Posted on

Mandatory clauses in general terms and conditions of sale

You’ve decided to draw up General Terms and Conditions of Sale to govern your business activity and your relationship with your professional customers. You’re wondering what must be included.

Article L. 441-1 of the French Commercial Code stipulates that general terms and conditions of sale must include two elements: (i) price-determining elements (such as the scale of unit prices and any price reductions) and (ii) terms of payment.

Elements of price determination

The unit price list

The December 8, 2005 circular on commercial relations sums up expectations in terms of pricing very well.

“A price list is not compulsory. In fact, it can only exist if the activity in question lends itself to its elaboration. This does not apply to products and services based on quotations. Similarly, the prices of certain products, particularly agricultural products, are subject to price fluctuations that preclude the establishment of a price list.

On the other hand, the seller is not prohibited from drawing up several price lists for several categories of customers to whom he markets his products or services.

Price reductions

This term covers three types of discount: rebates (immediate reductions in the price of a good or service), discounts (commercial price reductions granted in the event of quality defects, late delivery or non-conformity of the order) and rebates (reimbursement to the customer of part of the amount already paid). The amount and terms and conditions under which any buyer may benefit from these discounts must appear in the general terms and conditions of sale .

Terms of payment

These are all the terms and conditions under which the customer’s obligation to pay the price is to be fulfilled.
At the very least, the terms of payment specify the payment deadlines and penalties for late payment.

Payment terms

The French Commercial Code sets a maximum payment term of 45 days end of month, or 60 days from the date of invoice. However, this period may be contractually extended when the contract provides for an acceptance or verification procedure to certify the conformity of the goods or services, and explicitly provides for the extension of the maximum payment term.

However, this must not have the effect of unreasonably delaying the start of payment terms.

Penalties for late payment

By law, the interest rate for late payment is “equal to the interest rate applied by the European Central Bank to its most recent refinancing operation, plus 10 percentage points”. It is possible to derogate from this rule, but the late payment interest rate cannot in any case be less than three times the legal interest rate.

N.B.: this article concerns the General Terms and Conditions of Sale for business customers only. The General Sales Conditions for private customers include other mandatory clauses.

Posted on

Communication and acceptance of terms and conditions of sale: what are your obligations?

You’ve drawn up General Terms and Conditions of Sale, or had them drawn up, but you don’t know how or when to pass them on to your customers. This is not a question to be taken lightly. Too many professionals have GTCs that cannot be applied, and are therefore completely useless to them, because they have not been properly communicated to customers. The first paragraph of article 1119 of the French Civil Code stipulates that: “the general terms and conditions invoked by a party shall only have effect with regard to the other party if they have been brought to the latter’s knowledge and if the latter has accepted them”. The General Terms and Conditions of Sale are a contract; they cannot be applied to your customers by you alone. Your customers must have read and accepted your General Terms and Conditions of Sale before ordering from you. It is important to break down the two phases of this obligation:
  • 1. Read our terms and conditions
  • 2. Accept T&Cs
For example, a customer may sign that they have accepted the terms and conditions, but if you have never given them to them, and they are not available online, then they have not been able to read them, and the conditions have not been met. Similarly, a customer may have received the General Terms and Conditions, sent with the quotation for example, but if he does not certify that he has signed them, the conditions are not fulfilled. We recommend that our customers always attach their terms and conditions to the customer’s quotation or order form, and ensure that both are signed at the same time. There are a number of software programs available to automate this process, or online signature software, which enable you to quickly get your customers to sign your terms and conditions, and keep electronic proof of this signature.

An example from our practice

We drew up general terms and conditions for a customer specializing in home services. He forgot to communicate them and have them signed by a client in a hurry to set up the service. A dispute arose between the two parties, and the failure to communicate the GTCs put our client in a difficult position. The dispute is still ongoing.
Posted on

Off-premises contracts: concept and obligations

The French Consumer Code governs relations between professionals and consumers (individuals acting in a private capacity). It grants consumers a number of particularly protective rights, including the right of withdrawal and the obligation to provide pre-contractual information.

