Liability of the escrow notary in the sale of a business

Liability of the escrow notary in the sale of a business: negligence found but no damage proven

A business transfer followed by a dispute between the parties

In a judgment of 18 May 2026, the Béziers Judicial Court was called upon to rule on the liability of a notary who had acted as escrow agent for the sale price during a business transfer. The case is of particular interest in that it clearly distinguishes between the existence of fault on the part of the escrow agent and the demonstration of the damage required to obtain compensation.

The dispute arose from the sale, on 8 July 2021, of a driving school business for a price of €35,000. In accordance with the deed of sale, the drafting notary had been instructed to hold the proceeds in escrow and then to distribute them in accordance with legal and contractual provisions.

A few months after the sale, a dispute arose between the purchaser and the seller. The purchaser then sent a letter to the notary on 9 December 2021, informing him of a serious dispute regarding the sale of the business and asking him to retain the funds held in escrow. Despite this dispute, the notary subsequently released the balance of the purchase price to the seller.

Believing that this release had compromised their chances of recovering certain sums owed by the seller, the purchaser brought an action for liability against the notary’s office and claimed €50,000 in damages.

The allegations against the notary acting as escrow agent

The transferee argued that the notary had breached his obligations as escrow agent by releasing the funds despite having been expressly informed of a dispute concerning the transfer. In his view, the existence of this dispute precluded any release of the sums to the transferor without his prior consent.

In the alternative, he also alleged a breach of the duty to provide information and advice. In particular, he criticised the notary for failing to explain sufficiently to him the consequences of an arbitration clause included in the deed of sale, or the steps necessary to preserve his rights to the escrowed price.

To substantiate his claim for damages, the transferee asserted that he had had to bear more than €34,500 in debts and costs that should have been borne by the seller. In his view, the release of the purchase price had resulted in a loss of opportunity to recover these sums from the transferor.

The court finds fault in the management of the escrow

The court first sets out the principles applicable to contractual escrow. Under Articles 1956 and 1960 of the Civil Code, the custodian responsible for an escrow cannot be released from their duties until the dispute is resolved, unless all interested parties agree or there is a legitimate reason.

The deed of assignment did indeed authorise the notary to make certain payments to creditors who had duly lodged an objection. The court therefore considers that the payments made to a secured creditor were in accordance with the contractual provisions.

However, the judges noted that the assignee had sent a letter of objection to the notary on 9 December 2021. This objection was sufficient to establish the existence of a dispute regarding the assignment. Consequently, before any payment of the balance of the price to the vendor, the notary was required to verify that the dispute had been resolved or to obtain the assignee’s consent.

The court further found that the funds had been released to the vendor after this objection had been sent. It concluded that the notary’s office had breached its duty of care and its obligations as a custodian by proceeding with this premature release of funds.

The lack of evidence of loss leads to the dismissal of the claim

Despite this fault, the transferee’s claim fails on the key issue of loss. The court points out that civil liability requires not only a fault, but also proof of actual loss and a direct causal link between the fault and that loss.

However, the claimant produced no supporting documents to establish the payments he claimed to have made, amounting to €34,512.70. Nor did he demonstrate the reality of the loss of opportunity alleged, nor the impossibility of pursuing the assignor directly to obtain reimbursement.

The judges therefore consider that the alleged loss has not been proven. Consequently, despite the breach found against the notary, the claim for compensation is dismissed in its entirety.

Scope of the decision

This decision illustrates a classic yet fundamental rule of liability law: the demonstration of a fault, even a clear one, is not sufficient to obtain compensation. It is also necessary to establish precisely the reality of the loss suffered and its direct link to the alleged fault. The judgment also reiterates that the escrow notary must exercise particular vigilance whenever a dispute affects the transfer of the business, even after the expiry of the time limits for creditors to lodge objections.