Condition precedent: the party who causes it to fail does not always lose

Under Article 1304-3 of the Civil Code, a condition precedent is deemed fulfilled if the party who had an interest in its fulfillment prevented it from occurring.

In this case, a company promised to sell a hotel subject to a condition precedent: that the lessors agree to the early exercise of the purchase option it held on the property.

A few days before the deadline, the buyer changed their mind. Contrary to their initial plan, they no longer wanted to use their own funds and requested the inclusion of a loan condition precedent.

The seller refused to change the terms of the offer, the transaction fell through, and the condition regarding the lease failed.

However, the contract stipulated that if one party refused to sign once the conditions precedent had been met, the other party could withdraw from the sale and claim a contractual penalty.

The seller then demanded payment of the penalty clause. They argued that the fulfillment of the condition precedent had been made impossible by the buyer and should therefore be deemed fulfilled.

The Court of Cassation rejected this argument and upheld its previous case law (Court of Cassation, 1st Civil Chamber, November 23, 1983, No. 82-14.827).

While the Court acknowledged that the buyer was indeed responsible for the failure, the buyer was the creditor of the obligation to sell. The legal fiction established by the Civil Code only penalizes the defaulting debtor (in this case, the seller).

The seller's claim was dismissed.