Under certain conditions, certain provisions of consumer law may apply to certain professionals. These include the right of withdrawal.

You must offer your customer a right of withdrawal if :

  • The contract is concluded off-site; and
  • The subject of the contract does not fall within the customer’s main field of activity (e.g.: contract for the creation of a website when the customer has a gardening business); and
  • The customer has 5 employees or less.

What is an off-premises contract?

This contract is defined in article L. 221-1 of the French Consumer Code, which applies in particular to contracts concluded at a place of sale which is not the seller’s usual place of business (a fair, exhibition, promotional excursion, etc.) or concluded at the seller’s usual place of business immediately after a meeting at such a place.

If your sales process falls into this category, or is likely to do so on the occasion of a particular event, you need to adapt your General Terms and Conditions of Sale.

In particular, you must :

  • Insert the specific information required by article L. 221-5 of the French Consumer Code;
  • Include all the special provisions applicable to off-premises contracts set out in the Consumer Code;
  • Establish a right of withdrawal.

Professionals operating at trade fairs and exhibitions are particularly likely to have their General Terms and Conditions of Sale reviewed by the relevant authorities.

Posted on

Right of withdrawal: who pays for postage?

What is the right of withdrawal?

The right of withdrawal is a right granted by law to individual consumers. It enables them to cancel a purchase and request a refund, without having to give any reason.

The right of withdrawal applies in the following cases:

  • When the purchase has been made remotely (by telephone, internet, etc.)
  • When the purchase was made at a door-to-door sale
  • When the purchase was made at a fair or exhibition

Consumers generally have 14 days to exercise their right of withdrawal, from the date of receipt of the order.

It is important to note that the right of withdrawal does not apply to all types of goods or services. For example, it does not apply to personalized goods or services that have already been fully completed.

Who benefits from the right of withdrawal?

The right of withdrawal is granted to consumers, i.e. natural persons who act for purposes that are not part of their professional activity.

It is important to note that the right of withdrawal does not apply to legal entities or professionals purchasing goods or services in the course of their business. The latter must refer to the general conditions of sale, which are specific to each contract.

Does the company have to reimburse shipping costs?

A distinction must be made between two types of shipping costs: shipping costs and return shipping costs.

The cost of sending the product from the professional to the consumer: these costs must be reimbursed to the consumer. This is clearly stipulated in article L221-24 of the French Consumer Code, which states that “when the right of withdrawal is exercised, the professional shall reimburse the consumer for all sums paid, including delivery costs”.

The cost of returning the product from the consumer to the professional: the consumer bears the cost of returning the product under two conditions:

  • The professional must have informed the consumer that this cost will be borne by him. It is therefore important that this be stated in the General Terms and Conditions of Sale.
  • The product must be able to be returned normally by post. For products that cannot be returned due to their nature, the seller will collect the goods at its own expense.

What impact does this have on the General Terms and Conditions of Sale?

The French Consumer Code requires that the General Terms and Conditions of Sale of a company targeting consumers detail the scope and conditions for implementing the right of withdrawal, and present a specific withdrawal form.

In addition, to avoid having to bear the cost of returning the product, it is advisable to inform the consumer that these costs will be borne by him or her.

Generally speaking, if your business is aimed at individuals, you are required to include a certain number of compulsory clauses in your General Terms and Conditions of Sale. We can help you navigate your obligations and draw up a document that clearly sets out your rights and obligations.

Posted on

Unfair competition: I’ve been accused of diverting customers & unfair competition

What is unfair competition?

Unfair competition is a business practice that consists in violating existing competition rules to gain an advantage over competitors in an illegal manner. It can take many forms, such as: counterfeiting, commercial parasitism, misleading advertising, misappropriation of customers, and so on.

In France, unfair competition is punishable under the Commercial Code and the Intellectual Property Code. Victims of unfair competition can take legal action to obtain damages, as well as emergency measures to put a stop to illegal practices.

