On 21 July 2023, the French Supreme Court (Cour de cassation) will have to decide on three important legal questions concerning the warranty against hidden defects on which three of its chambers (the first civil chamber, the third civil chamber and the chamber of commerce) have so far taken different positions.
The Cour de cassation’s answers are likely to have significant implications for foreign manufacturers and sellers in case French law applies to sales contracts concluded with French buyers.
All matters concern Article 1648 of the French Civil Code (code civil), according to which “the legal action based on the warranty against hidden defects must be brought by the buyer within a period of two years from the discovery of the defect”.
Here is a summary of the legal questions and the related answers suggested by the deputy prosecutor (avocat general). There is also a reform project of the code civil which partially deals with the same questions. The implementation of such reform is planned for end of 2023/beginning of 2024.
1. What is the nature of the two-year limitation period of Article 1648 code civil: is it a so called “prescription” or a “forclusion”?
Even if this seems to be a highly theoretical question, the related answer will have material consequences for foreign manufacturers and sellers in the event of an expert procedure, i.e. the so called „référé-expertise“, being ordered by a French court at the buyer’s request.
In France, when a product is suspected of having a defect, a “référé-expertise” is very often used to request the appointment of an expert to examine the product in question in order to identify the alleged defect and determine who is responsible for it. The above-mentioned two-year limitation period is interrupted by the request for the appointment of an expert and then suspended until the date on which the expert is appointed.
As of this date, there are two possibilities:
- if the two-year limitation period is qualified as “prescription”, it will be suspended until the date of submission of the expert report. In other words, the buyer has two years as of the date of submission of the expert report to bring a legal action against the seller based on the warranty against hidden defects;
- if the two-year limitation period is qualified as “forclusion”, it is not suspended during the expert procedure. This means that the buyer must bring legal action against the seller within two years as of the date of the appointment of the expert, even if the expert has not yet submitted his/her report within this two-year period.
To date, there is disagreement within the Cour de cassation about the qualification of this limitation period: the first civil chamber and the chamber of commerce consider that it is a “prescription”, while the third civil chamber considers it to be a “forclusion”.
- At the hearing before the Cour de cassation on 16 June 2023, the deputy prosecutor (avocat general) indicated that such limitation period should be qualified as a “prescription”, so that it would be suspended during the expert procedure.
- This is in line with the reform project of sales contracts, which proposes to expressly stipulate in Article 1648 code civil that “the legal action based on the warranty against hidden defects shall be time-barred after two years”.
2.Due to the fact that the starting point of the two-year limitation period is subjective, since it starts from the discovery of the defect, which can also take place several years after the sale or delivery of the goods, French case law considers that this limitation period must be encompassed by a second limitation period that starts from the sale of the goods, otherwise situations may arise in which the legal action based on the warranty against hidden defects would never be time-barred.
For sales concluded between a seller and a buyer who are not merchants (non commerçants), all chambers of the Cour de cassation consider that the second limitation period expires 20 years after the sale of the goods in compliance with Article 2232 code civil.
On 21 July 2023, the Cour de cassation will also answer the question of whether this 20-year limitation period should also apply to sales concluded between a seller who is an merchant (commerçant) and a buyer who may or may not be a merchant (commerçant or non-commerçant) (commercial sales), or whether, for commercial sales, the second limitation period should expire five years as of the sale of the goods, i.e. by applying the general limitation period between merchants (commerçants) in compliance with Article L110-4 of the French Commercial Code (code de commerce).
- At the hearing before the Cour de cassation on 16 June 2023, the deputy prosecutor (avocat general) indicated that the limitation period for commercial sales should last five years. This seems to be reasonable especially when comparing French law not only with the UN Convention on Contracts for the International Sale of Goods (CISG), but also for example with Italian and German law, according to which the legal action based on the warranty against hidden defects is time-barred after respectively one and two years as of the delivery of the goods.
According to the current version the reform project for sales contracts, the duration of the second limitation period should be explicitly included in Article 1648 code civil: while a narrow majority proposes to refer to the 20-year limitation period of Article 2232 code civil, a minority suggests setting a limitation period of 10 years, which would be in line with the 10-year limitation period as of the date on which the product is placed on the market which is applicable to the liability for defective products.
However, both alternatives leave open the question of whether or not this reform should also apply to commercial sales.
3. In the event of a recourse action brought in the context of a supply chain by the reseller against the manufacturer following a legal action brought by the end customer against the reseller, the Cour de cassation considers that the two-year limitation period of Article 1648 code civil starts as of the date on which the end customer brought legal action against the reseller.
Regarding the second limitation period, however, there is disagreement within the Cour de cassation: the third civil chamber considers that this limitation period is suspended until the date on which the end customer brings legal action against the reseller, whereas according to the first civil chamber and the chamber of commerce this limitation period starts running as of the day of the conclusion of the sales contract.
This question should also be decided by the Cour de cassation on 21 July 2023.
- At the hearing before the Cour de cassation on 16 June 2023, the deputy prosecutor (avocat general) indicated that the starting point of the second limitation period should be the date on which the sales contract was concluded between the parties concerned, i.e. the reseller and the manufacturer.
All these questions should be answered on 21 July 2023, it being specified that the Cour de cassation is not obliged to follow the deputy prosecutor (avocat general)’s proposals.
However, one thing is certain: should the Cour de cassation decide that the limitation period for all commercial sales expires after 20 years as of the conclusion of the sales contract, foreign manufacturers and sellers would have a real interest in having all their contractual documents (order confirmations, invoices, delivery notes, GTCs) checked to ensure that their arbitration clauses and/or clauses attributing jurisdiction to foreign courts and submitting the contract to a foreign law would actually apply in the event of a legal action brough by a French buyer before French courts.