Case 13: options given without charge

280 the enforceabilit y of promises

Code) or the absence of cause (art. 1131) if there was a mistake about the purpose of the sale or its achievement was impossible at the time the contract was made.

In both Cases 13(a) and 13(b), Simon has made a unilateral promise to sell (promesse unilatérale de vente) in favour of Realty. Although the promisee, Realty, has not undertaken to buy the land, Simon’s unilateral promise gives it an option to do so within the time specified. The length of this period (one month or two years) makes no difference.

Simon could argue that the promise is not binding if Realty failed to comply with the registration requirements of art. 1840A of the Code général des Impôts, enacted as art. 7 of the Loi de finances of 1963. These provisions require that a unilateral promise of sale which is not made in a notarially authenticated document must be registered within ten days of its acceptance by the beneficiary. Simon could claim that the promise is void for want of registration. This argument may not succeed since registration formalities are primarily a protection against tax evasion, and this muchcriticized provision has been interpreted restrictively. The case law has thus tried to ensure that this provision is not exploited by contracting parties who are acting in bad faith.1 Moreover, in the case of an option, it has been held that the promise has not been accepted, in so far as these provisions are concerned, until the option is exercised.2

In principle, therefore, Simon’s promise is binding. He cannot revoke it during the period of the option, and it is valid until the option period has expired. Nevertheless, the promisee cannot have it specifically enforced. Specific enforcement of a contract of sale is possible, but, if the promise is revoked before the option is exercised, a contract of sale has not yet been made. Moreover, the case law has held that a promise such as this one creates an obligation ‘to do’ something (obligation de faire) (see art. 1126 of the Civil Code). Promises ‘to do’ cannot be specifically enforced. Therefore, the promisee’s only remedy would be to claim damages. This is a strict application of art. 1142 of the Civil Code which provides that ‘every obligation to do or not to do (something) gives rise to a claim in damages in the event of breach by the promisor’. Thus, in a recent decision, the Cour de cassation3 held that ‘as long as the promisees of a promise to sell have not announced their decision to buy, the promisor’s undertaking only constitutes an obligation to do, and the exercise of the option subsequent

3Civ. 3, 15 Dec. 1993, JCP 1995, II, 22366, note D. Mazeaud; Rép. Def. 1994, art. 35845, note P. Delebecque; RTDCiv. 1994, 588, obs. J. Mestre; confirmed afterwards, Civ. 3, 5 April 1995, Bull. civ. III, no. 101.

to the promisor’s revocation excludes the possibility that the parties had the common intention of buying and selling’. Although this view has been received with almost unanimous disapproval by scholars, nevertheless Realty would have a great deal of difficulty in enforcing such a promise. If, however, Simon refused to sell after the option was exercised, Realty could claim specific performance.

Article 1589 of the Civil Code clearly states that a promise to sell is equivalent to a sale as long as the parties have agreed on the subject matter and the price. When a binding contract exists, normally the courts cannot interfere with the bargain. By way of exception, however, another remedy may be available to Simon. If he does not refuse to sell but wishes to contest the price for the sale because of the sharp rise in the market price (but regardless of the purpose for which Realty has bought), he may bring an action for rescission for lésion. Such an action may be brought if, because of the increase in market value, the contract price is less than seven-twelfths of the market value of the land.

The aim of the remedy of lésion is to protect sellers from making foolish sales. The drafters of the Civil Code considered that a person might be coerced into selling (though not into buying) when, for example, the parties are in a situation of inequality.4 Nevertheless, the view of the case law is that lésion is an autonomous remedy which does not depend on proof of circumstances such as coercion or mistake that might vitiate consent (vices du consentement).5 The time limit to bring an action for lésion is, as a general rule, two years from the date of the contract of sale. Moreover, the Law of 28 November 1949, which supplements art. 1675 of the Civil Code, provides that the date for evaluating the market price of the land is the date on which the sale is completed, that is, the day upon which the option is exercised.

The 1949 law increases the protection given to the seller. One might argue that it is consistent with the approach of the case law which distinguishes lésion from factors that vitiate consent.6 Nevertheless, the fact that the date that matters is not that of the promise is an exception to the rule set out in art. 1589 of the Code that ‘a promise of sale equals a sale’. Moreover, the 1949 law constitutes an exception to the hostility of French law to the theory of imprévision, since using the later date allows market fluctuations to be taken into account, and so ensures that the remedy is of genuine, rather than theoretical, value to the seller.

4 Terré, Simler, and Lequette, Les obligations no. 295, p. 246; no. 299, p. 250.

5 Req., 28 Dec. 1932, DP 1933, I. 87; Ghestin, Traité de droit civil no. 791, pp. 791 f. 6 Flour and Aubert, Droit civil no. 252, pp. 171–2.