Can I take my competitor’s business?

It all depends on how you build up your customer base. In principle, it is not forbidden to attract customers who normally use another service provider.

On the other hand, the way in which you do it can be considered unfair, and characterize a case of customer misappropriation, which is illegal.

Customer “detour” consists in seeking to divert customers away from a competitor’s business by using illegal or unfair means, which can be :

  • Denigration: the dissemination of false information or rumours about a competitor’s products or services, with the aim of damaging its reputation and persuading customers to change supplier.
  • Use of confidential data: the illegal use of fraudulently obtained confidential information, such as customer lists, marketing plans, etc.
  • Offering excessive discounts or benefits: offering excessive price reductions or other financial advantages to attract competitors’ customers.

However, if you refrain from using unfair means, you can perfectly well solicit customers who usually use another service provider to offer them your services.

Can I canvass my former employer’s clientele?

If you’ve left one company to set up a competitor, there are a number of things you need to watch out for.

If you have signed an employment contract with a non-competition clause, it is possible that this clause prohibits you from carrying out an activity that competes with that of your former employer for a given period after the end of your employment contract.

In addition, your employment contract may contain a non-solicitation clause. A non-solicitation clause prohibits an employee from soliciting his former employer’s customers or suppliers for a specified period after leaving the company. This clause is often included in

Posted on

How do you handle a dispute with a business partner?

Your company has entered into a contract with a partner (customer, supplier, etc.) and you have a disagreement with them over the performance of the contract. We’ll show you how best to avoid a dispute, and how to protect your rights in the event of legal action.

Read and apply the contract

In the event of doubt or disagreement over the performance of a contract, it is always advisable to refer to it. What does it say? What sanctions does it provide for?

If you have entered into an agreement with your partner that deviates from the contract, find all traces of your written exchanges on this subject (sms, e-mail) and remind your partner of them.

Similarly, if you haven’t signed a written contract, keep a record of all your exchanges and the way things are usually done to prove that you’re fulfilling your obligations.

Negotiating with your co-contractor

Litigation, while it can have a very favorable outcome, is necessarily longer and sometimes more costly. Negotiation is often the quickest way to resolve a conflict situation. For a successful negotiation, remember that you are within your rights, but offer your co-contractor a solution in which he or she also has something to gain. Be firm, yet inviting, and remember that if you fail, you won’t hesitate to take your case to court.

Formal notice

Negotiating amicably does not exempt you from sending your co-contractor a letter of formal notice. This acknowledges the situation, and sets in motion certain deadlines which may encourage your co-contractor to be more reactive, and enable you to take legal action more quickly.

We urge you to consult a lawyer before drafting such a letter. It sets the framework for your potential future dispute, and it is therefore vital that it be drafted with diligence.

Consult a lawyer

Don’t wait until relations have been irretrievably compromised before contacting a lawyer. A large proportion of the disputes referred to us by our customers are settled out of court, following a formal notice and exchanges between the parties negotiating an amicable outcome.

Posted on

How to deal effectively with the sale of your business

You’re getting ready to sell your business. You have a buyer and want to get the process moving as quickly as possible. Here are 3 top tips for speeding up the process, without compromising safety.

Prepare your parts

Before buying your business, the buyer will conduct a kind of audit of your business, looking at every aspect of it. You’ll need to provide a range of documents, such as tax and accounting documents for the last few years, employee employment contracts, a list of current contracts, etc.

More often than not, the customer is missing parts. It could be the general terms and conditions of a leasing contract that he has lost and that the leasing company has failed to return despite repeated requests, a lost employment contract, or a certificate from a less-than-responsive accountant.

Our advice is to start as early as possible, listing the parts available to you, and looking for missing parts.

Purging pre-emptive rights

One of the main reasons for slowing down the sale of a business is the purging of pre-emption rights.

