{"id":457,"date":"2026-02-16T14:32:28","date_gmt":"2026-02-16T13:32:28","guid":{"rendered":"https:\/\/rlfavocats.com\/2026\/02\/06\/post-example\/"},"modified":"2026-03-06T11:32:04","modified_gmt":"2026-03-06T10:32:04","slug":"post-example","status":"publish","type":"post","link":"https:\/\/rlfavocats.com\/en\/2026\/02\/16\/post-example\/","title":{"rendered":"Recent French M&amp;A\/PE Case Law"},"content":{"rendered":"<p style=\"text-align: center;\">by<br \/>\nReid Feldman, Avocat \u00e0 la Cour<\/p>\n<p>&nbsp;<\/p>\n<p>Recent French court cases reinforce confidence in the French legal framework applicable to mergers, acquisitions and private equity (M&amp;A\/PE) deals. Described below are some of these cases, dealing with (1) the duty to disclose, (2) distressed acquisitions and (3) correcting a \u201cscrivener\u2019s error\u201d. <\/p>\n<p style=\"padding-left: 40px;\"><strong>1. Duty to disclose<\/strong><\/p>\n<p>The French civil code was modified in 2016 by the addition of a new article 1112-1 <a href=\"#_ftn1\" name=\"_ftnref1\">[1]<\/a> dealing with mandatory disclosures by contracting parties. This article has given rise to a plethora of recent cases. <\/p>\n<p>As in the US, French legal doctrine long ago moved away from the strict <em>caveat emptor<\/em> approach endorsed by some 19<sup>th<\/sup> century scholars, illustrated by a Cour de cassation ruling in 1901 standing for the principle that the contracting party who made a bad bargain \u201cbecause he was too credulous or negligent in his verifications has only himself to blame.\u201d<a href=\"#_ftn2\" name=\"_ftnref2\">[2]<\/a> Some case law since then eroded this principle, affirming liability of sellers who did not disclose key information.<a href=\"#_ftn3\" name=\"_ftnref3\">[3]<\/a><\/p>\n<p>New article 1112-1 affirms and expands on this jurisprudence, setting out a general mandatory disclosure standard, applicable to all contracts subject to French law. It provides that prior to concluding a contract each party must provide, to the other, information deemed to be \u201cdeterminative\u201d of the latter\u2019s decision to contract. Such \u201cdeterminative\u201d information must have a \u201cdirect and necessary\u201d relation to the \u201ccontent of the contract\u201d or the \u201cnature of the parties\u201d. The disclosure obligation does not apply to a party\u2019s view on the value subject of the contract. A party which proves that such \u201cdeterminative\u201d information was not disclosed and that it was \u201clegitimately\u201d unaware thereof (or that it \u201clegitimately\u201d relied on its counterparty in this respect) can obtain damages (on the basis of tort liability) or, if the omission resulted in error or fraud,<a href=\"#_ftn4\" name=\"_ftnref4\">[4]<\/a> rescission of the contract. This new statutory provision has the status of mandatory public policy and cannot be limited or excluded by contract.     <\/p>\n<p>Fears that French courts would interpret this new obligation very broadly have turned out to be misplaced, as illustrated by several recent cases, which clarify that a party seeking relief under article 1112-1 has the burden of proving that<\/p>\n<ul class=\"list-with-dashes\">\n<li>the information not revealed was \u201cdeterminative\u201d for its decision to contract;<\/li>\n<li>the other contracting party knew such information at the time of contracting; and<\/li>\n<li>such other contracting party knew at such time that the information was \u201cdeterminative\u201d for the other party.<\/li>\n<\/ul>\n<p>Here are some examples:<\/p>\n<ul>\n<li><strong>Is all information having a \u201cdirect and necessary\u201d relation to the contract necessarily \u201cdeterminative\u201d?<\/strong> Not according to the Cour de cassation (the French supreme court for civil, commercial and penal matters). In a recent case,<a href=\"#_ftn5\" name=\"_ftnref5\">[5]<\/a> the purchaser of a fast-food restaurant discovered some time after closing that, although the restaurant had an existing ventilation system, condominium rules prohibited expanding it, with the result that the restaurant could not make fried foods as it wished. The purchaser argued that since this restriction has a \u201cdirect and necessary\u2019 relation to the \u201ccontent of the contract\u201d, it constituted information \u201cdeterminative\u201d of its decision to purchase. The court rejected this argument, stating that not all information that has a \u201cdirect and necessary\u201d relation with the content of the contract is automatically \u201cdeterminative\u201d. This interpretation, followed by other courts,<a href=\"#_ftn6\" name=\"_ftnref6\">[6]<\/a> is not the only possible reading of article 1112-1, and so constitutes a welcome check on overbroad interpretation of the text.    <\/li>\n<li><strong>Does the obligation to disclose \u201cdeterminative\u201d facts apply during due diligence?<\/strong> Indeed it does \u2013 but of course the seller has no liability if the information was in fact disclosed. For example, in a recent Cour de cassation case,<a href=\"#_ftn7\" name=\"_ftnref7\">[7]<\/a> the parties signed an LOI including a tentative purchase price, but during due diligence the potential buyer found that receivables were significantly overstated and proposed a reduced price. The seller broke off negotiations. The potential buyer claimed costs including for its due diligence, arguing that the true state of the receivables was a \u201cdeterminative\u201d factor which the seller should have disclosed. The court examined the claim of failure to disclose during due diligence but denied liability, since the relevant information was in fact ascertainable by the seller during due diligence.    <\/li>\n<li><strong>The duty to disclose arises only if a party knows that the undisclosed information was \u201cdeterminative\u201d for the other party.<\/strong> Several recent cases have affirmed this principle.\n<ul>\n<li>A Cour de Cassation ruling<a href=\"#_ftn8\" name=\"_ftnref8\">[8]<\/a> arose out of a public works contract for emergency lighting in tunnels of a metro line. The general contractor sued its lighting fixture supplier, claiming the latter\u2019s failure to provide certain information about the brightness of the lighting fixtures was a violation of its duty to disclose under article 1112-1 and also amounted to fraud. These claims were rejected because the general contractor had not identified this brightness specification as relevant when entering into the contract.  <\/li>\n<li>A recent appellate court decision<a href=\"#_ftn9\" name=\"_ftnref9\">[9]<\/a> involved a sale (under locked box terms) by several PE funds of a target which was likely to breach a bank loan financial covenant. Pointing out that the sale process involved extensive due diligence, including access to accounts showing the likely breach of the bank loan covenant, and that the buyer showed no interest in this issue during due diligence, the court held that the covenant breach was not a \u201cdeterminative\u201d fact for the buyer. <\/li>\n<\/ul>\n<\/li>\n<li><strong>Can a passive buyer rely on the disclosure obligation?<\/strong> The answer may depend on the relevant facts. One appellate court decision<a href=\"#_ftn10\" name=\"_ftnref10\">[10]<\/a> suggests that a buyer which does not take even elementary investigation of the financial viability of the purchased business cannot expect relief under the new mandatory disclosure requirement. <\/li>\n<li><strong>Can the terms of a letter of intent (\u201cLOI\u201d) impact what information is deemed determinative?<\/strong> In one recent case<a href=\"#_ftn11\" name=\"_ftnref11\">[11]<\/a> the answer was \u201cno\u201d. The LOI set out a price calculation for acquisition of an insurance brokerage, including a multiple of \u201crecurring\u201d commissions. Asserting that the seller knew that some past commission might not be recurring, the buyer claimed breach of the seller\u2019s disclosure obligations. These claims were rejected by the court, which pointed out that the share purchase agreement, signed three and a half months later, after the buyer conducted due diligence, stated only a lump-sum price, without reference to the multiple. But in other cases LOI terms have been taken into account in assessing whether information is \u201cdeterminative\u201d.    <a href=\"#_ftn12\" name=\"_ftnref12\">[12]<\/a><\/li>\n<li><strong>When does non-disclosure amount to fraud? <\/strong>Under French law, fraud (<em>dol<\/em>) can exist when a party lies, engages in \u201cmaneuvers\u201d or intentionally hides information \u201cwhich it knows is determinative for the other party\u201d<a href=\"#_ftn13\" name=\"_ftnref13\">[13]<\/a> \u2013 the latter standard taking some elements listed in article 1112\u20111, but adding the extra element of intent. In one recent appellate case,<a href=\"#_ftn14\" name=\"_ftnref14\">[14]<\/a> involving acquisition of a wind-turbine maintenance company subject to a locked box price term, the court inferred the intent necessary for fraud from the failure of the seller to spontaneously reveal the loss of a key client, when the information disclosed, including in a data room, did not allow the buyer to discover this information easily. <\/li>\n<li><strong>What relief is available for breach of the mandatory disclosure obligation?<\/strong> French courts seem unlikely to be overgenerous in awarding such damages. This lesson can be drawn from an appellate decision from 2023,<a href=\"#_ftn15\" name=\"_ftnref15\">[15]<\/a> affirmed by the Cour de cassation in 2025,<a href=\"#_ftn16\" name=\"_ftnref16\">[16]<\/a> involving a \u20ac310M sale of a dietary-supplements group to a PE buyer. The court analyzed in detail the buyer\u2019s claims based on fraud, failure to make a mandatory disclosure of \u201cdeterminative\u201d information and breach of rep\/ indemnification obligations set out in the share purchase agreement. The court of first instance rejected the fraud claim, awarded \u20ac2M for breach of the mandatory disclosure obligation, rejected a contract-based indemnification claim and awarded \u20ac100K to the buyer for legal fees (an unusually high amount for such an award in France). On appeal parties reiterated and expanded their claims; for legal fees, the buyer requested an additional \u20ac100K and the seller requested \u20ac600K. The appellate court\u2019s decision described in detail the provisions of the LOI, the price negotiations between the parties and the extensive due diligence process (noting that the data room contained 18,000 pages, the Q&amp;A featured more than 500 questions and the buyer\u2019s advisors prepared detailed due diligence reports). The court rejected the fraud claim and approved the buyer\u2019s claim for failure to make mandatory disclosures of \u201cdeterminative\u201d information. It found that, although the possible reduction in price attributable to the non-disclosed information amounted to about \u20ac12.3M, considering the parties\u2019 negotiating positions the buyer\u2019s chances of negotiating a lower price were small, so awarded only 5% of that amount, i.e. about \u20ac616K. The court admitted in principle the contractual indemnification claim but found that there were no net damages. As for legal costs, the court overruled the lower court\u2019s award to the buyer and decided not to award such costs to either party.         <\/li>\n<\/ul>\n<p>Although the need to account for article 1112-1 is well known in French M&amp;A practice, <strong>language addressing the issue in share purchase agreements<\/strong> may be of limited impact. For example, for a seller to assert that it has \u201cnot intentionally withheld or omitted to disclose information that would be material to a reasonable purchaser\u2019s decision to purchase\u201d does not avoid seller\u2019s liability if in fact there has been failure to disclose. There are other formulations that may be more protective for sellers.  <\/p>\n<p style=\"padding-left: 40px;\"><strong>2. Distressed acquisitions and carve-outs<\/strong><\/p>\n<p>Under French law, managers of a French company falling into bankruptcy can have liability for cash shortfalls in the bankrupt estate, if the shortfall was caused, even in part, by their \u201cmanagement errors\u201d<a href=\"#_ftn17\" name=\"_ftnref17\">[17]<\/a> \u2013 an ill-defined but potentially broad concept. The \u201cmanagers\u201d (<em>dirigeants<\/em>) potentially subject to this liability include <em>de jure<\/em> managers, i.e. those holding certain managerial positions, and <em>de facto<\/em> managers, i.e. others \u2013 potentially, a controlling shareholder \u2013 who participate in or exercise management functions. Liability can be significant, including back pay and extensive severance payments to employees, among other factors.  <\/p>\n<p>The extent of the risk to a controlling shareholder was illustrated by a case<a href=\"#_ftn18\" name=\"_ftnref18\">[18]<\/a> involving the carve-out, from a multinational lighting manufacturing group, of a fluorescent light manufacturing division, placed in a new company and sold to a third party in December 2012 for one euro \u2013 while the seller at the same time entered into a commercial assistance contract for a four-year term. In 2017 the company fell into bankruptcy and was liquidated. The liquidator claimed that the seller was liable for a large part of the cash shortfall of the liquidation, and the lower court agreed, awarding the liquidator damages of over four million euros. But the court of appeal reversed, rejecting the liquidator\u2019s claims including that the activities carved out and sold were structurally loss-making and that the business plan of the buyer was inadequate. In reversing the lower court judgment, the court of appeal pointed out that a parent company has no obligation to verify the business plan of a purchaser of its subsidiary; that a court is not to second-guess the business choices made by management of a company which is not insolvent; that any evaluation of whether actionable management errors were made should take account of the situation at the time, rather than in hindsight; that the seller following the sale did not act as a <em>de facto<\/em> manager of its former subsidiary; and that the purchaser of the carved-out business was qualified to turn it around \u2013 even if the business ultimately failed.    <\/p>\n<p style=\"padding-left: 40px;\"><strong>3. Scrivener\u2019s error \u2013 or the case of the misplaced parenthesis.<\/strong><\/p>\n<p>In this 2025 appellate case<a href=\"#_ftn19\" name=\"_ftnref19\">[19]<\/a> the parties entered into a JV agreement in 2016 incorporating transfers, via separate share purchase agreements, of their respective shareholdings in subsidiaries operating old-age homes (<em>\u00e9tablissements d\u2019h\u00e9bergement pour personnes \u00e2g\u00e9es <\/em>or EHPAD), as well as call options for further transfer of shares in those subsidiaries. After a change of control in 2019, one party exercised its call option for purchase of the remaining shareholdings in subsidiaries of its JV partner. The call options included a formula for calculation of the purchase price \u2013 but the formula was different from the one used in all the other share purchase agreements signed and executed by the parties. Instead of   <\/p>\n<p style=\"padding-left: 40px;\">Shareholding&nbsp;% x (Multiple x Earnings less Net Debt)<\/p>\n<p>the formula in the call option was written<\/p>\n<p style=\"padding-left: 40px;\">Shareholding&nbsp;% x (Multiple x Earnings) less Net Debt<\/p>\n<p>with the result that the full amount of net debt, rather than a percentage share, was deducted from the price. Relying on Civil Code article 1188 (formerly article 1156), pursuant to which a contract is interpreted based on \u201cthe common intention of the parties, rather than the literal terms thereof\u201d, the court corrected the scrivener\u2019s error in setting the price for the share. Based on the facts set out in the decision this seems to be fair. But it took six years of litigation to reach this result. A better strategy: careful proofreading!    <\/p>\n<p style=\"text-align: center;\">***<\/p>\n<p>Reid Feldman, Avocat \u00e0 la CourRLF Avocats242 boulevard Saint-Germain, 75007 Paris, France<br \/>\n<a href=\"mailto:rfeldman@rlfavocats.com\">rfeldman@rlfavocats.com<\/a> \/ <a href=\"tel:+33609671509\">+33 (0)6 09 67 15 09<\/a><\/p>\n<hr>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> French Civil Code (\u201c<strong>C. civ.<\/strong>\u201d) article 1112-1.<\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\">[2]<\/a>\u00ab <em>Le contractant qui s\u2019est tromp\u00e9 parce qu\u2018il a \u00e9t\u00e9 trop cr\u00e9dule ou n\u00e9gligent dans ses v\u00e9rifications ne doit s\u2019en prendre qu\u2019\u00e0 lui-m\u00eame&nbsp;\u00bb<\/em>, attributed to Cour de cassation (<strong>Cass.<\/strong>), Chambre des requ\u00eates, 07.01.1901&nbsp;:D.1901.I.128.