Significant developments in tort liability based on breach of contract

a Court of Cassation makes contractual predictability prevail over the relative effect of contracts.

The principle of the relative effect of contracts means that only the parties to a contract can avail themselves of the provisions of the said contract. However, since a judgment of the Plenary Assembly of 6 October 2006, the Court had already ruled that a third party to a contract may invoke a contractual breach, but on the basis of tort and not contractual liability, since this breach causes him damage (appeal No. 05-13.255). In addition, in a judgment of 13 January 2020, the Court had specified that the third party is not required to demonstrate a tort separate from the contractual breach (appeal No. 17-19.963). This situation is different from that in which it is a party to the contract who invokes it against a person who is not a party to the contract; for example, the creditor of a The post-contractual non-compete clause who sues a competitor for third party complicity, for entering into a contract with a former distributor, in violation of the non-competition clause which had been subscribed by this former distributor.

In this case, Aetna Group Spa transported several machines from Italy to France for an exhibition in Paris. The handling and unloading of these machines were entrusted to the company Clamageran Expositions by a contract signed in November 2014. During handling, a machine was damaged by a Clamageran employee. Aetna Group Spa then obtained compensation from its insurer, Itas Mutua, which, subrogated to the rights of its insured, sued Clamageran for damages. Here the insurance company, a third party to the handling contract, assigns one of the parties to said contract.

The central legal question in this case concerns the enforceability of contractual liability limitation clauses against a third party: when a third party invokes non-contractual liability for the non-performance of a contractual obligation, the conditions and limits of liability provided for in the initial contract are enforceable against this third party.

The Court of Appeal had ruled that the limitation of liability clauses arising from the terms and conditions of the contract between Clamageran and Aetna Group France were unenforceable against Itas Mutua. The Court of Cassation considered that this decision violated Articles 1134 and 1165 of the Civil Code (in their wording prior to the order of 10 February 2016) and Article 1382 (now 1240) of the same code.

The Court of Cassation therefore partially quashed the judgment of the Paris Court of Appeal. 4. A third party to a contract may invoke, on the basis of liability in tort, a breach of contract when this breach has caused damage to it. However, in order not to circumvent the debtor’s forecasts and not to give the third party a more advantageous position than that of the creditor, the conditions and limits of contractual liability are enforceable against this third party.

Thus, the conditions and limits of contractual liability are enforceable against the third party who invokes a contractual breach on the basis of tort.

This case law is important for distribution networks, in which a distributor may want to invoke a breach of the distribution contract committed by another distributor, when this breach causes him harm. Let us take the example of an exclusive distributor A whose contract would include a clause prohibiting it from making active sales in the territory of the other exclusive distributors in the network. A distributor B considers that it has suffered damage as a result of the distributor having made prohibited active sales in its territory. He is not a party to the contract between the brand and the distributor A. He is therefore acting on the basis of tort. On the basis of this judgment, the brand may oppose to it the limitations of liability that would appear in the contract it has concluded with the distributor A. For example, in the event of the existence of a clause of advance prescription, requiring action to be taken within a shorter period than the 5-year statute of limitations under ordinary law, or limiting the franchisee’s liability in the event of a breach, these stipulations will be enforceable against Distributor B.

(Cass. com., July 3, 2024, No.21-14947)