The right of pre-emption is the right granted to a person to have priority for the purchase of your business in the event of it being put up for sale. There may be several pre-emptive rights: for employees, for the municipality in certain cases, but also for a co-contractor, if you are a franchisee for example.

To purge a pre-emptive right, you must inform the person holding the pre-emptive right and wait a pre-determined period (usually two months) for them to come forward before you can sell.

However, to move more quickly, you can ask these people for certificates stating that they do not intend to acquire your business, leaving you free to proceed with the sale before the pre-emption period expires.

It is therefore particularly important to identify existing pre-emptive rights early on in the process, in order to settle this formality as a matter of priority.

Give your board plenty of warning

As a matter of economics, many company directors wait until they are as far advanced in the process as possible before notifying their lawyer.

However, in the event of a dispute, your lawyer will not have been able to review the letter of intent or the promise to sell.

If you try to save a little, you could end up with a big loss.

If you’re planning to sell your business, we strongly recommend that you discuss the matter with your usual advisor as soon as possible.

What’s more, this will enable him to get organized and guarantee you maximum reactivity during the busy times of the transfer.

Posted on

Dissatisfied customer? Your responsibilities (withdrawal, warranty, hidden defects, etc.)

You’ve sold a product to a customer and they’re not happy with it. The customer may have changed their mind, the item may be damaged… your customer wants their money back. What exactly are your rights and responsibilities?

The right of withdrawal

The right of withdrawal is a right that certain buyers have, under certain conditions, to return a product to the seller and request a refund, without having to justify themselves.

The right of withdrawal only applies to sales made at a distance or off-premises (without the simultaneous physical presence of both parties), and where the buyer is a consumer, i.e. a natural person purchasing for personal use.

In special cases of “off-premises” sales, the right of withdrawal can be extended to professional buyers. This applies in particular to contracts concluded at trade fairs or exhibitions, when the contract does not fall within the scope of the customer’s main activity, and when the customer has 5 or fewer employees.

Customers may exercise their right of withdrawal within 14 days of delivery of the goods. In principle, the customer must return the goods at his or her own expense, but the seller is obliged to reimburse all sums paid by the customer at the time of purchase, including shipping costs.

Please note that the right of withdrawal also applies to services.

The Civil Code’s obligation to comply

The Civil Code devotes an entire section to the obligation to deliver the item sold. The term “obligation de délivrance conforme” (obligation to deliver in conformity) means that the item delivered and its accessories must conform to the order and, in particular, to the characteristics agreed between the parties.

If the goods are not delivered on time, the sale may be cancelled. However, certain formalities must be observed.

This obligation applies to all sales contracts.

The consumer code’s obligation to conform

The obligation of conformity, also known as the “guarantee of conformity” in the French Consumer Code, only applies to contracts concluded between professionals and consumers.

This guarantee of conformity covers the product sold for a period of two years after delivery. During this period, the consumer can turn to the professional if the product does not conform to the usual use of a good of the same type, does not correspond to the description, has a manufacturing defect, etc.

The seller is then obliged to repair or replace the product, at the customer’s option. If it is not possible to repair or replace the product, the seller must reimburse the customer.

Hidden defects

The warranty for hidden defects applies to all sales contracts, regardless of the status of the parties.

On the other hand, it only applies if the buyer discovers a defect that already existed at the time of purchase but was not apparent at that time, and if this defect renders the good unfit for the use for which it was intended.

The time limit for claiming a latent defect is also two years, but from the date of discovery of the defect, and not from the date of delivery of the good.

In this case, the customer has the choice of returning the goods and receiving a refund, or keeping the goods and requesting a partial refund.

Between professionals, under certain conditions, it is possible to include a clause excluding the benefit of the warranty for hidden defects in the sales contract or in the General Sales Conditions.

Posted on

Selling your business: what’s the difference between selling shares and selling goodwill?

You want to sell your business and may even have already found a buyer. However, you’re not sure which type of transaction to carry out, and don’t know the difference between selling your company’s shares and selling your business.

Who does it?

