Damages for Breach of Contract in France: What Courts Actually Award

Damages for breach of contract in France: what courts actually award

In the absence of a lawful contrary clause, the debtor of an unperformed or badly performed obligation must personally repair the damage its creditor suffers. Behind that simple principle sits a structured regime: the breach must be imputable to the debtor, the damage must be certain, direct and personal, a causal link must be proved and is never presumed, and, in the signature rule of French contract law, only the damage foreseeable at the conclusion of the contract is in principle recoverable (C. civ. Art. 1231-3).

This article sets out the conditions of the damages claim, the foreseeability rule and its two exceptions, the heads of loss French courts compensate, the loss-of-chance doctrine, the non-cumul boundary between contractual and tort liability, the debated place of mitigation, and the clauses by which the parties can define the recoverable damage in advance.

What can you recover from a defaulting French counterparty?

The conditions of the damages claim: imputable breach, proven loss, causal link

The debtor answers for the damage wherever it is established that it did not accomplish all the diligences in its power to avoid it (Cass. com., 30 janv. 2019, n° 17-16.604), and every contractual failure engages liability, even one that would not justify the immediate unilateral termination of the contract (Cass. com., 22 févr. 2020, n° 18-20.394). The imputation is broad: the debtor answers even where it suffers a mental disorder (C. civ. Art. 414-3), where the non-performance is due to the agent it appointed, where the failure was committed by its subcontractor, or by the shareholders who in fact direct it (Cass. 1e civ., 3 févr. 1993, n° 90-19.262). And the availability of a parallel action against a third party, such as a legal professional whose act created the damaging situation, does not release the debtor (Cass. 1e civ., 9 nov. 2004, n° 02-10.769). Even the transfer of the contract does not automatically transfer the exposure: the debtor answers for the breach committed by the party to whom it transferred its position unless the creditor released it, the substitution must actually be established (Cass. civ., 15 mai 1973, n° 72-11.915), and the transferor who declared itself "guarantor" of the transferred obligations answers only where the substitute is itself bound, an undertaking to answer even where the substitute is not requiring explicit words.

The causal link, by contrast, is never presumed:

• the mere existence of a contractual fault does not carry it (Cass. civ., 18 nov. 1997): the fault gives rise to damages only if the judge, at the moment of ruling, finds that a prejudice resulted from it (Cass. 3e civ., 3 déc. 2003; Cass. com., 31 janv. 2012, n° 11-10.716; Cass. 1e civ., 9 sept. 2020, n° 19-16.047);
• nor does the nature of the obligation: the debtor of an obligation of result answers only for the damage caused by the breach of that obligation, and the victim must establish that the damage it invokes is linked to it (Cass. 1e civ., 28 mars 2008, n° 06-18.350);
• any factor that intervened in the realisation of the damage can, however, be retained as causal (Cass. 3e civ., 12 juin 2003).

One timing rule completes the picture: the claim in reparation is born on the day of the breach, not on the day the damage revealed itself, because it finds its principle in the contract (Cass. com., 12 janv. 1982). The date matters for prescription, for insolvency declarations and for the interest calculation, and it is fixed by the breach even where the loss surfaces years later.

The foreseeability rule of Article 1231-3, and the three characters of the recoverable damage

The recoverable damage must be certain, direct and personal to the party who invokes it (Cass. com., 13 mars 2007, n° 05-20.606). Even where the non-performance results from gross or intentional fault, the damages cover only what is an immediate and direct consequence of the non-performance (C. civ. Art. 1231-4), and the damage must find its cause in the debtor's failure, not in the creditor's compliance with its own obligations (Cass. com., 31 janv. 2018, n° 16-12.406) nor in the effect of a legal rule.

Above these conditions sits the rule foreign claimants most often discover in court: only the contractual damage foreseeable at the conclusion of the contract is in principle recoverable (C. civ. Art. 1231-3), and on condition of being an immediate and direct consequence of the breach (Cass. com., 11 mars 2020, n° 18-22.472). Foreseeability is assessed at the moment of conclusion, and it concerns the constitutive elements of the damage, not their monetary equivalent at the day of reparation (Cass. com., 4 mars 1965, n° 60-12.767): inflation does not make a damage unforeseeable, but an unforeseeable extent does.

