaching his pre-contractual information obligation, pursuant to article L.330-3 of the French Commercial Code.
- Reminder of applicable law: Article L330-3 of the French commercial code requires from the network promoter to provide his distributors/ members with a specific information, prior to entering into the contract. The information must be provided through a document, usually called the “Precontractual Information Document (in French, “Document d’information précontractuelle” or DIP). Such DIP must contain all the information listed under article R.330-1 of the French Commercial Code, which are deemed to be sufficient for the distributor to give its informed consent.
- In the present case: apart from the compulsory information listed under precited article R.330-1, the network promoter spontaneously disclosed a local market study and a geo-marketing study, that were not required by law and which were blamed for being "unrealistic and ill founded", with projected figures considered to be lacking of "objective grounds and rigor".
- Issue at stake and answer by the French Supreme Court
- Issue at stake: Is the promoter network liable for disclosing voluntarily non mandatory precontractual information? Additionally, isn’t there an obligation to “enquire/investigate” lying upon the distributor that should lead him to balance the information provided by the promoter?
- Answer: Since it appeared that the distributor’s financial forecasts were partially based on the local study disclosed by the promoter, French Supreme Court retained the latter’s liability, considering that: “if Article L.330-3 of the French commercial code does not impose on the network promoter any local market study, it however requires that, in case such information is disclosed, it should reflect a since presentation of the market”. Furthermore, and under same decision, the unrealistic and ill-grounded information provided by the network promoter released the distributor from its own investigation/search obligation which he is normally bound to.
- Key Takeaway: This decision points out how important it is for the network promoter to think twice before voluntarily disclosing information that are not prescribed by law. He needs to be aware that his liability may be searched for any disclosed information which, even if given spontaneously, should remain at all times accurate, sincere, reliable, and fair. Best is really sometimes the enemy of good.
By Sarah Temple-Boyer, Attorney at law and Maxence Guillard, Legal intern
Publié le 21/12/2023