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Substantial imbalance and judicial control of the price

- Newsletter

After reviewing 300 contracts and 96 trade relations with suppliers, the judgment on “Leclerc Le Galec”’s central purchasing organization due to substantial imbalance has been upheld.

By judgment no°15-23.547 of 25th January 2017, Le Galec’s appeal has been completely rejected.

The judgment is particularly instructive; the Court of cassation applies the judicial control of price through the instrument of substantial imbalance, ruling as follows:

  •  The principle of the Convention unique (compulsory framework contract in French law) according to article L.441-7 of the Code de commerce, which allows a comparison between the price fixed by the parties and the standard tariff applied to suppliers, is the basis for a price control via the notion of “substantial imbalance”. Hence, price clauses can be reviewed by the judge: “Article 422-6, I, 2° of the Code de commerce allows a judicial control of the price as far as the price is not the result of free negotiations and represents a substantial imbalance of the parties’ rights and obligations.”
  •  The principle of free negotiability of purchase conditions, particularly concerning prices, does not apply without exception. The Court of cassation stipulates: “A lack of counterpart or of any other justification for the contracting parties’ obligations, even if such obligations don’t fall into the definition of “commercial cooperation” services, may be sanctioned by Article 422-6, I, 2° of the Code de commerce as far as this constitutes a submission or attempted submission and leads to a substantial imbalance.  

The control of price clauses by the judge is notable, as the Code civil (which applies to all contracts) and the Code de la consommation (which applies only to B2C contracts), even if they have much in common with the Code de commerce, both explicitly provide that substantial imbalance does, in principle, not apply to price clauses.

Moreover, the Court of cassation confirms the following:

  • A “submission” as described by art. L. 442-6, I, 2° of the Code de commerce is indicated by pre-printed clauses and a lack of real negotiations.
  •  The Minister for Economic affairs, who is entitled to bring actions for the recovery of sums paid but not due (action en répétition de l’indu) in the context of an independent claim in order to protect the market’s functioning as well as free competition according to article L. 442-6 III of the Code de commerce, is valid.

This important decision, which clarifies the scope of application of article L.442-6, I, 2° of the Code de commerce, will certainly have substantial impact on future negotiations.