On 12 February 2025, the commercial, financial and economic chamber of the Court of Cassation handed down a ruling dismissing the case between Mr X and the company MJM and the companies So Ca Sport and City Sport (appeal no. 23-22.414). This ruling deals with the question of the takeover of a contract by a company in the process of being formed.

Context and history of the case

The case has its origins in fairly old events.

A memorandum of understanding concluded on 12 June 1997 between Mr X and the company Diffusion Électronique Catalane (DEC), providing for the entry of Mr X into the capital of this company via a contribution in cash and in current account. In accordance with this agreement, the company MBM (now MJM) made transfers to the DEC account. However, these transactions were called into question by several court decisions that annulled the general meetings validating the entry of Mr X and the company MJM into DEC’s capital.

In 2018, a general meeting of the company MJM decided to take over the commitments made before its registration. Following this decision, Mr X and MJM sued the companies So Ca Sport and City Sport, which had succeeded to DEC’s rights, to have this takeover of commitments recognised and to claim damages.

Appeal dismissed

In its judgement of 12 February 2025, the Court of Cassation dismissed the arguments raised by the plaintiffs. It reiterated that:

• The assumption of commitments entered into for a company in the process of being set up presupposes a clear intention on the part of the parties. However, the Court noted that the memorandum of 12 June 1997 had been signed by Mr X ‘both on his own behalf and on behalf of any third party of his choice’. This statement, together with the circumstances of the case, demonstrate that the agreement had not been concluded in the name or on behalf of the company MJM, which was then only in the process of being formed.

The Court of Cassation approved the appeal decision which had established that the common intention of the parties to the protocol was not that this act be concluded in the name or on behalf of a company in the process of being formed.

• The failure to identify MJM as the beneficiary of the commitments. The Court concluded that the company MJM could not validly claim the resumption of the commitments in question.

By rejecting the appeal, the Court of Cassation put an end to the claims of the company MJM and Mr X.

This ruling illustrates the requirement for precision regarding the takeover of commitments by a company in formation. It reiterates that the will of the parties must be unequivocal and that the identity of the beneficiary company must be clear from the outset of the act.

This decision is in line with established case law on the takeover of acts performed on behalf of a company in formation. To safeguard such transactions, it is essential that:

• The company in formation is explicitly mentioned as the beneficiary of the commitments,
• The acts concluded prior to registration are adopted in accordance with legal provisions,
• The will of the parties is clearly established.

Otherwise, the contract or contractual engagement won’t be taken over by the company in formation, as illustrated by this ruling.

By Olivier VIBERT,

Lawyer at the Paris Bar

Partner at KBESTAN, a business law firm in Evreux and Paris

www.kbestan.fr