In the case of a sale of shares, you, as an individual, are selling the shares in a company that you own. If the shares sold are owned by another company, such as a holding company, it is this company that will sell the shares.

Conversely, in a business sale, the company sells its business.

This has tax and other consequences. In the first case, it is the person selling the shares who will be taxed. In the other case, the company selling the business will be taxed.

What exactly am I giving up?

In a business sale, you only sell the assets of your business. This means that you retain any debts that may have arisen prior to the sale agreement. In all likelihood, you will then have to deduct from the sale price the amount needed to repay the company’s debts.

With a sale of shares, you sell the entire company, with its assets and liabilities. This is riskier for the buyer, whose liabilities may turn out to be greater than anticipated at the time of sale. In most cases, therefore, a transfer of shares is accompanied by so-called “asset” or “liability” guarantees, enabling the seller to be held liable in the event of any unpleasant surprises.

That’s the main difference between the two.

The fate of current contracts

Buying a company necessarily means taking over all its activities, and therefore all its current contracts.

On the other hand, the purchaser of a business may, under certain conditions, not take over certain contracts. This applies to both employment and commercial contracts. For example, the sale of a business may provide an opportunity to break with an unreliable supplier.

Price payment

In the case of a tax sale, payment of the price is immediate, making the operation seem quicker. In reality, if guarantees are given, the transfer of securities can have much longer-term effects.

At the same time, the sale of a business usually requires that the proceeds of the sale be placed in escrow, to be released to the seller only after the expiry of a period known as the “opposition period”, during which the business’s creditors can request payment from the proceeds of the sale. The seller often has to wait at least three to five months before receiving the proceeds of the sale.

DESRUMAUX AVOCATS can support you in the sale of your business, as well as in an acquisition.

Posted on

Top 3 mistakes managers make when drawing up contracts

As the director of a small company, you are often the manager, human resources manager and legal expert all rolled into one. This means you have to do a bit of everything, including drafting your own contracts.

Here are the top 5 mistakes we notice in this type of contract, when they are not submitted for litigation.

1. Lack of clarity

If you draft your own contract, you can be sure of drawing up a personalized contract that covers every aspect of your agreement with your co-contractor. However, you also run the risk of losing sight of the big picture, and of a contract that is perfectly clear and detailed at the time of drafting becoming unreadable in the event of a dispute.

The number of clauses, the lack of standardized language and the complexity of the provisions, which are sometimes the result of lengthy negotiations, make the contract difficult to read, and sometimes even lead to contradictory provisions.

This becomes a problem in the event of disagreement between the parties, and the need to submit the contract to a judge or arbitrator.

2. Lack of provisions to prevent or resolve conflicts

Many contracts contain incomplete clauses. The best example is the price renegotiation clause, which can be found several times in the same contract. It is often stipulated that in the event of any event whatsoever, the parties undertake to renegotiate the price, or one party may propose a price increase to the other.

In reality, however, and especially in financial matters, negotiations often fail. In such cases, the price revision clause makes no provision: does the contract continue? Is the contract terminated? Should a conciliator be appointed?

It is the role of the contract to provide for unforeseen circumstances, so that when they arise, the parties are not left in the dark. If the parties change their minds by mutual agreement, there will always be time to conclude an amendment to settle the dispute in another way.

3. The presence of illegal clauses

Even if commercial contracts can be drafted very freely, there are a few clauses that cannot be inserted and will not be applicable in the event of a dispute.

In this respect, we note excessive jurisdiction clauses, limitation of liability clauses or penalty clauses, poorly drafted retention of title clauses, and so on.

What’s more, in the absence of specific provisions, the presence of an unlawful clause can jeopardize the entire contract.

These clauses give the drafter a false sense of security, and are a nasty surprise when he or she tries to enforce them in the event of a dispute.

Whether you have doubts about the wording of a contract, or need help negotiating with an opposing party, we can help you. We recommend this even more strongly when your co-contractor is himself advised by a professional.