The case law draws the line concretely. Held foreseeable: the late-delivery penalties a supplier had to pay because its freight forwarder delivered a container late; the replanting costs and three years of lost harvest caused by diseased vine plants; the indemnity amount agreed between insurer and insured, treated as the damage foreseeable in the parties' eyes (Cass. com., 29 mars 2017, n° 15-19.761); and, for a contract concluded for eighteen years but terminable every three years, a damage limited to three years of the relationship. Held unforeseeable: the loss of connecting air tickets by rail passengers, the rail carrier being unable to foresee at conclusion that the train's destination was not the final one (Cass. 1e civ., 28 avr. 2011, n° 10-15.056); goods stored in leased premises in violation of the lease; interest on a loan never declared to the seller; and the solidification of delivered fuel in an exceptional cold spell.

The rule has two exceptions: the parties may agree to cover even unforeseeable damage, and the limitation falls where the debtor committed the breach intentionally, that is, deliberately (C. civ. Art. 1231-3; Cass. com., 19 janv. 1993; Cass. com., 8 févr. 2005). In every case, only the damage caused by the debtor is repaired: not the part attributable to the fault of a guarantor, nor the aggravation due to the proven fault of the victim itself (Cass. 2e civ., 24 nov. 2011, n° 10-25.635).

The heads of loss French courts compensate

Reparation covers the loss suffered and the gain of which the creditor was deprived (C. civ. Art. 1231-2). The evaluation is made either by the parties in advance, through a penalty clause, or by the judge at the level of the prejudice proved. In practice the judicial award is built from the following blocks:

• Losses suffered. The expenses the damage occasioned: costs of restoration (Cass. civ., 19 nov. 1975) and of correcting defective works, and the additional cost of contracting elsewhere on more onerous terms (Cass. civ., 10 avr. 1975). Extravagant expenses are refused. The depreciation and deterioration of damaged property is compensated without distinguishing between use value and market value, and the financing costs of the expenses and losses are recoverable (Cass. com., 17 mars 1987). For VAT, the amount is a compensable loss only where the victim cannot recover it from the tax authorities: where recovery is available, the award is calculated on the amount net of tax (Cass. 3e civ., 17 janv. 2012, n° 10-16.321), though the parties may agree to exclude VAT from the indemnity (Cass. 1e civ., 16 févr. 1988, n° 85-18.843).
• Lost profit. The commercial prejudice: lost clients and turnover, cancelled orders, damage to brand image, the lost rents of a lessor, and the lost return on the sums devoted to repairing the damage rather than invested (Cass. civ., 8 mars 1995). The gain must still be proved, not asserted (Cass. 3e civ., 7 nov. 2024, n° 23-12.315), and the accounting reconstruction of the lost margin is usually where these claims are won or lost.
• Default interest. On sums of money, interest at the legal rate runs from the formal notice, without proof of loss (C. civ. Art. 1344-1), and is claimed alongside the compensatory heads.
• Loss of a chance. Defined as the deprivation of a potentiality presenting a reasonable probability, not a certainty (Cass. 3e civ., 7 avr. 2016, n° 15-14.888). The courts have compensated the lost chance of concluding a profitable contract, without requiring the claimant to prove that it would have concluded it (Cass. 1e civ., 9 déc. 2010, n° 09-69.490; Cass. 2e civ., 20 mai 2020, n° 18-25.440), the lost chance of contracting on better terms (Cass. 3e civ., 21 nov. 2019, n° 18-23.251), and the lost chance of seeing a securities portfolio grow as it would have under a normally diligent manager, where the appointed manager managed it fraudulently. The award is a fraction of the hoped-for advantage, weighted by the probability lost: a sixty per cent chance of a gain is compensated at a fraction of that gain, never at its full value.

Would your loss be recoverable in a French court?

Contract or tort: the non-cumul principle

French law separates the two orders of liability strictly. Where the damage consists in the breach of a contractual obligation between the parties, only the rules of contractual liability apply: the victim has no option to prefer the rules of tort, with their different regime of foreseeability and proof. The boundary runs at privity: the rule operates only in the relations between the contracting parties, so a third party to the contract sues in tort, as did the owner of goods damaged in a transport to which its quality of party had not been established (Cass. com., 9 juill. 2002, n° 99-19.156).

