Early termination of a fixed-term contract: price or damages?

Instalments still to run after the early termination (résiliation anticipée) of a fixed-term contract are not due as the price: the price is due only where the agreed service has been performed. The commercial chamber derives this from Articles 1103 and 1229 of the French Civil Code read together. The service provider deprived of its contract must then claim compensation for its damage, which the court assesses.

Key points

• Where a fixed-term contract is terminated early, the price is due only where the agreed service has been performed, by combined application of Articles 1103 and 1229 of the French Civil Code.
• The service provider cannot obtain, as the price, the flat fees for the months following the termination: it must bring a claim for compensation for its damage.
• For the months preceding the termination, the court must examine whether the service provider performed the services it was required to supply before that date, even where the remuneration is on a flat-fee basis and spread over time.
• The date of termination is the point at which each party's performance of its respective obligations is assessed.
• The absence of force majeure or hardship (imprévision) does not turn future instalments into a debt for the price.

A fixed-term communications contract terminated without notice

Where a fixed-term contract is terminated early, the price of future instalments is not due. The commercial chamber (Com., 13 May 2026, No. 24-21.473) rules on a contract entered into for a term of twenty-four months, from 1 November 2020 to 31 October 2022. Under it, a hotel company entrusted an agency with communications services carried out at specific times of the year, remunerated by monthly flat fees. By letter of 3 October 2021, the hotel company terminated the contract without notice. The agency brought proceedings against it for payment of the fees from February to October 2021 and of the instalments still to run until October 2022.

The decision under appeal (CA Paris, 18 September 2024, No. 23/05911) ordered the hotel company to pay both sums claimed. The lower court judges held that a contract entered into for a fixed term must be performed until its term, save for force majeure or hardship, and that the client had not shown any impossibility of performance. The commercial chamber quashes those orders: the binding force of the contract does not turn instalments falling due after the termination into a debt for the price (free translation).

It follows from those provisions read together that, where a fixed-term contract is terminated early, the price is due only where the agreed service has been performed.

The quashing also extends to the fees predating the termination. The lower court judges had rejected the exception of non-performance, holding that the agreed remuneration was not linked to the carrying out of services but corresponded to the spreading, into monthly flat fees, of services planned on an annual basis. The commercial chamber criticises them for not having verified what the agency had actually supplied.

without examining, as it was invited to do, whether [the agency] had performed the services it was required to supply before 3 October 2021, the date of the termination of the contract, being the date at which the performance by the contracting parties of their respective obligations was to be assessed

Which sums may the service provider claim?

The service provider may claim the price of the services it has performed and, for the period after the termination, compensation for its damage. The price remunerates a service. After the termination, the service provider no longer supplies anything: it cannot therefore obtain the fees for the following months as the price. Its claim changes in nature and becomes a claim for compensation. In principle, the creditor of an unperformed obligation may obtain damages, the amount of which the court assesses in the light of the damage established.

The flat-fee nature of the remuneration does not remove the need to prove performance. A monthly flat fee that smooths over the year actions concentrated in certain periods does not create an automatic claim. Where the client raises non-performance, the court must place itself at the date of termination and examine whether the services due before that date were supplied. Deliverables, reports, invoices and correspondence then become the decisive evidence in the debate.

What the decision changes for fixed-term contracts

The binding force of a fixed-term contract is confirmed, but its non-performance is not resolved by payment of future instalments. A client who terminates before the term without justification remains exposed to an order to pay. What changes is the subject matter of that order: the court cannot order payment of fees corresponding to services that will never be performed. The service provider must establish and quantify damage, which the court assesses.

The commercial chamber held the first ground of appeal admissible, even though it had not been argued before the lower court judges, because it is a pure point of law. The quashing remains partial: it extends to the two orders to pay and, by a necessary link of dependency, to the dismissal of the request for time to pay, pursuant to Article 624 of the French Code of Civil Procedure. The case is remitted to the Versailles court of appeal, which will assess the performance of the services before 3 October 2021.

The decision under appeal had also dismissed the claim based on the sudden termination of an established commercial relationship (rupture brutale de la relation commerciale établie), for want of stability in the relationship. That head of the judgment is not affected by the quashing. The lesson therefore focuses on one point: the distinction between the price, which presupposes a counterpart actually performed, and compensation, which presupposes proven damage.

Drafting and evidence: points to watch

Two reflexes emerge from the decision: documenting the performance of the services and organising in advance the consequences of an early termination. A service provider remunerated on a flat-fee basis is well advised to keep, month by month, a record of its work: schedules, deliverables, approvals, regular invoicing. That traceability conditions payment of the price for periods already elapsed, including where the remuneration smooths seasonal services.

A client contemplating termination before the term is not released by merely pointing to economic difficulties: in this case, the lower court judges rejected force majeure and hardship. Its debt is not, however, equal to the total of the instalments lost. It retains an interest in identifying precisely the services not supplied before the termination and in documenting them.

The parties may, in principle, stipulate a right of early termination and set its financial consequences. Absent such a clause, the debate shifts entirely to proof of the damage, with the uncertainty inherent in its assessment by the court.

Checks to carry out after an early termination

• Establish the exact date of termination: it is at that date that each party's performance of its obligations is assessed.
• Reconstruct, period by period, the services actually supplied before that date, whether on a flat-fee basis or not.
• Clearly separate two claims: the price of the services performed and compensation for the damage relating to the remaining period.
• Quantify and substantiate the damage, without assuming that it equals the amount of the instalments still to run.
• Review the contract: term, right to terminate, termination indemnity, arrangements for invoicing fees.