Paris appeal court upholds role of ethical rules to counter ‘brutal’ terminations

Written on 22 Jun 2021

The breach of a code of conduct can justify the immediate termination of commercial relations

The Paris Court of Appeal recently issued (5 May 2021) a crucial decision (No 19/15680) regarding the consequences of the breach of a code of conduct that highlighted the importance of ethical rules in relationships with business partners.

French commercial law prohibits the brutal termination or partial termination of established commercial relationships without sufficient grounds and written notice.

The appeal court considered how the manager at a retail company was offered a briefcase, a case of champagne and a trip with his wife to Mauritius by a supplier. The said breach was revealed by an internal investigation carried out by the retail company.

Consequently, the retail company terminated the commercial relationship with the supplier without prior notice, whereas both companies had a commercial relationship of more than eight years.

The supplier then filed an action against the retail company for brutal termination of commercial relationships.

Legal approach

The court decided, on the one hand, that these facts constituted a breach of the retailer’s code of conduct applicable to suppliers, and on the other hand, that these facts were sufficiently serious to justify the immediate termination of commercial relationships.

The same Paris Court of Appeal had previously ruled similarly in a decision (No 19/155565) on 24  March 2021.

Osborne Clarke comment

The decision highlights the importance of ethical rules in the relationship with business partners, regardless of their size.

Companies must ensure that their employees effectively comply with the obligations arising from codes of conducts, as a breach can lead to the immediate termination of established business relationships.

This decision also highlights how decisive it is to ensure that partners agree with your own ethical rules.