After some doubts, this generous French law approach was thought to have been finally settled by a Full Court decision of the French Supreme Court in the Boot Shop case handed down in October 2006.1 However, since then, some residual doubts have been expressed by certain courts (some of which have been reluctant to step into this extraordinary legal panorama), perhaps most eloquently captured by the words of Cardozo J in Ultramares Corporation v. Touche2 and reproduced in the title of this alert.
This year the French Supreme Court has handed down yet another Full Court decision, calling to order those courts (including sections of the Supreme Court itself) that sought to find chinks in its earlier Boot Shop Full Court ruling.
Background
In the particular case,3 an energy supplier suffered a fire following which a factory operated by a cane sugar manufacturer, Bois Rouge, was closed for a number of weeks due to a lack of energy supply caused by the fire.
Under the terms of an agreement that Bois Rouge had previously concluded with another sugar manufacturer, Sucrerie, the latter carried out part of the cane processing that should have been carried out by Bois Rouge.
The subrogated insurer of Sucrerie, having indemnified its client for operating losses, applied to the court to obtain reimbursement of this indemnity from Bois Rouge and the energy supplier. The claim was dismissed by both the court of first instance and the court of appeal.
The insurer appealed to the French Court of Cassation, the Supreme Court for civil and criminal matters. The matter was referred to the Court’s Plenary Assembly, i.e., to a Full Court bench of 19 judges.
Argument focused on the claim made by Sucrerie’s insurer against the energy supplier. The French Court of Cassation was invited to consider whether the insurer, as a third party to the energy supply contract between Bois Rouge and the supplier, could bring a claim in tort against the supplier based on a breach of contract by the supplier. The breach in question was that the supplier had failed to supply energy to the factory operated by Bois Rouge, which had led to Sucrerie suffering operating losses when it came to the assistance of Bois Rouge. A crucial part of the argument centered on the nature of the negligent act committed by the party said to be in breach of contract that must be proven by the third party in order to establish tortious liability.
The Full Court referred to the position previously set out in its Boot Shop decision, in which it held that “a third party to a contract, on a tortious cause of action, may invoke a breach of contract where that breach has caused him loss.”4
The Court of Appeal, while purporting to apply the principle enunciated in the Boot Shop decision, nuanced its application by requiring that the third party show a tortious act committed by the contracting party vis à vis the third party, something akin to a breach of the common law duty of care.
It was on this point that the Full Court took the opportunity to clarify its earlier ruling in the Boot Shop decision. The court held that no burden of proof of any broader tortious act lies on the third party, other than proof of the contractual breach in question and the causal link between the breach and its loss and damage. No distinction is to be drawn between types of breach of contract. The principle applies equally whether the breach is a breach of a contractual duty to exercise due care or a strict contractual duty to achieve a particular outcome. The Court of Appeal’s decision was accordingly set aside as it had not correctly applied the appropriate principles.
Comment
Dissident courts: Although the final outcome in this case would appear to have been clearly signaled in 2006 by the Boot Shop decision, an explosion of case law has since occurred, at times casting doubt on the apparent simplicity of the Supreme Court’s formulation of the law. While the First Civil Chamber of the Supreme Court firmly adopted the principle of the Boot Shop decision,5 the Third Civil Chamber and the Commercial Chamber did not hesitate to deviate from this solution, either by limiting it to cases where the breached contractual obligation was an obligation to take due care6 or by subjecting the principle to an additional burden of proof that some tortious element beyond the mere breach of contract and specific to the third party be shown.7
The judicial disarray in this area no doubt reflects the strong criticism of the Boot Shop ruling that has emerged over the years. Legal commentators have almost unanimously denounced the consequences of the generality of the adopted principle, which offers third parties the benefit of a more favorable situation than that of the co-contracting party. Tellingly, in his opinion to the Full Court in the commented case, the advocate general recommended that the court depart from the Boot Shop decision. However, the Supreme Court did not follow the advocate general’s recommendations.
