Contrat de droit privé souscrit par une commune : nullité absolue en cas d’incompétence du signataire !

Contract of private law subscribed by a municipality: absolute nullity in case of incompetence of the signatory!

by Sébastien Palmier on April 11, 2019 | Category: Public markets
Contrat de droit privé souscrit par une commune : nullité absolue en cas d’incompétence du signataire ! Contrat de droit privé souscrit par une commune : nullité absolue en cas d’incompétence du signataire !

Cass.com 6 March 2019, Township of Carrière sur Seine, n ° 16-25.117

In this case, the Court of Cassation considers that a loan contract subscribed by the mayor of a municipality which is not expressly empowered by its municipal council is tainted absolute nullity unsusceptible regularization and can be questioned at any moment by the municipality. A good way therefore for municipalities to renegotiate their loan agreement and failing agreement banks to denounce without being required to repay the deadlines at least, if the mayor has acted without regular delegation.

Teaching n ° 1:

In its judgment of March 6, 2019, the Court of Cassation considers that the breach of the rules of public order relating to the jurisdiction of the authority signatory of a contract of private law concluded in the name of a municipality is sanctioned by the nullity absolute

In this case, following a proposal to refinance two loans taken out in 2002 and 2006, Dexia local credit (the bank), acting for itself and its subsidiary, Dexia Municipal Agency, which became the Caisse Française de Financement Local (Caffil), made two loans in 2007 to the municipality of Carrières-sur-Seine, represented by its current mayor. Claiming that the mayor had not been regularly charged by delegation of the city council to conclude loan agreements, the municipality decided to assign the bank to cancel these contracts.

The Court grant this request considering that the provisions relating to the competence of the authority signatory of a contract concluded on behalf of a municipality are of public order and must be sanctioned by the absolute nullity without possibility of regularization : " Whereas to reject the requests of the municipality, after having retained that the deliberation of the municipal council had not validly made delegation of power to the mayor to conclude the loans in dispute, the judgment states that the provisions of the article L. 2122 -22 of the code général des collectivités territoriales do not constitute rules of public order, the non-observance of which entails the absolute nullity of the contracts and then reveals various circumstances, which it describes, establishing that the municipal council has given its agreement a posteriori to the conclusion of the contracts in dispute; that it deduces that in view of the requirement of fair contractual relations, the defect resulting from the absence of authorization prior to the signing of contracts can not be regarded as serious enough to justify their cancellation;

That being so, while the breach of public policy provisions relating to the jurisdiction of the signatory authority of a private law contract concluded in the name of a municipality is sanctioned by absolute nullity, which can not be covered by the confirmation of the contract, the Court of Appeal violated the abovementioned texts ".

In doing so, the Court of Cassation adopts a position consistent with the principle of legality and diametrically opposed to that of the Council of State which prefers to prevail the requirement of fair contractual relations to refuse to sanction the incompetence of the signatory of a contract of public law (EC Ass.28 December 2009, Commune of Béziers n ° 304802: the circumstance that the mayor of the municipality abstained, before signing the contract, to transmit to the prefect, as part of its mission of control of legality, the deliberation of the municipal council authorizing it to proceed to it, if it constitutes a fault affecting the conditions under which the parties have given their consent, may not, having regard to the requirement

The solution rendered by the Court of Cassation deserves to be welcomed as it is consistent with the principle of legality and does not derogate from the law, as is regularly done in the case law of the Council of State to protect unduly the interests of the administration .

Teaching n ° 2:

In its judgment of 6 March 2019, the Court of Cassation also considers that the informed nature of a municipality is not presumed so that in connection with the subscription of variable rate loan contracts, the bank is obliged to with regard to the municipality to the delivery of information fair, unambiguous and complete. The bank is thus bound by a duty to warn about the adaptation to the financial capacities of the borrower and the risks of indebtedness resulting from the granting of the loan.

The Court of Cassation thus considers that by not investigating whether the loans at issue were suitable, particularly for the purposes of the after having noted that "the indexing clauses in the contracts at issue are particularly complex and involve a significant financial risk to the extent where the variable interest rates are not capped and, taking into account the indices selected, subject to the uncertainties of the international economic situation "and referring ineffectively to the risk of excessive indebtedness, impossible to determine, and to the knowledge the bank had on the repayment powers of the municipality, the Court of Appeal has deprived its judgment of legal basis under Article 1147 of the Civil Code.


Cass.com 6 March 2019, Township of Carrière sur Seine, n ° 16-25.117

 

Whereas, according to the judgment under appeal, following a proposal to refinance two loans subscribed in 2002 and 2006, Dexia local credit (the bank), acting for itself and its subsidiary, Dexia Municipal Agency, now Caisse Française de Financement Local (Caffil), made two loans in 2007 to the municipality of Carrières-sur-Seine (the municipality), represented by its current mayor; that claiming that the mayor had not been regularly charged by delegation of the municipal council to conclude the loan contracts, the municipality has assigned the bank for cancellation of these contracts and, subsidiarily, liability; that she called the company Caffil in forced intervention;

Whereas to reject the requests of the municipality, after having retained that the deliberation of the municipal council had not validly made delegation of power to the mayor to conclude the loans in dispute, the judgment states that the provisions of the article L. 2122 -22 of the code général des collectivités territoriales do not constitute rules of public order, the non-observance of which entails the absolute nullity of the contracts and then reveals various circumstances, which it describes, establishing that the municipal council has given its agreement a posteriori to the conclusion of the contracts in dispute; that it deduces that in view of the requirement of fair contractual relations, the defect resulting from the absence of authorization prior to the signing of contracts can not be regarded as serious enough to justify their cancellation;

That being so, while the breach of public policy provisions relating to the jurisdiction of the signatory authority of a private law contract concluded in the name of a municipality is sanctioned by absolute nullity, which can not be covered by the confirmation of the contract, the Court of Appeal violated the abovementioned texts;

FOR THESE REASONS, and without it being necessary to rule on the other complaints:

BREAK AND CANCELED, in all its provisions, the judgment rendered on September 21, 2016, between the parties, by the Court of Appeal of Versailles; remits, accordingly, the cause and the parties in the state in which they were before that judgment and, to be done right, remits them to the Paris Court of Appeal;

Condemns the company Dexia local credit costs;