In three rulings dated November 29, 2023, the Cour de cassation expressly abandoned the principle that a pre-incorporation contract, to be binding upon the company once registered, had to mention that it had been concluded “on behalf of” the company being formed.
From now on, the judge will make a “sovereign assessment, based on an examination of all circumstances, both intrinsic to the deed and extrinsic, as to whether the common intention of the parties was that the deed should be concluded in the name or on behalf of the company in formation […]”.
Thus, “notwithstanding defective drafting“, a purchase or lease entered into by the company prior to its registration may be taken over by the company once registered under the usual conditions (mention of the contracts in the articles of incorporation, subsequent decision at a shareholders’ meeting or power of attorney provided in the articles of incorporation or by separate deed).
As the Court explained, the previous solution “had undesirable effects, as it was sometimes used by parties to avoid their commitments“, and “paradoxically had the effect of weakening companies at their very beginning, rather than protecting them, without providing adequate protection for third-party co-contractors, who in the event of annulment of the contract find themselves without any debtor“.
This major change in case-law is welcome in that it gives greater deference to the common intention of the parties; all the more so as no text imposed such a strict formalism as that required by previous case law.