It's Not So Simple To Terminate An Agreement Without Misconduct

Author:Ms Christine Sévère and Constance Belin

Following the clauses of the agreement is not sufficient to terminate a commercial relationship. Economic law imposes constraints which cannot be neglected.

Feel like a change? Want to benefit from a new supplier's innovative ideas and original proposals? Want to work for a new client in whose organization you are most interested and with which you could easily renegotiate your terms and conditions of sale? Quite often, after several years of collaboration, companies wish to change partners. Not because a partner has breached its obligations. All is working well, the agreement is performed and exchanges are correct. But an indescribable desire for renewal, the impression that things could be better with a new partner, is slowly taking hold.

How to end the existing collaboration and recover the freedom to conclude a new agreement with a new company? Most simply check whether there is an agreement, and if so, read its terms to comply therewith. But, for several years now, there is a developing economic law, which overlaps standard contract law. This law, whose aim is notably to encourage fair commercial relationships, has a direct impact on the terms of their termination. Simply analyzing the clauses of an agreement, without taking this economic law into account, could lead to grave errors.

Notice period to be observed once a relationship is established

A striking example of economic law is Article L.442-6, I-5° of the French Commercial Code (mandatory rule). It states that any producer, trader, industrial or any person registered with the trade register incurs its liability if it suddenly terminates, even partially, an established commercial relationship, without written notice taking into account the commercial relationship and respecting the minimum notice period determined, by reference to business practices, by interprofessional agreements. Excluding this Article in international agreements does not necessarily work, as French judges regularly characterize it as a mandatory rule.

What are the practical consequences of the application of this Article? Here are a few examples.

In the absence of agreement, many companies think that they are free and can change commercial partners as they please. This is not the case. If you have been in a commercial relationship with a partner for several years, you have to give your partner a sufficient notice period. Namely a notice period which will allow it to reorganize its activity before the...

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