The classification matters commercially. The contractual regime carries the foreseeability limit of Article 1231-3 and gives effect to the contract's limitation and penalty clauses; the tort regime knows neither. A defendant therefore argues privity to obtain the contract's protections, and a claimant outside the contract pleads tort to escape them. For groups contracting through subsidiaries, the question of who exactly is party to which contract decides which regime governs the loss, and the answer should be settled at drafting, not discovered in litigation.

Mitigation of loss: what French law actually requires of the victim

Whether the victim must limit its own loss is one of the live debates of French contract law. The Cour de cassation has held, in contractual matters, that the author of a damage must repair all its consequences and that the victim is not bound to limit its prejudice in the interest of the party responsible (Cass. 3e civ., 10 juill. 2013, n° 12-13.851), a formula the commercial chamber has repeated (Cass. com., 25 sept. 2019, n° 15-28.598). The same court has nonetheless required, in a construction insurance recourse, that all useful measures be taken to avoid the aggravation of the loss (Cass. 3e civ., 9 avr. 2014, n° 13-15.555).

The practice of the lower courts and of arbitrators runs the other way, refusing the part of the damage the victim could have avoided:

• a hirer of a defective wagon could not unilaterally switch to a more expensive mode of transport when demanding a replacement wagon sufficed (CA Paris, 21 mars 1979);
• a buyer of non-conforming equipment who attempted no interim solution to limit the consequences of the seller's failure was refused compensation for the avoidable part (CA Versailles, 26 nov. 1986);
• a publisher aggravated its own loss by continuing to pay the author's monthly instalments, without protest, after the manuscript deadline had passed (CA Paris, 25 févr. 1987);
• a buyer who replaces a defaulting seller of generic goods recovers the additional cost only if it paid a reasonable price for the replacement.

Two fixed points stand in the middle of the debate. The aggravation of the damage due to the victim's proven fault is never charged to the debtor (Cass. 2e civ., 24 nov. 2011, n° 10-25.635). And legal professionals cannot invoke the victim's inaction at all: the liability of a notary or lawyer who owed the act its legal efficacy is not subsidiary, and he cannot argue that the victim could have avoided the damage (Cass. 1e civ., 22 sept. 2016, n° 15-13.840). The Court of Justice of the European Union has, for its part, accepted national rules denying compensation for the loss a claimant could generally have been expected to avoid or reduce (CJUE, 12 sept. 2019, aff. C-688/17), and the pending French civil-liability reform proposal would require the victim to take safe, reasonable and proportionate measures, having regard to its means, to avoid the aggravation of its prejudice. Prudent claimants therefore document their efforts to contain the loss from the first day; prudent defendants plead every avoidable component, and the difference between the two supreme-court lines is often worth more than the liability debate itself.

Defining the recoverable damage in the contract

The parties may define for themselves, as international contracts routinely do, the nature of the damages that will be repaired: the composition of the damage (which losses, which lost profits, whether moral, commercial, indirect or unforeseeable prejudice counts), the period over which damages are taken into account, and the facts that give rise to reparation. The drafting rules the case law teaches:

• Never refer to "indirect damages" without definition: the category can reach unexpected proportions, an operating loss of a whole shipping line having been admitted under that head; the formulations used in business-interruption insurance policies are the practical model for defining consequential loss and delay-related prejudice.
• Avoid promising reparation of "all" damages: the formula is ambiguous between every damage whatever and only the damage the law makes recoverable.
• Unilateral determination is possible, arbitrariness is not: the parties may leave one of them the right to determine the recoverable damage on condition of doing so in good faith, under the judge's control; a clause allowing one party to fix the indemnity arbitrarily is void (Cass. com., 4 mars 1980).

The other conventional instruments, the penalty clause fixing a lump sum in advance and the clauses limiting or excluding liability, obey a regime of their own, including the judge's power to moderate a manifestly excessive or derisory penalty (C. civ. Art. 1231-5). A well-built damage clause names the covered losses in the language of insurance practice, states the covered period, and says expressly whether unforeseeable and indirect losses are in or out, so that the Article 1231-3 default never has to be litigated.

Frequently Asked Questions

This article is for general information only and reflects French law as published at the date shown above. It does not constitute legal advice. Always seek qualified advice before acting.