Management lease contract

Management lease contract stipulating an annual fee

On November 9, 2023, the Paris Court of Appeal handed down a ruling concerning a dispute between SARL La Boutique du Fouilleur and SAS All in Factory. The dispute concerned a lease management contract signed on July 27, 2017, under which SARL La Boutique du Fouilleur had entrusted the management of its business to SAS All in Factory.

Termination after one month’s unsuccessful summons

The contract provided for an annual fee and stipulated that the contract would be terminated ipso jure in the event of non-payment or non-performance of a clause after a summons had remained unsuccessful for one month.

SAS All in Factory was summoned by a bailiff on June 8, 2019 to comply with its obligations, but the summons was not delivered to its directors until June 20, 2019. SARL La Boutique du Fouilleur took over its business on July 9, 2019, taking the view that SAS All in Factory had not complied with its obligations. SAS All in Factory contested this takeover, arguing that SARL La Boutique du Fouilleur and its manager, Mr [N] [P], had acted in bad faith.

Resolution of the contract with exclusive liability

The Créteil Commercial Court initially found that SARL La Boutique du Fouilleur was exclusively at fault in the termination of the contract, and ordered it to pay damages to SAS All in Factory. SARL La Boutique du Fouilleur and Mr [N] [P] appealed this decision.

Failure to pay royalties and keep cost accounting justifying termination

The Court of Appeal overturned the Commercial Court’s judgment, ordering the termination of the contract to the exclusive detriment of SAS All in Factory. The Court ruled that SAS All in Factory had failed to meet its obligations to pay royalties and keep cost accounting records, thereby justifying termination of the contract. The court also dismissed Mr [N] [P] from the case, finding that there had been no fault detachable from his duties as manager.

The Court ordered SAS All in Factory to pay SARL La Boutique du Fouilleur the sum of €166,300 for the balance of the 2019 current account, the balance of the management lease and the re-invoicing of vehicles, as well as damages totalling €5,133 for supplier invoices and IT repairs. SAS All in Factory was dismissed of its claims for damages and of its request for the contract to be declared null and void on the grounds of fraud.

Lastly, the Court ordered SAS All in Factory to pay the costs of the appeal and first instance proceedings, and to pay Mr [N] [P] and SARL La Boutique du Fouilleur the sum of €5,000 each under article 700 of the French Code of Civil Procedure for the first instance and appeal proceedings.

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