Revocation of mandate in France : the complete guide for SME managers and CEOs

As an SME manager, you regularly sign mandates: commercial agent mandate, management mandate, bank mandate, mandate given to a lawyer or an intermediary. La Revocation of mandate is then a strategic lever, but also a risky field if it is poorly anticipated or poorly executed.

The objective of this article is to give you a clear, practical and operational vision of mandate revocation: in which cases you can revoke “ad nutum”, when a Just reason is required, how to avoid being classified as an abusive revocation, and what clauses should be provided to protect you in advance.

Revocation of mandate: definitions and challenges for SME managers

What is the revocation of a mandate?

In French law, the revocation of a mandate is the act by which the mandator unilaterally terminates the powers he had granted to his mandatary. Concretely, you remove the intermediary's mission (agent, manager, lawyer, etc.) and he is no longer authorized to act in your name and on your behalf.

Article 2004 of the Civil Code enshrines a strong principle: the mandator can revoke the mandate “whenever he sees fit”, which is the basis of the famous Revocation ad nutum. However, this principle has important limitations, especially in the presence of a mandate of common interest or when revocation degenerates into abuse (brutality, unfair circumstances, misuse of purpose, etc.).

Practical challenges for an SME

For an SME, the revocation of a mandate is not just a theoretical question: it has a very direct impact on trade flows, customer relationships and sometimes the reputation of the company.

Some typical situations:

• Revoke a commercial agent exclusive that no longer performs, without triggering massive compensation litigation.
• Ending the mandate of a debt collection office whose methods are harmful to your image.
• Replace a solicitor Or a guidance during the proceedings, without disrupting the litigation.
• Remove a Bank mandate (e.g. management under mandate) to regain control of the financial strategy.

In all these cases, a poorly prepared revocation (lack of notice, lack of justification, non-compliance with contractual terms) can generate claims for damages, or even operational paralysis.

Revocation of mandate: general legal framework

The principle: revocation of the mandate ad nutum (article 2004 of the Civil Code)

The common law of mandate sets out a principle that is very favorable to the principal: revocation Ad Nutum. The Latin expression “ad nutum” literally means “at the nod of the head” and refers to the power to terminate the mandate at any time, without notice, without reason, without justification and, in principle, without compensation.

In concrete terms, this means that:

• The mandate may be terminated before it expires, even if it was concluded for a fixed period of time.
• No fault on the part of the mandatary is required.
• The principal does not have to give reasons for his decision, unless the contract expressly provides for the obligation to justify the revocation.
• The mandate may be modified partially (for example, withdrawal of an exclusivity) without the agreement of the mandatary, the latter may then refuse to continue the mandate thus arranged.

A recent judgment of the Court of Cassation recalled that the ad nutum revocation of a mandate is a specific rule that derogates from the ordinary law of contracts of indefinite duration, which in principle require reasonable notice. The High Court censured trial judges who had required notice where article 2004 allows for immediate unilateral termination without reason.

The limits of the principle: abuse of law and responsibility

The “ad nutum” nature of revocation does not mean that everything is allowed. The implementation of this faculty may degenerate into abuse of rights, for example in case of:

• Of obvious brutality (sudden rupture when the mandatary had made heavy and specific investments).
• In bad faith (revoke to appropriate a clientele or a business negotiated by the agent).
• Misuse of purpose (revoke simply to evict a mandatary in favor of a third party, on the eve of the conclusion of an important contract).

In these cases, the courts may retain a abusive revocation and order the principal to pay damages, not for having revoked (which is in itself lawful), but for the manner in which the revocation was carried out.

Concrete example: an SME entrusts an agent with an exclusive mandate to develop a portfolio of customers in a new region. The agent alone finances a local team, premises and marketing campaigns. Six months later, while the customer base was growing, the SME abruptly revoked the mandate, without notice, and handed over the area to an internal commercial subsidiary. Such a situation can be described as an abusive revocation, with compensation for the damage of the agent.

Revocation of mandate and specific forms of mandate

Revocation of the mandate of common interest

The mandate of common interest is a particular category of mandate in which the mandatary has a specific interest in maintaining the mandate, distinct from remuneration alone (for example, building and developing a client base from which he also benefits). This type of mandate is common in distribution, commercial agency or commercial representation.

In the presence of a mandate of common interest, case law has been consistent since the end of the 19th century: revocation ad nutum is no longer allowed. The revocation is then subject to:

• Either at mutual consent of the parties.
• Or to the existence of a legitimate cause recognized by the judge (serious misconduct, repeated breaches, objectively justified loss of confidence).
• Either Aux terms and conditions provided for in the contract (for example, 6 or 12 months' notice, limitatively enumerated reasons/

Recent decisions confirm that in the event of a mandate of common interest, a revocation without legitimate cause and without respect for contractual stipulations may give rise to significant damages. The ratio legis is simple: when the mandatary has invested in the relationship (clientele, structure, image) and is a co-beneficiary of the mandate, the principal can no longer unplug it unilaterally without reason.

