French law can be full of surprises.

Few are more unexpected than the provisions of article L.442-1 II. of the French commercial Code even though it has now been in force for more than two decades.

According to article L.442-1 II, “any person engaged in production, distribution or service activities who abruptly terminates, even partially, an established commercial relationship, in the absence of prior written notice taking into account the duration of the commercial relationship, with reference to trade practices, or interprofessional agreements will be held liable”.

In practice, this means that termination of any business relationship subject to French law should be carefully considered. If the notice period provided is too short, the terminating party will be held liable.

Foreign businesses will especially be taken aback when they learn that the provisions of article L.442-1 II apply even if the parties have freely negotiated and agreed on a termination clause including the notice period. Such notice period would become effectively irrelevant.

The longer the contractual relationship, the longer the notice period has to be. Fixed-term contracts also fall within the scope of article L.442-1 II if it is reasonable to expect that the contract might be renewed or extended.

The adequacy of the notice period is assessed on a case-by-case basis. The abundance of case law and the particularities of specific situations make it difficult to determine with certainty how long the notice period should be. The law however provides that the terminating party cannot be held liable if it has given 18 months prior notice.

A prudent business would be mistaken to think that article L.442-1 II can easily be avoided by picking another applicable law upon signing the contract. This would be underestimating the ambitions of the French courts!

Article L.442-1 II is indeed considered a mandatory norm (loi de police). This means that the French courts will have to apply it even if the parties opted for another applicable law in the contract. The jurisdiction clause should therefore also be carefully considered.

Blandine Orthmann, LL.M. Frau Orthmann advises national and international companies, especially in the French-speaking world. She also advises on international disputes involving interests in France and Germany.