Sudden breach of a contract and liability: key takeaways from the Altarea’s court decision (TAE Feb. 4, 2025, no. J2024000206)

A out of the ordinary case: a breach of contract for the sale of a business (rather than the breakdown of negotiations), and more specifically for the transfer of control of the Primonial Group. Back in March 2022, the shareholders of Primonial (the Sellers), who have retained their shares, summoned the Altarea group (the Purchaser) before the Paris Commercial Court to claim a total sum of around 1.1 billion euros for breach of a sale agreement signed in July 2021. This is an action in contractual liability rather than an extra-contractual (or tort) liability for wrongful breach of negotiations. It should also be noted that the Sellers of Primonial have not requested the forced execution of the sale agreement, but have made claims for compensation only. The Purchaser, for its part, also made counterclaims for substantial damages.

1. A dispute involving key notions of French contract legal theory (obligation of result for the timely transmission of contractual documentation, termination for faulty non-performance, exception of non-performance, lapse of contract) in a merger-acquisition dispute. Both parties have issued claims based on key notions of the general theory of obligations; this is a remarkable illustration of the importance of these notions in major disputes in corporate law and, more generally, in business law.
2. A very carefully and well-reasoned judgment: the new Tribunal des affaires économiques de Paris (which replaced the Tribunal de commerce de Paris on January 1, 2025) handed down a remarkable, well-reasoned judgment (43 pages), dismissing all of the parties' claims in their entirety; on the most sensitive point, it ruled out any wrongful termination of the sale agreement by the Purchaser, as well as any breach of its obligations under the agreement. After a detailed review of the arguments put forward by the parties, the Court responded on the two major issues, namely (i) the Purchaser's refusal to fulfill the sale on March 2, 2022, and (ii) liability for the failed transaction. The reasoning is commensurate with the issues at stake, with precise references to the exhibits (contract documentation, etc.).
3. The essential points are examined and discussed at length: stipulations of the sale agreement and in particular the qualification of transactions prior to completion of the sale, the scope of the parties' obligation to cooperate and of the Sellers' obligations with regard to the timely transmission of documentation, the validity of the non-performance under article 1219 of the French Civil Code and the caducity of the sale agreement under article 7.1 thereof.
4. With regard, firstly, to the Purchaser's refusal to proceed with the transfer on the scheduled date of March 2, 2022, based on the exception of non-performance, the Court considers that the Sellers' obligation to provide the documentation on time is an “obligation of result”, which is decisive. The Court points to the delays on the part of the Sellers, who “clearly did not master the process of preparing the documentation”.
5. Secondly, with regard to the responsibility for the failed transaction, the Court refers to the parties back to back: it considers that “neither party can rely on a request for postponement of the transfer nor on a refusal to postpone by the other party” and considers (p. 38) that “the protocol is therefore null and void”, pursuant to article 7.1, due to the failure to complete the Preliminary Transactions. The court states that “due to the Sellers' contractual breaches, the Purchaser was entitled as early as February 25 to refuse to proceed with the transfer on March 2”. After pointing out that the Purchaser was entitled to refuse to proceed with the transfer, the court goes on to note that “the Purchaser renounced the transfer and is also responsible for its failure”.
6. This reasoning and its conclusion prevent the Court from ruling on the consequences of the failed transaction and the parties' claims for compensation in this respect (p. 41), “all parties having renounced the sale and being responsible for its failure”. The Purchaser’s counterclaims are therefore dismissed. While the Sellers' claims for damages are dismissed in their entirety, the Court also dismisses the Purchaser's counterclaim along with its claim for a very substantial procedural indemnity, which is consistent insofar as the claims and demands of each of the parties are dismissed in their entirety. This decision is currently under appeal.
7. Major lessons for M&A and litigation practitioners: several points deserve to be emphasized, and firstly the qualification as an obligation of result applied to the obligation of the Sellers to transmit to the Purchaser, in good time before closing, the contractual documentation; this is a major clarification for those involved in these transactions; secondly, while transfer protocols usually exclude any possibility of “exiting” the contract or of unilateral breach of contract by one of the parties, the exception of non-performance (C. civ., art. 1219) appears to be a relevant and highly effective means of defence (all the more so as the exception of non-performance can be invoked without formal notice and without prior intervention by the judge, who nonetheless checks its validity a posteriori, in the event of a dispute); the purchaser is therefore left with this means of defence in the event of the seller failing to meet his obligations under the sale agreement (unless the purchaser has contractually waived it, which is conceivable but probably not advisable). It is also worth noting the cut-off effect of the contractual lapse resulting from failure to carry out the pre-closing operations referred to in the sale agreement, which is also a protection for the purchaser and a point of attention for the seller in other sales involving such stipulations and a reference to pre-closing operations incumbent on the seller (carve out, for example). Last but not least, the quality of the reasons given for the judgments handed down by the Tribunal des affaires économiques contributes to the attractiveness of Paris as a business location, in terms of speed and legal certainty, by settling a major dispute within a very reasonable timeframe (less than three years for a highly complex case with extraordinary stakes), with a very solid and didactic set of reasons.