Deceitful Reticence in Transfer of Social Rights

Extract

[...] It is not a matter of systematically presuming deceitful intention in the presence of any failure to comply with the duty of information, but only of facilitating its proof in the presence of several elements. Upon reading the judgment, these elements are two in number and have already been identified. Firstly, it is a matter of the importance of the information; this being derived in the matter of the transfer of social rights from the impact on the results and prospects of the transferred company. [...]

[...] This solution by the Court of Cassation is conducive to facilitating the proof of the dolosive reluctance. It emphasizes the need for the transferor to reveal all information related to the company to the acquirer during negotiations in order to avoid the annulment of the transfer contract. Thus, it would be advisable for the acquirer of social rights to mention in the transfer contract the elements that they consider to be determining of their consent. [...]

[...] By characterizing the deceitful reticence in this case, there is no doubt that the scope of the decision raises questions. II- The scope of the characterization of the deceitful reticence The scope of the characterization of deceit in this case is double. On the one hand, this solution reaffirms the distinction that exists between a breach of the duty to inform and deceitful intent On the other hand, in the field of evidence, it relaxes the rigor shown by deducing this deceitful intent from the knowledge by the transferor of the concealed information The theoretical distinction existing between a breach of the duty to inform and deceitful intent By this judgment, the Court of Cassation takes up the distinction between, on the one hand, the intentional nature of deceit and, on the other hand, the simple breach of the duty to inform. [...]

[...] Intentional concealment The decision on the case deduced the reluctance by the characterization of the intention to conceal different information. Under the old Article 1116 of the Civil Code, consistent case law required proof of the intentional nature of deceit. By a judgment of June the Court of Cassation refused to sanction the lack of information in the absence of proof of an intention to harm: 'the failure to comply with a pre-contractual obligation to provide information, assuming it to be established, is not sufficient to characterize deceit by reticence, if there is no additional finding of the intentional nature of this failure and of a decisive error caused by it'. [...]

[...] In this sense, Article 1112-1 of the Civil Code provides in its paragraph 3 that "the information that has a direct and necessary link with the content of the contract or the quality of the parties is of determining importance." Or, becoming a partner in a company is to pursue an activity with a view to realizing profits. This is in total contradiction with the risk on the permanence of the transferred company, the company contract no longer having any reason to be. The jurisprudence has more than once recognized, at several times, the determining character for the transferee of social rights, the consequences of the loss of a client on the profitability of the company or the certain loss of the economic profitability of the company (CA Paris April 2005; Cass. com May 2005). [...]