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The sudden termination of established business relations: consequences of the transfer of the business

November 26th 2015

The French Commercial Code (Article L.442-6 I 5°) sanctions the sudden termination of an established business relation, without written notice taking into account the duration of the business relation and respecting the minimum notice period defined in reference to business practice, by inter-professional agreements.
On this basis, a provider claimed damages from the transferee of a business for the sudden termination of an established business relation, intending to assert the duration of the business relation that he had built up over the years with the transferor of the business.

In the case in question, the transferor of a business in the beverage trade had built up a business relation with a provider, who had been responsible for several years for the transport of beverage supplies of said business.

Then, the transferor had granted his business for six months under lease management for the benefit of the transferee, prior to transferring it to him.

Two weeks after the transfer of the business, the transferee informed the provider that he intended to end the existing business relation and this decision became effective more than three months later.

Given these circumstances, the Cour de Cassation considered that:

  • the transfer of the business by the transferee had not automatically substituted the latter in the business relations that the transferor had built up with the provider;
  • the fact that said business relation had lasted during the lease management, then after the transfer of the business for the benefit of the transferee before the latter informed the provider of the termination of their relations, does not enable to consider that the transferee had the intention of continuing the business relation initially established by the provider with the transferor.

Accordingly, the Court considered that the termination notice given by the transferee to the provider did not have to be determined with consideration for the relation that previously existed between this provider and the transferor of the business.

The important issue is that the situation would have been otherwise if the transferee had indicated his intent to continue the business relations previously established.

Advice: it may be advisable to indicate in the deed of transfer of the business, the parties’ intent for the continuation or not by the transferee of the agreements relating to the business operations.

(Cass. Com September 15, 2015)

Gérald Garcia