June 11th, 2009

Continental European Legislative and Judicial Trends: France

Posted at 1:00 AM ET

David Lewin, Managing Director
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Toward the Recognition of a Duty to Mitigate Damage in French Law?

Under French law, the principle that damage must be made good in full (known as réparation intégrale du préjudice) is absolute. One of the main statutory bases for this principle is Article 1382 French Civil Code: “any human act whatever that causes damage to another obliges the one by whose fault it occurred to make it good.” French legislation and case law do not impose a general duty for aggrieved parties to mitigate their damage. Only where the aggrieved party has contributed to bringing about the accident or the breach of contract through his own negligence or where the damage is not directly linked to the accident or the breach of contract may the right to full compensation be limited. The only area in which the duty to mitigate is applied in France is international sale of goods.

Under Article 77 of the 1980 Vienna Convention (which constitutes French law with respect to contracts for the international sale of goods), a party who pursues legal action on account of a breach of contract must take reasonable measures to mitigate the loss - including loss of profit — resulting from the breach. If he fails to take such measures, the party in breach may request a reduction in the damages in the amount by which the loss should have been mitigated.

In French law, the victim of a tort or a breach of contract is under no obligation to seek to minimize his loss and prevent it from worsening. As a matter of fact, the French Supreme Court has repeatedly held: “the person liable for damage must make it good in full. The aggrieved party is not required to mitigate his damage in the interest of the person responsible for the accident.”1

The courts have, however, sometimes used the concept of good faith (or, the requirement for a direct link between the tortious or negligent act and the damage) or the doctrine of perte de chance (loss of an opportunity to make a gain or avoid a loss) to limit the amount of damages awarded to aggrieved parties.

Under the influence of common law, the question of recognition of a duty to mitigate has arisen. Some recent decisions pave the way for the establishment of such a duty.

On January 22, 2009, the French Supreme Court quashed a decision of a court of appeal that had refused to award the victim of an assault full compensation for economic loss arising from the assault.2 As a result of his injuries, the victim was unable to run his business, in which he was the majority shareholder. He therefore sold his shares. As the price he got for them was well below their market value, he sought compensation for his economic loss from his attacker.

The court of first instance awarded him full compensation for the loss on the sale of his shares under market value.

The court of appeal overruled the decision, taking the view that the victim had contributed to his loss by selling his shares prematurely without taking the time to find a buyer at a higher price. The court of appeal characterized the victim’s loss as a perte de chance and awarded the victim damages for the loss of the opportunity to sell his shares at a better price — not for the loss he actually incurred.

The Supreme Court quashed the appellate judgment on the grounds that the findings of fact made by the court of appeal showed that the loss consisted of the loss made on the sale of the shares and that the sale of shares, decided as a direct result of the offense, was an appropriate management decision.

Although the Supreme Court reiterated in its decision the principle that damage must be made good in full, it reviewed the appropriateness of the victim’s conduct, which is a key criterion for mitigation. This decision could therefore open the door to scrutiny of the victim’s conduct by the trial and appeal courts when assessing the damages to be awarded.

This decision confirms the position adopted in a previous case on May 3, 2006. A person infected with hepatitis C through a blood transfusion had refused to allow medicine to be administered to him because the chances of recovery were only 50 percent. The Supreme Court ruled that the victim’s refusal could not limit his right to compensation, given that there was little chance that the medicine would cure him.

A commission chaired by Professor Pierre Catala in 2005 released an outline plan for reforming the law of contracts and torts and limitation periods (Avant-projet de réforme du droit des obligations et de la prescription) in which the commission suggests introducing an article into the French Civil Code worded as follows: “Where the aggrieved party failed to use safe, reasonable and appropriate means available to him to limit the extent of his loss or prevent it from worsening, his compensation shall be reduced, unless such means were likely to cause bodily injury.” The Supreme Court, in its report on the projected reform, supported this duty to mitigate

The January 22, 2009 decision could therefore be perceived as a first step towards widespread recognition of a duty to mitigate under French law.

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Footnotes:

  1. See, for example, Cass., 2nd Civ. Div, June 19, 2003, Bull. Civ. II, No 203.
  2. Cass., 2nd Civ. Div., Case 07-20.878.
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