The « established » relationship (“relations établies”) refers to a business connection or partnership that is characterized by regular and consistent commercial dealings, rather than being a series of isolated transactions. Besides its duration, other factors play a crucial role in defining an established relationship. According to the French Supreme Court (« Cour de cassation »), a commercial relationship qualifies as established when there is a stable and steady exchange of business, and the aggrieved party had reasonable expectations for the continuity of the business association. Several indicators are considered to assess these expectations, including the investments made by the aggrieved party, exclusivity arrangements, product reputation, economic reliance on the relationship, and more.
Determining the appropriate notice period for terminating such established relationships is not a straightforward process. Article L. 442-1 II of the French Commercial Code mentions that the notice period should be in line with multi-sector agreements and standard commercial practices. However, these practices are not widely available. Consequently, courts have significant discretion in determining the notice period, taking into account factors such as the duration of the relationship and the level of dependence of the aggrieved party on the defaulting party. Economic dependence is established when a substantial portion of the aggrieved party’s revenue comes from the relationship with the defaulting party, and there are no viable alternatives for business or supply sources.
Due to the complexity and individuality of each case, a specific calculation method for the notice period is challenging to generalize. Relationships lasting less than ten years might warrant notice periods of six to twelve months, while those extending over twenty years could lead to notice periods of twelve to twenty months. However, since the Ordinance of April 24, 2019, if an eighteen-month notice period is respected, it cannot be deemed insufficient.
In cases of partial breach, where the business relationship reduces progressively without complete termination, it can be interpreted as a « partial breach » and subjected to sanctions under Article L 442-61 II° of the French Commercial Code.
The damages awarded to the aggrieved party are generally calculated based on the margin it would have made during the appropriate notice period. Additionally, the party responsible for the breach may face a civil fine.
In some situations, courts may order the continuation of the relationship or other temporary measures through summary proceedings, backed by progressive penalties, to ensure compliance.
It is essential to note that Article L 442-1 II of the French Commercial Code allows for termination without notice in cases of the other party’s failure to fulfill obligations or force majeure. However, this right to terminate without notice requires evidence of gross misconduct by the other party, such as significant non-payment or unfair practices.
Regarding the nature of the action based on Article L 442-1 II, traditionally, French case law considered it to be based in tort.
In an international context, issues regarding the competent court and applicable law arise. If the parties have a contract with jurisdiction or arbitration clauses, those will be honored. Otherwise, French courts might have jurisdiction based on specific provisions in the French civil code. Determining the applicable law is more complex, as there is no clear ruling yet on whether Article L 442-1 II of the French Commercial Code is an international mandatory provision that French courts must apply.
Parties cannot preclude the application of Article L 442-1 FCC in their contracts or waive their right to make a claim based on this provision. However, they may reach a settlement after the dispute has arisen.
Given the complexity of these matters, seeking legal counsel before terminating or dealing with a breach of a business relationship with a French partner is highly advisable from a strategic standpoint. MFL registered lawyers remain at your entire disposal to assist you in that matter. MFL will provide you with the best lawyers to handle your issues and give you the appropriate advices to secure your interests.