Sudden Termination of an Established Commercial Relationship: How To Secure the End of a Partnership & Limit Litigation Risk

Ending a collaboration with a supplier, distributor, subcontractor or service provider is sometimes unavoidable — whether for economic or strategic reasons. But in business law, the way a relationship is terminated matters as much as, if not more, than the decision itself.

This is where the concept of sudden termination of an established commercial relationship (or “established commercial relationship”) comes into play, a notion strictly governed by Article L.442-1, II of the French Commercial Code. A termination that occurs too quickly, without sufficient written notice, may expose the company to damages that can sometimes be very significant, generally calculated on the basis of the gross margin lost during the notice period considered to be missing.

This article offers a practical and operational overview of the applicable rules: the criteria used by courts, the pitfalls to avoid, and best practices to secure the termination of commercial relationships.

1) The legal framework: what Article L.442-1, II of the French Commercial Code sanctions

1.1. A simple principle: you may terminate, but not abruptly

The provision sanctions the sudden termination, even partial, of an established commercial relationship in the absence of written notice that takes into account, in particular, the duration of the relationship and commercial practices.

An important point: the fault does not lie in the termination itself, but in its abrupt nature, meaning the absence or insufficiency of notice.

1.2. Liability in tort (and procedural implications)

Under French law, actions based on the sudden termination of an established commercial relationship (Article L.442-1, II of the French Commercial Code) are traditionally characterised as tort liability. What is sanctioned is not the termination itself, but its abrupt nature — in other words, the absence or insufficiency of notice.

However, this classification raises questions under European Union law, particularly in disputes with an international dimension.

In a decision dated 2 April 2025, the French Supreme Court (Cour de cassation) referred a key question to the Court of Justice of the European Union (CJEU): does an action for sudden termination fall under…

• a contractual obligation— in which case the law chosen by the parties could apply (the Rome I Regulation);
• or a non-contractual obligation — leading to the application of the law of the place where the damage occurred, or the law most closely connected to the situation (the Rome II Regulation)?

This distinction is far from trivial: depending on the classification adopted, the applicable law and the competent court may vary significantly in international commercial relationships.

Pending the CJEU’s answer, French case law still predominantly considers that actions based on the sudden termination of an established commercial relationship fall within tort liability.

1.3. The 18-month notice “shield” (for terminations notified since 2019)

Since the ordinance of 24 April 2019, a cap has been introduced: if the party terminating the relationship has complied with 18 months’ notice, its liability can no longer be engaged on the ground that the notice period was insufficient.

In practical terms: even for a very long-standing relationship, once the 18-month threshold is reached, any debate over the adequacy of the notice period becomes legally moot — without prejudice to the other conditions that may still need to be assessed.

2) An “established” commercial relationship: how courts assess it

The law does not define this concept. Case law therefore relies on a set of indicators: the relationship must be ongoing, stable and regular, and such that the partner could reasonably anticipate the continuation of the business flow.

2.1. The most important criteria in practice

Courts typically examine in particular:

• the duration of the relationship and the regularity of the business dealings;
• the predictability and stability of the relationship;
• the existence of incidents likely to weaken the relationship (and potentially deprive it of its stability);
• whether there was systematic competitive tendering (for example annual calls for tender), which may indicate a precarious relationship.

2.2. Examples: an established relationship… even without a “long-term” contract

A relationship may well be considered established:

• even without continuous dealings: a succession of contracts or orders may be sufficient (recurring services, annual events, etc.);
• even without a written contract, if the exchanges are regular (orders, invoices, stable course of dealing);
• even where fixed-term contracts are repeatedly renewed, if the overall relationship is stable and predictable over time.

3) When does a termination become “abrupt”?

3.1. Abruptness = absence or insufficiency of written notice

A termination is considered abrupt when it occurs without notice, or with written notice that is insufficient in light of the legal criteria and the circumstances.

Important: only written notice triggers the notice period.

3.2. Total termination… and partial termination

The provision also covers partial termination: a sudden and significant drop in volumes, the delisting of a substantial part of a product range, a rapid reduction in orders, etc.

A common example: a company announces a “notice period” but empties the relationship of its substance by drastically reducing orders before the end of the notice period. Such a situation may be analyzed as a sudden partial termination.

