SUDDEN TERMINATION OF ESTABLISHED COMMERCIAL RELATIONSHIPS – The judge does not have to explain the reasons why the notice period deemed sufficient enables the victim to find new opportunities

Cass. Com. 18^th October 2023, no. 22-20.438

In the case of a sudden termination of established commercial relationships, compensation is calculated on the basis of the notice period that should have been granted to the victim. Article L.442-1, II (formerly Art. L.442-6, I, 5°) of the French Commercial Code requires the length of the commercial relationship to be taken into account when assessing the notice period but does not rule out the consideration of other criteria. In any event, the judge does not have to justify the reasons why the notice period enables the victim to find new opportunities. This is what the Court of Cassation ruled in a judgment issued on 18^th October 2023.

In this case, in 2014 a service provider (a consultancy firm) entered into a one-year contract with a bank for consultancy services. A second contract was signed in 2015 for the same duration. The services under both contracts were provided by the service provider and by two of the bank’s self-employed workers. In 2016, the bank decided to resort to the services of these two self-employed workers through two other companies.

Taking the view that the bank had breached its obligations and abruptly terminated their established commercial relationship, the service provider brought an action against the bank before the Paris Commercial Court.

In a judgment dated 17^th June 2019, the Paris Commercial Court dismissed all the service providers claims on the ground that the succession of two fixed-term contracts was not sufficient to characterise an established commercial relationship.

In response, the service provider decided to lodge an appeal, seeking an order that the bank pay it the sum of €100,000 for the sudden termination of an established commercial relationship.

In its ruling of 22^nd June 2022 (RG no. 20/17215), the Paris Court of Appeal ruled in favour of the service provider, holding that the bank had been guilty of the sudden termination of an established commercial relationship, when the bank should have given the service provider a three-month notice to allow it to reorganize itself.

The Court of Appeal recalled that a commercial relationship is established when it is “ongoing, stable and regular“, stability being understood as the fact for the victim of the termination to have legitimate expectations of “continuity in the flow of business“.

The appeal judges therefore considered that two successive one-year contracts could constitute an established commercial relationship considering the continuity of the assignment entrusted to the service provider, justifying, moreover, its legitimate belief in a new renewal of the contract, similar to that which occurred at the end of the first contract.

The Court of Appeal also emphasised that the notice period should be understood as “the time required for the company to reorganise itself in the light of the duration, nature and specific features of the relationship“.

The Court considered in this case that a three-month notice should have been granted to the service provider in view of the length of the two-year relationship between the parties and changes in costs and turnover. The Court then ordered the bank to pay damages of €25,000.

The service provider appealed to the Court of Cassation, claiming that the judgment limited the damages to the sum of €25,000, whereas the Court did not specify to what extent the three-month notice had enabled it to find new opportunities.

The Court of Cassation dismissed the appeal on the ground that the Court of appeal had legally justified its ruling: “the Court of Appeal, which did not have to explain further why the three-month notice period enabled the service provider to find new opportunities, since it assessed the sufficiency of the notice period solely in the light of the legal criterion applicable at the time and the specific circumstances of the relationship in question“.

Consequently, the Court of Cassation, after confirming the established nature of a commercial relationship consisting of two successive one-year contracts, pointed out that, since the Court of Appeal assessed the sufficiency of the notice period in the light of the legal criterion set out in Article L.442-1, II (formerly Art. L.442-6,I, 5°) of the French Commercial Code, i.e. the duration of the relationship, it was not bound by any obligation to provide further reasons even if, in addition to the legal criterion, it used other criteria, such as the possibility of finding new opportunities, to assess the notice period.