Cass. com. 3 July 2024, 21-14.947

Change in case law regarding the relative effect of contracts.

On 3 July 2024 (no. 21-14.947), the Commercial Chamber of the French Supreme Court (Cour de cassation) handed down a noteworthy decision in which it called into question well-established case law.

In the facts, a handling contract had been concluded between two companies, relating in particular to the unloading of machinery. During this operation, the employee of the company responsible for unloading the machines damaged one of the machines.

The company that owned the machine sought compensation from its insurer.

Subrogated to the rights of its insured, the insurance company brought an action in tort against the company whose employee had damaged the machine.

The company then attempted to invoke a limitation of liability clause in its contract with the company that owned the machines.

The Court of Appeal, following established case law and applying the principle of the relative effect of contracts, unsurprisingly refused to apply this clause where the insurer was a third party to the contract.

However, the Cour de cassation took the unexpected step of recognising the contracting party’s right to enforce a clause limiting liability under the contract against the insurance company that was a third party to the contract.

This is in order ‘not to thwart the predictions of the debtor, who undertook in consideration of the general scheme of the contract, and not to confer on the third party who invokes the contract a more advantageous position than that available to the creditor himself, the third party to a contract who invokes, on the basis of delictual liability, a breach of contract which has caused hiḿ damage may have set up against him the conditions and limits of liability which apply in relations between contracting parties.’

Thus, it now appears that a third party could have a limitation of liability clause provided for within a contract to which he is not a party set up against him, when he brings an action in tort against one of the co-contracting parties, on account of damage caused by the performance of that contract.

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