Abrupt termination of a commercial relationship: notice period and role of judges

Pursuant to the provisions of article L.442-1, II of the French Commercial Code (Cass. com. 18 October 2023, no. 22-20.438), an established commercial relationship may not be terminated without sufficient notice, on pain of incurring liability on the part of the party responsible for the sudden termination.

In a ruling dated 18 October 2023, the Cour de cassation clarified the role of the judge in assessing the notice period.

The notice period is used to calculate the compensation awarded for the sudden termination of an established commercial relationship. In particular, it is determined on the basis of the duration of the relationship.

In this case, a service provider entered into two successive contracts for consultancy services with a bank, each providing for a fixed term of one year and excluding any tacit renewal. The bank subsequently decided to stop using the service provider.

The Paris Court of Appeal held that the commercial relationship had been established, taking into account in particular the two-year duration of the contract, the changes in the service provider’s costs and turnover over this period and their importance in the service provider’s balance sheet. It concluded that the notice period should have been three months to allow the service provider to reorganise.

The Court of Appeal therefore awarded compensation corresponding to the loss of earnings during the notice period.

The service provider invoked the provision for sudden termination and, considering the compensation of 25,000 euros awarded insufficient, appealed to the Court of Cassation.

Two successive one-year contracts are sufficient to establish an established relationship

The Cour de cassation usefully points out first that a two-year relationship may be sufficient to demonstrate an established relationship. The criteria taken into account are not only duration, but also the stable, ongoing and sustained nature of the relationship and the victim’s legitimate belief that the relationship will continue.

Sovereign assessment of the notice period

Secondly, the Court of Cassation clarifies the assessment of the length of notice to be given in order to avoid the classification of the termination as brutal:

• firstly, the Court of Cassation points out that this concept is a matter for the discretion of the trial judges: they do not therefore have to justify how the period granted enables the victim to find a satisfactory alternative,
• in addition, the Court of Cassation stated that although, in calculating the notice period, the trial judges must refer to the duration of the relationship, a criterion set out in Article L.442-1, II of the French Commercial Code, they may also refer to other criteria, such as the importance of the relationship in the service provider’s turnover or the lack of diversification of activities attributable to the service provider.