Collo vs McDo

Legal concepts

Contractual good faith

“Agreements must be performed in good faith.” A sentence from the Civil Code of 1804, which has become the judge's main instrument for reviewing the use of contractual prerogatives.

In brief

  • Former Article 1134, paragraph 3 of the Civil Code (1804-2016) — this is the provision applicable to the Collorafi case.
  • Became Article 1104 following the order of 10 February 2016: “negotiated, formed and performed in good faith”. It is a matter of public policy.
  • ⚠️ The current Article 1134 has nothing to do with it any more (it deals with mistake as to the qualities of the other contracting party). Writing “Article 1134” without specifying “former” is an error.
  • Limit set in 2007: the judge may sanction the unfair use of a prerogative, but may not “undermine the very substance of the rights”.

Since 1804, the Civil Code has required performance in good faith. The 2016 reform moved the rule to Article 1104, extended it to the negotiation and formation of the contract, and expressly made it a matter of public policy — no clause may derogate from it.

This principle allows the judge to neutralise the unfair exercise of a right, without touching the right itself. The commercial chamber drew this line in the so-called “Les Maréchaux” judgment of 10 July 2007 (no. 06-14.768): good faith “allows the judge to sanction the unfair use of a contractual prerogative”, but “does not authorise him to undermine the very substance of the rights and obligations lawfully agreed between the parties”.

Applied to franchising: the franchisor does not lose its right to terminate, nor its right to be paid. But the manner in which it triggers the termination may be held to be unfair and deprived of effect. Since good faith is presumed, it is for the party alleging unfairness to prove it.

Two judgments extended this reasoning to distribution networks: the Huard judgment (Com., 3 November 1992), in which a supplier deprived its distributor “of the means to charge competitive prices”, and the Chevassus-Marche judgment (Com., 24 November 1998), which requires the principal to put its agent “in a position to perform its mandate”.

Sources

External sources.

  1. Civil Code, Article 1104 — Légifrance
  2. Civil Code, former article 1134 (version in force until 1 October 2016) — Légifrance
  3. Cass. com., 10 July 2007, no. 06-14.768, known as “Les Maréchaux” — Légifrance

Where this comes up in the case file

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