<\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\">[3]<\/a> Cass. 1<sup>\u00e8re<\/sup> chambre civile 24.11.1976 n\u00b0 7\u2019-12.352 (seller of a used car did not reveal to a professional buyer that the odometer had been altered); Cass. 3<sup>\u00e8me<\/sup> chambre civile 30.06.1992 n\u00b0 90-19.093 (seller of a building lot did not reveal that the water table height made construction of a house impractical without disproportionate cost).<\/p>\n<p><a href=\"#_ftnref4\" name=\"_ftn4\">[4]<\/a> See C. civ articles 1130 <em>et seq<\/em>.<\/p>\n<p><a href=\"#_ftnref5\" name=\"_ftn5\">[5]<\/a> Cass. Chambre commerciale (\u00ab <strong>com.<\/strong> \u00bb), May 14, 2025, n\u00b0 23-17.948. <\/p>\n<p><a href=\"#_ftnref6\" name=\"_ftn6\">[6]<\/a> See Cour d\u2019appel of Orl\u00e9ans, December 18, 2025, n\u00b0 23\/0144 (additional ventilation for a restaurant not indicated to be determinative for the purchaser).<\/p>\n<p><a href=\"#_ftnref7\" name=\"_ftn7\">[7]<\/a> Cass. com. Feb. 26, 2025, n\u00b0 23-18.119 <\/p>\n<p><a href=\"#_ftnref8\" name=\"_ftn8\">[8]<\/a> Cass. com. Jan. 21, 2026, n\u00b0 24-13.471.<\/p>\n<p><a href=\"#_ftnref9\" name=\"_ftn9\">[9]<\/a> Cour d\u2019appel of Paris, Jan. 22, 2026, n\u00b0 24\/20013.<\/p>\n<p><a href=\"#_ftnref10\" name=\"_ftn10\">[10]<\/a> Cour d\u2019appel of Caen, Dec. 4, 2025, n\u00b0 24\/01009 (claims against seller of small business rejected when the sales contract recited communication of financial statements).<\/p>\n<p><a href=\"#_ftnref11\" name=\"_ftn11\">[11]<\/a> Cour d\u2019appel of Toulouse, Dec. 9, 2025, n\u00b0 2&nbsp;\u00bb\/04428.<\/p>\n<p><a href=\"#_ftnref12\" name=\"_ftn12\">[12]<\/a> See Cass. com. June 18, 2025 n\u00b0 23-23.208, discussed in text at note 15.<\/p>\n<p><a href=\"#_ftnref13\" name=\"_ftn13\">[13]<\/a> C. civ. article 1137.<\/p>\n<p><a href=\"#_ftnref14\" name=\"_ftn14\">[14]<\/a> Cour d\u2019appel of Rennes, May 27, 2025, n\u00b0 24\/03183.<\/p>\n<p><a href=\"#_ftnref15\" name=\"_ftn15\">[15]<\/a> Cour d\u2019appel of Paris, Sept. 14, 2023, n\u00b0 21\/22491.<\/p>\n<p><a href=\"#_ftnref16\" name=\"_ftn16\">[16]<\/a> Cass. com. June 18, 2025, n\u00b0 23-23.208 .<\/p>\n<p><a href=\"#_ftnref17\" name=\"_ftn17\">[17]<\/a> See Code de commerce article L651-2.<\/p>\n<p><a href=\"#_ftnref18\" name=\"_ftn18\">[18]<\/a> Cour d\u2019appel of Dijon, July 10, 2025, n\u00b0 22\/01112.<\/p>\n<p><a href=\"#_ftnref19\" name=\"_ftn19\">[19]<\/a> Cour d\u2019appel of Paris, June 26, 2025, n\u00b0 24\/06835.<\/p>\n<p style=\"text-align: right;\">\n<div class=\"pdfprnt-buttons pdfprnt-buttons-post pdfprnt-bottom-right\"><a href=\"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/posts\/457?print=pdf\" class=\"pdfprnt-button pdfprnt-button-pdf\" target=\"_blank\" ><span class=\"pdfprnt-button-title pdfprnt-button-pdf-title\">Pdf<\/span><\/a><a href=\"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/posts\/457?print=print\" class=\"pdfprnt-button pdfprnt-button-print\" target=\"_blank\" ><span class=\"pdfprnt-button-title pdfprnt-button-print-title\">Print<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>by Reid Feldman, Avocat \u00e0 la Cour &nbsp; Recent French court cases reinforce confidence in the French legal framework applicable to mergers, acquisitions and private equity (M&amp;A\/PE) deals. Described below are some of these cases, dealing with (1) the duty to disclose, (2) distressed acquisitions and (3) correcting a \u201cscrivener\u2019s error\u201d. 1. Duty to disclose [&hellip;]<\/p>","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[47],"class_list":["post-457","post","type-post","status-publish","format-standard","hentry","category-publication","tag-fevrier-2026"],"_links":{"self":[{"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/posts\/457","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/comments?post=457"}],"version-history":[{"count":6,"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/posts\/457\/revisions"}],"predecessor-version":[{"id":551,"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/posts\/457\/revisions\/551"}],"wp:attachment":[{"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/media?parent=457"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/categories?post=457"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rlfavocats.com\/en\/wp-json\/wp\/v2\/tags?post=457"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}