French High Court Strengthens Rules Regarding Settlement Agreements | La Cour de cassation réaffirme la portée d’un protocole transactionnel

[authors: Alexandre Bailly, Aude du Parc, Xavier Haranger, and Coline Warin]

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The Court holds that settlement agreements have the force of a final and binding judgment only when all parties comply with the agreement's terms.

On 12 July, the French Supreme Court for Judicial Matters (Cour de cassation) issued ruling Number 09-11.582,[1] finding that settlement agreements are binding only when parties comply with the agreement's terms. The High Court's decision strengthens the provisions of Article 2052 of the French Civil Code. Individuals and companies should take steps to comply with settlement agreements in order to ensure that these agreements are binding.

Background

In the above case, party X and party Y were facing neighborhood issues and decided to settle. Pursuant to the settlement agreement, party Y undertook to carry out works to prevent any further damage but failed to do so within the agreed time period. Therefore, party X filed a suit against party Y and claimed damages. The Court of appeal (Aix-en-Provence, 18 December 2008), ruled that party X was entitled to bring an action notwithstanding the existence of a settlement agreement.

Before the French Supreme Court, party Y, who had failed to perform the settlement agreement, claimed that the settlement had "the force of res judicata of a final and binding judgment as long as it has not been terminated by the Court based on one of the parties' failure to meet its obligations."

High Court's Findings

In adjudicating the case, the High Court reaffirmed Article 2052 of the French Civil Code, which provides that "as between the parties, settlement agreements have the force of res judicata of a final and binding judgment" only, however, when the parties comply with the terms of the settlement agreement.

In so holding, the High Court dismissed the argument of the party who had failed to perform the agreement [Y] and stated that "the settlement agreement, which settles the dispute only where it has been performed, can be relied upon by either party only if said party has complied with the conditions thereof."

Implications

Prior to this decision, the parties could have sought to argue that a breach of a settlement agreement could not impact the res judicata force of the settlement before a court could rule that the settlement agreement should be terminated. Now, with the High Court's decision supporting the inclusion of the phrase "subject to the due performance of this agreement" in settlement agreements, a party can bring an action before a court without delay in the event the other party breaches the settlement agreement.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis attorneys:

Paris
Alexandre Bailly
Aude du Parc
Coline Warin
Xavier Haranger


[1]. Cour de cassation [Cass.] [French supreme court for judicial matters] 1st civ., 12 July  2012.

 

Les transactions n'ont autorité de la chose jugée qu'à la condition que les parties en exécutent les termes.

Si l'article 2052 du Code civil prévoit que « les transactions ont, entre les parties, l'autorité de la chose jugée en dernier ressort », ce n'est qu'à la condition que les parties exécutent les termes de l'accord transactionnel.

C'est cette évidence qu'a rappelée, avec force, la Cour de cassation, le 12 juillet 2012 (Cass. 1ère Civ.,  12 juillet 2012, n°09-11.582). Dans cette affaire, les parties (Y et X d'autre part), avaient décidé, pour mettre fin au litige qui les opposait, de conclure une transaction.

Aux termes de l'accord transactionnel, Y s'était engagé à réaliser des travaux afin d'éviter tout dommage ultérieur mais ne les a pas réalisés dans le délai imparti. X a donc engagé une action en responsabilité à l'encontre de Y. Le 18 décembre 2008, la Cour d'appel d'Aix-en-Provence a reconnu le bien-fondé de l'action initiée par X nonobstant l'existence d'un accord transactionnel. La partie n'ayant pas exécuté le protocole transactionnel y soutenait que la transaction avait, entre les parties, « autorité de la chose jugée en dernier ressort aussi longtemps que la résolution n'en a pas été prononcée par le juge en raison du manquement de l'une des parties à ses engagements ».

La Cour de cassation a rejeté l'argument en relevant que « la transaction, qui ne met fin au litige que sous réserve de son exécution, ne peut être opposée par l'une des parties que si celle-ci en a respecté les conditions ».

Ainsi, la portée de la mention : « sous réserve de la parfaite exécution du présent protocole », qui figure dans nos protocoles transactionnels, se trouve renforcée par cette décision.

Contacts

Si vous avez des questions ou souhaitez recevoir plus d'informations sur les sujets développés dans ce LawFlash, n'hésitez pas à contacter les avocats de Morgan Lewis:

Paris
Alexandre Bailly
Aude du Parc
Coline Warin
Xavier Haranger

 

Published In: Civil Remedies Updates, General Business Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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