When a contract is not honoured, creditors often find themselves at a loss, faced with the debtor's inertia or default. The law of obligations, far from being a mere compendium of theoretical principles, offers concrete and powerful tools for protecting creditors' interests and punishing contractual non-performance. These mechanisms form part of the wider arsenal of remedies available, as we set out in our complete guide to creditor guarantees. Among these courses of action, contract resolution and oblique action are distinguished by their purpose and the conditions under which they are implemented. Understanding how they work is essential for any manager or individual wishing to assert their rights effectively.
Action for rescission: annulling the contract to punish non-performance
An action for rescission is a radical mechanism that allows a creditor to demand the annulment of a contract when the other party fails to honour its commitments. It is not simply a matter of suspending the creditor's own obligations, as is possible with the defence of non-performanceThis is not the case for the contractual relationship itself, but for the destruction of the contractual relationship itself, with retroactive effect. Termination acts as a fundamental safeguard: it allows the injured party not to perform its own obligations or, if it has already done so, to obtain restitution. In practical terms, if a supplier fails to deliver the agreed goods, the buyer may not only refuse to pay the price, but may also request that the sale be rescinded in order to be fully released from his obligations.
Scope and sources of the resolution
Rescission is best applied to synallagmatic contracts, i.e. those that create reciprocal obligations between the parties, such as sales, leases or contracts of enterprise. However, case law has extended its application to certain unilateral contracts, such as gifts with encumbrances. Since the 2016 reform of contract law, article 1224 of the Civil Code has clarified the different ways of obtaining resolution:
- The resolutory clause : the parties may stipulate in the contract that failure to perform a particular undertaking will automatically result in its termination.
- Unilateral notification : the creditor may, under certain conditions and at his own risk, notify the debtor of his decision to cancel the contract.
- The court decision : the creditor may apply to the court to have the contract rescinded.
- Force majeure : if an event of force majeure makes performance definitively impossible, the contract will be terminated ipso jure.
It is important to note that, except in the case of a specific resolutory clause or force majeure, termination (by notification or court order) is only possible in the event of "sufficiently serious" non-performance. A simple minor delay or an incidental breach will generally not justify a sanction as severe as the annulment of the contract.
Conditions and effects of the resolution
The implementation of the resolution is subject to specific conditions. Unless there is an emergency or a clause to the contrary, prior formal notice is generally required. The creditor must summon the debtor to perform within a reasonable period of time before being able to trigger resolution. The response must also be proportionate to the fault. If the matter is referred to the court, it has broad discretionary powers and may, instead of ordering resolution, grant payment deadlines or simply award damages.
The effects of resolution are significant. The main one is the retroactive destruction of the contract: the parties must be returned to the state they were in before the contract was concluded. This implies obligations of restitution. The buyer must return the goods, and the seller must return the price. However, there are limits to this retroactivity. In the case of contracts with successive performance, such as a lease, the termination of the contract, which is then referred to as resiliation, only has effect for the future. In addition, certain clauses of the contract are designed to survive its annihilation, such as dispute resolution or confidentiality clauses, as provided for in article 1230 of the Civil Code. Finally, the termination of a contract may result in the invalidity of interdependent contracts, creating a domino effect that requires careful legal analysis.
Oblique action: substitution by the creditor to preserve his general pledge
The oblique action is a more subtle prerogative, which allows a creditor to act in the place of his own debtor when the latter neglects to exercise his own rights and actions. The aim is not to be paid directly, but to reconstitute or preserve the debtor's assets, which constitute the general pledge of all his creditors. If paulian action The action oblique, on the other hand, punishes simple passivity. For example, if a company (A) owes money to a supplier (B), but A neglects to claim a large sum owed to it by its own customer (C), supplier B can take legal action against C on A's behalf to recover the debt.
Conditions for bringing an action oblique
The exercise of the action oblique, codified in article 1341-1 of the Civil Code, is subject to strict conditions to avoid improper interference in the debtor's affairs.
Firstly, the default by the debtor must be established. There must be proven and prolonged inaction, negligence that is not justified. Judges are sovereign in their assessment of this condition. If the debtor has taken action, even if clumsily, the action oblique is in principle inadmissible.
Secondly, this deficiency must cause prejudice to the creditor. This prejudice is most often materialised by the fact that the debtor's inaction compromises his chances of recovery, typically because it leads to or exacerbates his insolvency.
Finally, the claim of the creditor acting must be certain (not disputed in principle), liquid (quantified) and due (arrived at maturity). The creditor may exercise all the debtor's property rights and actions by way of an objection. Excluded, however, are rights "exclusively attached to the person", such as actions in family matters or compensation for non-material damage, as well as rights that cannot be seized.
Effects and limits of derivative actions
One of the most important features of a derivative action is its collective effect. The proceeds of the action, whether a sum of money or property, do not fall directly into the assets of the creditor who has taken the action. It reverts to the assets of the negligent debtor. Consequently, the creditor who initiated the action has no preferential right over the sums recovered. These sums become available to all of the debtor's creditors, who will compete against these reconstituted assets.
This action has other limitations. The third party being sued (the debtor of the debtor) may raise against the creditor acting all the defences that he could have raised against his own creditor (the original debtor). For example, he could invoke prescription of the debt or set-off. In order for the judgment to be enforceable against the inactive debtor, it is strongly recommended that the debtor be joined in the case, i.e. intervene in the proceedings. Without this precaution, the debtor could contest the decision. The action oblique is therefore clearly distinct from civil enforcement procedures such as seizure-attribution, which allow direct payment to the seizing creditor.
Actions for resolution and derivative actions are two powerful legal levers available to creditors. The former offers a radical way out of a faulty contractual relationship, while the latter makes it possible to remedy the negligence of a debtor who is jeopardising his own assets. The choice between these tools, or their combination with other guarantees, depends on a detailed analysis of the contractual situation, the solvency of the parties and the objectives pursued. To help you secure your receivables and assess the relevance of these measures to your case, we offer you the assistance of our law firm specialising in securities and guarantees is a key asset.
If you are faced with a defaulting or negligent debtor, do not hesitate to contact our firm for a personalised analysis of your options.
Sources
- Civil Code
- Commercial code
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