Absent legislative intervention (see below), the room for legal maneuver from disgruntled contracting parties now seems increasingly limited in light of this latest decision of the Supreme Court. Since this decision was handed down, we have identified at least two Court of Cassation decisions and three Court of Appeal decisions applying the Boot Shop principle.8 Insuring risk for those whose contractual obligations may directly or indirectly affect third parties’ interests will not be made any easier by the commented decision of the Supreme Court.
Legislative reform: Following legislative recodification of the law of contract in 2016,9 recodification of French tort law is currently underway, the main purpose of which would be to codify the case-law principles that have been developed by the courts based on current laws. However, there has been push back against the Boot Shop decision in this process. Successive proponents of reform have proposed various legislative formulations with radically different outcomes.
Under the latest draft bill dated March 13, 2017, article 1234 describes a principle that sets out to restrict the Boot Shop approach, by requiring that the third party in its tort action show a tort committed against the third party by the contracting party beyond mere breach of contract, while providing that the Boot Shop principle remains applicable if the third party has “a legitimate interest in the proper performance of the contract.”
At present, the legislator’s final position is not clear. Certain legal commentators underline the vagueness of the term “legitimate interest” and propose the concept of qualifying third parties as “members of a group of contracts united by an identity of obligations.”
What is clear from the commented decision is that the Full Court of the Supreme Court remains deaf for now to the legislative debate, and deaf as well to the recommendations of its own advocate general. While Cardozo’s concerns appear to be ringing loud in the corridors of the Elysée and in certain judicial quarters, the French courts must for now continue to chart an opposite course dictated by the Supreme Court, to the benefit of those who are not afraid to take an axe to privity of contract.
Post scriptum: We would make one final comment. Historically known for its succinct, briefly reasoned judgments, the French Court of Cassation adopted new drafting guidelines in 2019. This was done to meet the criticism that Supreme Court decisions were only understandable to trained lawyers and even then, left much to interpretation and reading between the lines by legal commentators. In accordance with these guidelines, the commented decision benefits from a “direct” style and an “enriched” reasoning. Its publication was also accompanied by the publication of the rapporteur’s report, the opinion of the advocate general and an explanatory note. For those interested, we are happy to provide a copy of the decision and the advocate general’s opinion, together with an English translation.
How Reed Smith can help
Reed Smith Paris offers particular expertise in French law, which enables us to provide our clients with personalized solutions while taking into account the particularities of the French legal system. We are at your service in the context of both arbitration/litigation and advice on contractual or tortious risk.
- Cass, Ass. Plén., October 6, 2006, no. 05-13.255; “Breach of contract as the basis for third-party claims in tort: A French affair with cross-border implications,” Andrew Tetley, L.M.C.L.Q. [2013], p.199.
- ltramares Corporation v. Touche, 174 N.E. 441 (1932), where Cardozo J refused to hold that any duty of care in tort could exist on the facts of the case, out of a concern that accountants might be exposed to “a liability in an indeterminate amount for an indeterminate time to an indeterminate class.” Current French law harbors no such reservations or concerns.
- Cass, Ass. Plén., January 13, 2020, no. A 17-19.963.
- Cass, Ass. Plén., October 6, 2006, Boot Shop, no. 05-13.255.
- Cass, Civ. 1, May 24, 2017, no. 16-14.371; June 9, 2017, no. 16-14.096.
- Cass, Civ. 3, May 18, 2017, no. 16-11.203.
- Cass, Com., January 18, 2017, no. 14-16.442.
- Cass, Civ. 3, July 9, 2020, no. 18-23.920; Cass, Com., October 21, 2020, no. 18-17.064; CA Paris, June 4, 2020, no. 17/21094; CA Versailles, October 1, 2020, no. 19/02396; and CA Montpellier, October 27, 2020, no. 17/05621.
- See our series of client alerts: Legal revolution in France – civil law reforms (or Napoleon’s second coming); New French Civil Code: “Volte face as hardship becomes part of French law”; Pre-contractual negotiations – a new codified French regime; and New French Civil Code: Protecting the Weaker Contracting Party.
Client Alert 2020-603
