28/09/2023 - Abrupt termination of commercial relations does not apply to logistics transport contracts

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The rules governing the abrupt termination of established commercial relationships governed by article L.442-1 of the French Commercial Code are designed to protect businesses against the hasty termination of a contract by a co-contractor. Regardless of the notice period stipulated in the contracts, the courts endeavour to control the length of the notice period by taking into account "in particular the duration of the commercial relationship, with reference to trade practices or inter-professional agreements".



In other words, even if there is a contractually agreed period, the party wishing to terminate the commercial relationship will necessarily have to give the other party notice, the length of which will depend solely on the length of the relationship and custom. This system has a very broad scope, since it is intended to cover all pre-established relationships. The only limitation, introduced in 2019, is that an eighteen-month notice period will always be considered sufficient regardless of the length of the relationship.


As a result, companies often end up keeping inefficient service providers rather than having to pay them a large amount of compensation in lieu of notice. Furthermore, this system has an inflationary effect, since this compensation will inevitably be passed on in one way or another in the final price.


However, over the last fifteen years or so, there has been a timid movement backwards in case law.  Some rulings purely and simply exclude the application of Article L 442-1 when it comes to special contracts such as the "contract for the public road transport of goods" (Cass. com. 23 Sept. 2014 no. 12-27.387) or the "contract for the hire of vehicles with driver for the road transport of goods". For the latter contracts, there are in fact standard contracts defined by regulation that provide for a derogatory regime that is much less favourable to the ousted contractor.


Another approach is emerging, which is to regard the provisions contained in standard form contracts as evidence of established professional practice. It should be remembered that, under the law, the period of notice to be given to an ousted contractor depends not only on the length of the relationship but also on established practice. Where a standard contract provides for a limited period of notice, this is likely to constitute established professional practice.


A ruling handed down by the Paris Commercial Court on 22 June 2020 relates to the latter approach. In this case, an IT equipment manufacturer had used the services of the same subcontractor for its logistics transport services for 27 years. In 2019, the manufacturer decided to terminate the business relationship and gave nine months' notice. The subcontractor disputed this notice period and took the case to court.


After noting that standard contracts existed in the transport sector that provided for a limited notice period, the Court ruled that the nine-month period granted in this case was sufficient. In so doing, the judges appear to have considered that the existence of standard contracts in the transport sector constituted established professional practice.


In the transport sector, there are a number of standard contracts promulgated by the State that provide for fixed periods of notice, and as long as the business relationship is likely to fall within the scope of one of these standard contracts, it will be possible to invoke it as standard practice and grant the ousted service provider a period of notice that does not have to take into account the total duration of thebusiness relationship.


 


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Author of this analysis: Alexandre Marinelli - Attorney specializing in Business Law, particularly in commercial law



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