Financial lease : termination indemnity and new effects for termination of the sale: three innovative decisions

In a judgment of April 11, 2018 (N°16-24143) related to concerning a financial lease, the commercial section of French Court of Cassation specifies that the termination indemnity due in case of exercise by the lessee-credit of the right of early termination the lease, does not consist in a penalty, but an indemnity for the purpose of repairing the damage suffered by the lessor as a result of the lessee’s exercise of its right to terminate early. The indemnity is therefore not revisable by the court.

On April 13, 2018, French Court of Cassation (No. 16-21345) that changes its usual case law applicable in case of the cancellation of the sales contract linked to a financial lease. It explains this evolution. « The Court of Cassation so far used to rule that the cancellation of the sale agreement necessarily entailed the termination of the financial lease agreement, subject to the application of clauses intended to settle the consequences of such termination (Ch. Mixte 23 November 1990, Appeal Nos 86-19.396, Nos 88-16.883 and 87-17.044, Bull, 1990, Mixed Chord, Nos 1 and 2, Com., 12 October 1993, Appeal No. 91 -17,621, Bull, 1993, IV, No. 327, Com., January 28, 2003, Appeal No. 01-00.330, Com., December 14, 2010, Appeal No. 09-15.992).

The court explains that this approach can no longer extend to the financial lease, which is ancillary to the sale agreement.

Then, the cancellation of the sale agreement has now the effect to sunsetting (and no longer voiding for the future) the financial lease: the clauses provided for in case of termination of the contract cannot apply.

On 14 March 2018, the Court of Cassation (No. 16-28302) considers that the action for the cancellation of a contract of sale containing a clause giving jurisdiction to foreign judge must be brought before that judge, even though the bank which granted a credit falling within the competence of the French judge, is also a party to the dispute, and though the claimant raised the argument of the interdependence of the sale and credit contracts.


Frédéric Fournier

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