3.3. Contractual notice: useful, but not always sufficient

Even where the contract provides for a notice period (6 months, 3 months, etc.), the court may consider that period insufficient in light of the relationship and award damages.

In other words, a contractual clause does not override this mandatory protective rule.

4) How to determine a “sufficient” notice period

4.1. The assessment criteria used by courts

Article L.442-1, II of the French Commercial Code requires a notice period that takes into account, in particular, the duration of the relationship and commercial practices or interprofessional agreements.

In practice, case law also considers:

• the importance of the business volume concerned;
• any economic dependence;
• seasonality;
• the specific nature of the products or services;
• the time required for the partner to reorganize.

4.2. The 18-month cap: a strategic benchmark

Where the litigation risk is high, adopting a notice period approaching 18 months can be an effective way to secure the issue of duration — without, however, dispensing with the need to analyze whether the relationship qualifies as an established one or how the notice period is actually carried out.

5) Exceptions: can a relationship be terminated without notice?

The provision provides for two main grounds for exemption.

5.1. A sufficiently serious breach by the partner

Termination without notice is possible in the event of non-performance, but the seriousness of the breach is subject to judicial review: a contractual clause alone is not sufficient if the breach is not objectively serious.

Our advice: carefully document formal notices, quality reservations, delays, penalties, etc., in order to be able to demonstrate the seriousness and/or repetition of the breaches.

5.2. Force majeure… and external economic constraints

Force majeure is assessed strictly. Case law also recalls that certain external economic constraints (sectoral crisis, objective decline in activity, production difficulties) may be taken into account when assessing the absence of fault, provided they are objective and properly documented.

6) What sanctions apply in the event of sudden termination of an established commercial relationship?

6.1. Damages: lost gross margin as the main basis

The main loss is assessed based on the expected gross margin during the notice period that should have been granted. This is often where the most significant awards of damages arise.

6.2. Possible additional losses

Depending on the circumstances, additional losses may also be compensated (cash-flow impact, investments, indebtedness, etc.), provided their reality and causal link with the abrupt termination are demonstrated.

6.3. Multiple parties involved: joint and several liability may be imposed

Where several companies — for example within the same corporate group — have contributed to the damage, the court may order joint and several liability, with the internal allocation between them to be determined afterwards.

7) Who can bring a claim? And how can the case be proven?

7.1. Only the party in a direct relationship may bring a claim under Article L.442-1, II

The action belongs to the partner directly involved in the commercial relationship. Third parties (group companies, indirect partners) must rely on another legal basis, namely general civil liability, and must demonstrate a separate and distinct loss.

7.2. Useful evidence (for the claimant… and for the defendant)

To establish — or challenge — the existence of an established relationship, the following elements are typically relied upon:

• order / invoice history (regularity, volumes);
• framework agreements, amendments, renewals;
• emails, meeting minutes, commercial plans;
• stability of the terms (prices, volumes, exclusivity);
• evidence of competitive tendering (calls for tender) to support the argument that the relationship was precarious.

8) Our recommendations for securing a termination (and avoiding an abrupt termination)

8.1. Anticipate: map out “at-risk” relationships

Before deciding to end a relationship, identify those that are:

• long-standing;
• high in business volume;
• exclusive;
• or marked by potential economic dependence.

This mapping exercise helps reduce “reflex” terminations — and therefore legal risk.

8.2. Notify properly: clear and usable written notice

Your notification should ideally be written, dated and unambiguous, specify the effective termination date and the length of the notice period, and, where appropriate, provide for transition arrangements (progressive reduction, transfer, stock buy-back, etc.).

8.3. Perform the notice period in good faith: do not “empty” the relationship

During the notice period, the previous conditions should in principle be maintained, except for non-substantial and justified adjustments.

Particular caution is required if you modify pricing, supply channels, exclusivity, or volumes.

Where a substantial and adverse change is imposed, case law may attribute the partial termination to the party that imposed the change.

8.4. Securing the relationship contractually (without believing in a “magic clause”)

Some useful tools include:

• realistic duration and notice clauses, consistent with industry practice;
• clauses governing termination for serious breach;
• exit clauses, such as stock buy-back, transfer of files/data, or service continuity;
• a post-termination settlement agreement to resolve a dispute over compensation, where the context allows.