The termination clause

The clause that brings the contract to an end automatically in the event of a breach, without a judge having to order it. The judge merely records it.

In brief

Article 1225 of the Civil Code (since 1^st October 2016). Before that date: no dedicated article — the regime was case-law based.
The clause must specify the obligations whose non-performance gives rise to termination.
It requires an unheeded formal notice, which must expressly mention the clause.
In commercial leases: the clause only takes effect one month after an order to pay that has gone unheeded (Art. L. 145-41 Commercial Code).
The judge does not assess the seriousness of the breach: he records that the clause has taken effect.

The termination clause is a contractual weapon. It spares the creditor from asking the judge to terminate the contract: termination operates automatically, and the judge seised merely records that it has taken effect. He does not weigh the seriousness of the breach; he checks that it occurred.

The counterweight lies elsewhere: in the requirement of good faith. The first civil chamber laid this down on 31 January 1995 (no. 92-20.654): “a termination clause does not take effect if it has been implemented in bad faith by the creditor”. This counterweight is narrow. The third civil chamber held on 2 December 1998 (no. 97-11.109) that the implementation is assessed in the light of the order itself: the clause cannot be set aside by invoking grievances unrelated to the non-performance in question.

It is precisely on this knife-edge that the Collorafi case was played out. The Paris Court of Appeal held on 8 March 2000 that the orders to pay had been served in bad faith, and that the termination was therefore wrongful — without, however, releasing the franchisee from paying the fees due.

Sources

Where this comes up in the case file

Other glossary entries — Legal concepts