30 October 2002

Christian Rothhahn

In a decision given on 15 May 2001, the French Supreme Court, “Cour de cassation”, refused to enforce a liability disclaimer clause inserted in an IT provider agreement.

In this matter an IT provider, Cegid, whose main activity is software publishing, entered into an agreement with Samino, a clothing wholesaler. The purpose of the agreement was the supply of an IT system mainly composed of order management software.

After delivery of the system, Samino noticed a limitation in the functionality of the software: it was not possible to manage more than 999 items in the same size and colour which, given its activity as a wholesaler, was crippling.

Samino sued Cegid and obtained the cancellation of the agreement. Cegid was ordered by the Court of Appeal to pay damages to Samino. The Supreme Court confirmed this decision.

Samino’s position was that Cegid was in breach of its obligations to follow good industry practice in underestimating the real needs of Samino and consequently in supplying to Samino a system that did not meet its needs. It should be noted that, before the agreement was entered into, Samino did not draw Cegid’s attention to its particular needs in terms of items to manage.

Two clauses of the agreement excluded the liability of Cegid with the effect that Cegid (on the face of the contract) was under no obligation to advise Samino with regard to the sufficiency of the software’s functionality: pursuant to these clauses Samino acknowledged that it had been fully informed and released Cegid from any liability on this issue.

Under French law, liability limitation/exclusion clauses are valid if concluded between two professionals, which was the case in this matter. However, clauses excluding hidden defects warranties are only valid under French law in agreements concluded between two professionals of the same speciality.

Nevertheless, the Court followed a quite unusual reasoning:

  • it expressly considered the clause as a non warranty clause and not as a liability exclusion clause,
  • it noted further that even though the agreement had been concluded between two professionals, they were not of the same speciality, one being an IT provider and the other a clothing wholesaler,
  • as a consequence, the Court decided the so-called “non-warranty” clause was not enforceable against Samino,
  • then, the Court decided that the fact Cegid did not fulfil its advice obligations lead to the supply to Samino of a solution which did not meet its requirements, therefore the Agreement should be cancelled.

The advice obligation is usually not considered as a warranty under French law. The Supreme Court nevertheless did not hesitate to qualify it as a warranty, without giving any explanation as to why it did so.

Concerning the breach of the advice obligation, the decision seems to be quite strict given the facts:

  • Samino did not draw Cegid’s attention to the specific requirement,
  • Samino had the opportunity to verify the adequacy of the proposed software before the agreement was signed (they were provided with a detailed documentation and a pre-sale presentation of the software).

In this matter, the Court considered that the supplier had to fulfil its advice obligation in a more active way. Insofar as Cegid was aware of Samino’s activity as a wholesaler, its attention had been sufficiently drawn to the specific needs of Samino for the Court to conclude that Cegid should have given sufficient advice and warning in order to deliver a solution adapted to these needs.

In this matter the Court seemed to favour a solution driven by equity instead of legal reasoning. This decision is not representative of the current state of French law but reminds us that a court can sometimes override exclusion clauses where to allow the clause would be unfair.