Example: an SME entrusts an exclusive distributor with a mandate to sell its products in a territory, with the obligation to develop the brand and authorization to transfer customers at the end of the contract. Case law tends to qualify this situation as a mandate of common interest, making revocation much more comprehensive and often subject to proof of just cause.

Revocation ad nutum and for just cause of corporate officers

In company law, we find the distinction revocation ad nutum/revocation for just cause About corporate officers (manager of SARL, president of SAS, director or managing director of SA, etc.).

• In some types of companies, revocation is in principle Ad Nutum (especially for some SA managers), which means that the Assembly can dismiss them at any time, without cause.
• In others, or as a result of the statutes, revocation presupposes a Just reason (poor management, behavior compromising social interests, serious disagreements paralyzing the functioning of society).

The Court of Cassation regularly recalls that it is necessary to analyze the corporate form to determine whether the dismissal of a manager is taking place ad nutum or for just cause, each social mandate having to be assessed in light of its own regime. Even when it is ad nutum, revocation must not be abusive (implemented in vexatious, brutal or unfair conditions), otherwise it will result in the right to compensation.

For an SME manager, this has a double impact:

• As Principal, you can dismiss certain directors or representatives under more or less flexible conditions depending on the structure (SARL, SAS, SA).
• As Director dismissed, you can contest an abusive revocation or a revocation that occurred without respecting the statutes or the convening/information rules.

Practical modalities for the revocation of a mandate

Form of revocation: written, tacit, specific formalism

In principle, the revocation of a mandate does not require any specific form: it can be Express or unspoken.

• Example of express revocation: registered letter withdrawing the agent's mission, unambiguous e-mail, general meeting resolution ending the corporate mandate.
• Example of tacit revocation: the principal himself carries out the act for which he had commissioned a third party, or he appoints a new mandatary for the same mission, in a manner incompatible with the initial mandate.

However, some mandates are subject to a particular formalism, which may influence the revocation:

• Mandate given to a lawyer by authentic instrument or according to rules of representation: the revocation must sometimes respect the same form (notarial act, notification to the court, constitution of a new lawyer) to take effect.
• Mandates governed by specific texts (real estate intermediaries, certain bank mandates, etc.): the law may require writing, mandatory information or a notification formalism for revocation.

The authors point out that, where the mandate itself required formalism for its validity, revocation can nevertheless be carried out freely, unless otherwise provided by law or specific contractual stipulation. In practice, however, it is strongly recommended to opt for a written, clear and dated revocation, to avoid any dispute about the end date of the mandatary's powers.

Effects of revocation: end of powers and security of third parties

Revocation puts an end, for the future, to the powers of the mandatary: the mandatary can no longer engage the mandatary. Revocation does not have retroactive effect: acts regularly performed prior to revocation remain valid.

Two issues need to attract the attention of the manager:

• The management of Acts in progress : contracts in the process of being signed, negotiations advanced, legal proceedings in progress. It should be immediately clarified who is taking over the file and third parties should be notified if necessary.
• The safety of bona fide third party : as long as the revocation is not brought to the attention of third parties, they may continue to consider the mandatary as authorized to act. In the event of litigation, the question will be when the revocation could be brought against third parties.

In the case of mandatory representation by lawyer, the Council of State ruled that the dismissal of the lawyer has an effect on the conduct of the proceedings only when another lawyer is appointed to replace him, where appropriate after an invitation sent to the party by the court. In other words, dismissing a lawyer without immediately replacing him with new advice does not, in itself, suspend the course of the proceedings.

Example: an SME defendant in summary proceedings dismisses its lawyer the day before the hearing in the hope of saving time. The court considers that the revocation does not end the lawyer's obligations until new counsel is formed, and the hearing is being held. The “delay” strategy fails and can even worsen the risk for SMEs.

Contractual clauses on the revocation of a mandate: how to secure your SME?

Examples of revocation clauses in a mandate

In most commercial or management mandates, it is possible (and often recommended) to contractualize the methods of revocation: notice, reasons, compensation, compensation, adversarial procedure, etc. The authors and practitioners emphasize that these clauses make it possible to regulate the freedom of the principal while securing the agent's investment.

Example of a clause (simple mandate, revocable ad nutum, reasonable notice):

“This mandate is concluded for an indefinite period of time.
Each party may terminate it at any time, by registered letter with acknowledgement of receipt, subject to three (3) months' notice.
The revocation of the mandate by the Principal will not require the justification of a particular reason and will not entitle the Contractor to any compensation of any kind whatsoever, subject to possible compensation in the event of gross negligence or abusive revocation.”

