Relative invalidity of a deed signed by a non-represented company: a case law in reprieve?

April 25th 2016

A deed signed by a company represented by a director who is actually deceased is only subject to relative invalidity.

This was the decision reached in a ruling of the Cour de cassation (French Civil Supreme Court) of the 1st Civil Section of November 12, 2015.

The facts of the case are straight forward: on June 1, 2008, a real-estate partnership granted an at-will lease to a commercial company. When summoned to make the payment of tax and rent arrears, the lessee replied by asserting the invalidity of the lease due to the manager’s demise on June 29, 2006.

This argument was approved by the lower court judges (Aix-en-Provence, June 3, 2014) which considered that minus its manager, the company did not have the capacity to contract.

The Cour de cassation, on the basis of Article 1984 of the French Civil Code relating to the term of office, recalled that “the invalidity of an agreement based on the absence of powers of the corporate officer which is relative, may only be requested by the represented party”.

This decision, albeit conventional, gives rise to some evident remarks:

  • Firstly, it concerns a reversal ruling of the French Supreme Court; it proves that the solution was not just as simple as one might think.
  • Then, the decision is criticized by at least a part of the doctrine. For Professor Hugo Barbier, for example (Bulletin Joly sociétés, February 2016 page 69), two situations should have been distinguished: “on the one hand, the cases of relative invalidity for default or excess of power by the representative which question the hierarchy duly setup by the company and for which it must be solely protected […] and on the other hand, the cases of absolute invalidity for the shortcoming of the represented party […] ».

Yet, above all we shall recall:

  • On the one hand, if the deed was salvaged by the Cour de cassation, it shall nonetheless remain under the aegis of the relative invalidity which could be raised according to the interests of the case by the “unduly represented” party, with the contracting party being responsible for asserting the theory of the apparent mandate (theory now codified in Article 1156 of the French Civil Code in its version that should enter into force on October 1st, 2016).
  • On the other hand, this same Article 1156 sets forth that: “when the third party contracting was unaware that the deed was accomplished by a representative without any power or had acted beyond his power, he may assert the nullity”, an innovative concept, nonetheless moderated by the last paragraph of the Article: “The unenforceability, in the same manner as the invalidity of the deed, may no longer be asserted insofar as the representative has ratified such deed.”

Cass., 1st Civil Section, November 12, 2015, case no.14-23340:

Raphaël Oualid