Court of Cassation Rulings on Associations' Economic Activities

Extract

[...] The appeals court accepts its request (CA Rouen 26 May 1988) because it holds that the contribution in enjoyment of the fund must bethree considerationswere considered as a lease and that the deed of transfer concluded between the company and the third party had transferred to him the obligations of the company concerning the fund and notably the obligation to exploit it. The defendant then appealed to the cassation court. The Court of Cassation must therefore answer the following question: can a contribution in enjoyment of a commercial fund to a company bethree assimiled to a lease, resulting in the transfer of obligations in the event of a transfer? [...]

[...] 3 women are engaged asinfirmisrecruited by the Home Help Association in rural. A non-compete clause inserted in their employment contract prevents them from settling within the geographical limits of the association and within a 10km radius for a period of 5 years afteristo their departure from the association. Afteristo their resignation, the association acts in violation of the non-compete clause against the 3 former nursesisres. The first-instance courtsisfirst instance and appeal (CA Montpellier 14 February 1991) reject their requests and rule on the validity of the non-competition clause, not being illegitimate due to the non-profit economic activity of the association and not infringing on their freedom of work. [...]

[...] The Commercial Chamber of the Court of Cassation responds negatively and quashes the decision of the judges of the first instance. At the articles 1832 and 1843-3 of the civil code concerning the definition of a company and on the differencesrents types of'contribution, it retains that the court of appeal a violit is these texts. It thus rejects the assimilation between a contribution in enjoyment of a business asset to a company and a lease and confirms that the obligations related to this asset are not transferred to the assignee. [...]

[...] She states that an association can engage in economic activity. In fact, it asserts that an association can realize profits as long as theactivityis economically secondary and non-profit. By doing so, the association can bebetween confrontrelates to a situation of competition from which it can try to protect itself by inserting non-competition clauses in the employment contracts of its employees, to the extent that these remain limited in time, space, and they do not prohibit the entire exercise ofa profession. [...]