On December 7, 2022, the French Supreme Court (“Cour de cassation”) upheld the Paris Court of Appeal’s judgment dismissing Concurrence’s damage claim brought against Samsung Electronics France (“Samsung”).[1] Concurrence claimed that Samsung had abruptly terminated their long- standing commercial relationship.
Background
Concurrence is an independent distributor of electronic products, both online and offline. In 2000, Samsung and Concurrence signed a distribution contract regarding the distribution by Concurrence of Samsung consumer electronics goods in France.
The distribution contract was renegotiable on an annual basis. However, the business relationship between the two companies significantly deteriorated over the years and, by letter on March 20, 2012, Samsung notified Concurrence of the termination of their commercial relationship effective as of June 30, 2013, following a notice period of more than 15 months.
In turn, Concurrence claimed damages before the Paris Commercial Court as it considered that Samsung’s letter constituted an abrupt breach of their long-standing commercial relationship then prohibited by Article L. 442-6 I 5° of the French Commercial code. Concurrence alleged that Samsung had unlawfully modified the conditions of their contract during the notice period. For instance, Samsung had asked all its distributors (including Concurrence) to place orders through wholesalers instead of buying directly from Samsung – all other terms of purchase remaining otherwise unchanged.
The Paris Court of Appeals’ judgment
On May 19, 2017, the Paris Commercial Court dismissed Concurrence’s damage claim against Samsung.[2] Concurrence appealed the first instance court’s ruling.
On June 5, 2019, the Paris Court of Appeal found that, because Samsung and Concurrence’s distribution contract was renegotiable annually, the initial commercial conditions could be changed, including during the notice period, unless (i) for conditions reflecting the parties’ customary conduct prior to the termination of the contract; (ii) if the supplier had agreed to guarantee these conditions for a given term; or (iii) if the supplier substantially changed the terms of the contract during the notice period.[3] Concurrence failed to prove any of these exceptions, and the Court thus found that Samsung’s termination notice did not constitute an abrupt breach of contract with respect to Concurrence and dismissed the latter’s damage claim. Concurrence appealed the 2019 judgment before the French Cour de cassation.
The French Cour de cassation’s ruling
On December 7, 2022, the French Cour de cassation upheld the Paris Court of Appeal’s judgment. It found that a change in the distribution conditions (from direct supply to indirect supply via wholesalers) does not constitute a substantial change in a contract that would normally have been prohibited during the notice period, in particular as pricing conditions remained unchanged,. Concurrence thus failed to prove that Samsung’s behavior constituted an abrupt breach of a long-standing commercial relationship.
Implications
The French Cour de cassation previously found that a long-standing commercial relationship cannot be changed until the end of the notice period, save for “exceptional circumstances”.[4] In its December 7, 2022 ruling, the French Cour de cassation clarifies that when parties have agreed to renegotiate their contract on an annual basis this constitutes “exceptional circumstances” allowing a party to modify some of the terms of a long- standing commercial relationship even during the notice period.
[1] Commercial Chamber of the French Cour de cassation, December 7, 2022, No. 19-22.538. Due to its significant practical implications, the ruling is to be published in the French Cour de cassation’s Official Journal.
[2] Paris Commercial Court, May 19, 2017, No. 2013005204.
[3] Paris Court of Appeal, June 5, 2019, No. 17/11700.
[4] See for instance Commercial Chamber of the French Cour de cassation, February 10, 2015, No. 13-26.414 (also published in the French Cour de cassation’s Official Journal).