Abrupt termination of an established commercial relationship is a restrictive commercial practice penalised by Article L. 442-1 of the French Commercial Code (Code de commerce) (in French). It consists in ending an established commercial relationship, even partially, without sufficient written notice. The victim of the termination can obtain compensation for its loss before one of the specially designated commercial courts (Article D. 442-2 of the Commercial Code (in French)). However, bringing this action requires gathering several items of evidence.
Proving that the commercial relationship was established
The commercial relationship must be established: it must be stable, significant and lasting. The factors that help prove this include the length of the relationship (the longer it lasts, the more readily it is presumed to be established), the volume of business between the parties, the share of the victim’s turnover that the relationship represents, the existence of regular business practices (recurring orders, stable terms of collaboration) and the investments made by the victim because of the relationship.
Proving that the termination was abrupt
Whether a termination is abrupt is assessed by reference to the notice given. The Commercial Code requires written notice that takes into account, in particular, the length of the commercial relationship, by reference to trade practice or inter-professional agreements. Insufficient or no notice makes the termination abrupt; however, the author of the termination cannot be held liable for insufficient notice where it has given eighteen months’ notice. The evidence includes the notice of termination (letter, email, oral statement for which a record exists), the absence of notice or the insufficient length of the notice given, and any sudden change in orders or commercial terms.
Assessing and documenting your loss
The recoverable loss is generally assessed on the basis of the margin lost during the notice period that should have been observed. It is useful to document the turnover achieved with the defaulting party over recent years, the corresponding gross margin and the notice period that should have been given according to trade practice and the length of the relationship.
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