Sudden termination of commercial relationships

Q: When is a commercial relationship considered to be established?

An established commercial relationship requires stable, significant and recurring exchanges, enabling the disadvantaged party to reasonably rely on their continuation. It may result from one or several contracts, but also from a consistent course of dealings not formalised in writing. The duration, regularity of transactions and economic importance of the relationship are key indicators. By contrast, occasional, precarious relationships or those systematically subject to tendering procedures are not considered established.

Q: When is the termination of a commercial relationship considered “sudden” under French law?

Termination is deemed “sudden” when it occurs without sufficient written notice, or in a way that is abrupt — for instance, if orders stop overnight. It may also be considered sudden where a significant change is imposed within the relationship, such as a major delisting of products or a unilateral change in pricing terms. However, termination is not wrongful where there is force majeure or a serious breach by the other party.

Are you the victim of a sudden termination of a commercial relationship or is your liability being challenged? Our firm can assist you.

Sudden Termination of Established Commercial Relationships: Definition, Consequences and Sanctions

The sudden termination of an established commercial relationship is defined in Article L. 442‑1, II of the French Commercial Code. It occurs when a commercial partner ends – even partially – a stable and recurring business relationship without providing sufficient written notice, taking into account the duration of the collaboration and industry practices.

This public‑order provision aims to protect businesses from unilateral and abrupt decisions that may seriously jeopardise their continuity.

A party engaged in production, distribution or service activities incurs liability and must compensate the loss caused if it suddenly terminates, even partially, an established commercial relationship, without giving written notice that takes into account the duration of the commercial relationship, industry practices or interprofessional agreements, and, for determining the applicable price during the notice period, the economic conditions of the market on which the parties operate. — Article L. 442‑1, II of the French Commercial Code

Which businesses are subject to the rules on sudden termination of established commercial relationships?

The prohibition against abruptly terminating a commercial relationship applies to all economic operators:

‍producers
distributors
service providers
industrial companies

This mechanism also protects associations engaged in economic activity as well as intellectual professions that may conduct commercial activity.

Which criteria does French case law use to characterise sudden termination?

A termination may be deemed sudden when it is:

‍sudden: a total lack of written notice or a notice period that is too short
‍significant: stopping or reducing orders, materially altering the relationship (e.g.: change in pricing conditions, delisting of products)

French law provides for a few exceptions: force majeure, the other party’s failure to fulfil its contractual obligations, or relationships where a specific notice period is set by statute (e.g. commercial agents).

What losses may be compensated if sudden termination is established?

Sudden termination engages the tortious liability of the terminating party.

Compensation covers only the loss linked to the sudden nature of the termination — mainly the loss of profit, corresponding to the margin that would have been earned during the notice period the victim should have received.

The following may also be compensated, provided there is a direct link with the suddenness of the termination:

non‑amortised investments
redundancy costs
internal disruption
reputational damage

Why seek legal assistance in matters of sudden termination?

For claimants

If you are the victim of sudden termination, there is an urgent need to act, as your revenue and margins are threatened in the short term.

In this situation, our firm can assist you to:

negotiate an amicable settlement with your (former) commercial partner by presenting strong legal arguments
bring urgent proceedings to obtain a temporary continuation of the commercial relationship, where appropriate
initiate proceedings on the merits to obtain compensation for your losses

Important: The negotiation route and urgent proceedings may become unavailable if you delay action. In such a case, only proceedings on the merits — longer and more costly — would remain possible.

For defendants

If you intend to terminate a commercial relationship, it is strongly recommended that you seek legal advice to reduce the risk of liability for sudden termination.

In this situation, our firm can assist you to:

carry out a precise assessment of the relationship (duration and economic importance)
estimate the appropriate notice period required to safely end the commercial relationship
negotiate an amicable settlement with your commercial partner to avoid litigation

Contact us today for a personalised quote and to protect your interests.

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Frequently Asked Questions

When is a commercial relationship considered to be established?

An established commercial relationship requires stable, significant and recurring exchanges, enabling the disadvantaged party to reasonably rely on their continuation.

It may result from one or several contracts, but also from a consistent course of dealings not formalised in writing. The duration, regularity of transactions and economic importance of the relationship are key indicators.

By contrast, occasional, precarious relationships or those systematically subject to tendering procedures are not considered established.

When is the termination of a commercial relationship considered “sudden” under French law?

Termination is deemed “sudden” when it occurs without sufficient written notice, or in a way that is abrupt — for instance, if orders stop overnight. It may also be considered sudden where a significant change is imposed within the relationship, such as a major delisting of products or a unilateral change in pricing terms.

However, termination is not wrongful where there is force majeure or a serious breach by the other party.

Are foreign companies subject to the French regime on sudden termination?

The French regime on the sudden termination of established commercial relationships can apply to foreign companies but it heavily depends on the circumstances of the case.

Each situation is unique, and a thorough analysis is required to determine the competent jurisdiction and the applicable law.