Example of a clause (mandate with characteristics of common interest):

“Taking into account the specific investments made by the Trustee for the development of the client and brand of the Principal, the Parties recognize that this mandate is concluded in their common interest.
Consequently, the Principal may only revoke the mandate before its end in the event of a serious and repeated breach by the Agent of its contractual obligations, duly noted after a formal notice remained unsuccessful for a period of thirty (30) days, or for any legitimate cause recognized by a competent court.
Any revocation occurring in violation of the provisions of this article will entitle the Contractor to full compensation for the damage suffered.”

These clauses must obviously be adapted to each situation (type of mandate, sector, duration, planned investments) and articulated with mandatory rules (for example, in terms of commercial agency or distribution).

Supervising revocation to limit the risk of litigation

For an SME manager, the objective is not to deprive himself of the right to dismiss, but to structuring to limit the risk of future disputes.

Some best practices:

• Specify, in the contract, whether the mandate is purely revocable ad nutum or if it has the characteristics of a mandate of common interest.
• Expect a Advance notice adapted to the investments envisaged by the mandatary, with possibly an increasing duration depending on seniority.
• Define the Fair reasons revocation (objectively observed insufficient results, repeated breaches, damage to brand image, loss of seriously established trust).
• Organize a adversarial procedure (formal notice, opportunity to respond, clarification meeting) before any final revocation.
• Anticipate the resumption of files (transfer of customer files, contractual documents, archives) so as not to disorganize the activity.

In case of doubt, it is strongly recommended that you have your mandate models and revocation clauses audited by a lawyer to ensure their compatibility with the most recent case law.

Summary table: revocation ad nutum, mandate of common interest, just cause

FAQ — Revocation of mandate: frequently asked questions from SME managers

What is the revocation of a mandate?

La Revocation of a mandate is the act by which the principal terminates the powers he had given to the mandatary to act in his name and on his behalf. Legally, this is a unilateral breach of the mandate contract by the principal, which results in the cessation of the mandatary's functions for the future.

In the practice of an SME, this may correspond to the decision to end the mandate of a commercial agent, intermediary, manager or lawyer, in order to regain control of a file or to entrust it to another service provider. The revocation may be express (letter, e-mail, meeting resolution) or result from acts incompatible with the maintenance of the mandate (appointment of a new mandatary for the same mission).

What does it mean to revoke a warrant?

Revoking a warrant means Formally withdraw the mission entrusted to the mandatary, so that he can no longer validly bind the company for the acts falling within this mandate. As of the revocation, the acts performed by the former mandatary on behalf of the company, when he no longer has the powers, may be contested against informed third parties.

For the manager, revoking a mandate implies anticipating the management of the transition period: appointing a new mandatary, informing the partners concerned, organizing the resumption of files. It is also important to check the conditions provided for in the contract (notice, reasons, compensation) to avoid opening a dispute with the former agent.

What is the difference between objection and revocation?

In practice, the revocation And theopposition do not have the same function:

• Revocation is an act internally by which the mandator terminates the mandate and withdraws the powers of the mandatary.
• Opposition is often an act turned to third parties (bank, assigned debtor, jurisdiction, etc.) to prevent the execution of an act or payment, or to make the revocation enforceable against such third parties.

For example, when a company revokes a bank management mandate, it informs the bank so that it no longer executes instructions given by the former agent; this information is similar to an opposition to the future actions of this agent with the bank. Conversely, as long as the bank is not aware of the revocation, it can be protected if it executes orders given by the apparent mandatary, within certain limits linked to good faith.

What is a revocation request?

One Request for revocation can target several realities, depending on the context:

• In a purely contractual framework, the principal notifies the mandatary of his decision to end the mandate, in accordance with the required formality (registered letter, notice, etc.).
• In a judicial or corporate context, it may be a request addressed to a court or to an assembly to obtain the dismissal of a corporate officer, director or representative, when the texts require a collective decision or intervention by the judge.

For an SME, the revocation request must be written carefully: recall the mandate contract, the legal basis, the alleged facts if applicable, the applicable clauses and the implementation schedule (notice, effective date). A clumsy or aggressive formulation, unsupported, may then facilitate an action by the mandatary for abusive revocation.

Ad nutum revocation: how does it work in practice?

La Revocation ad nutum is the option for the principal to revoke the mandate at any time, without having to justify reasons, without notice and, in principle, without compensation. It derives directly from article 2004 of the Civil Code for the common law mandate and constitutes a rule specific to this contract.

In concrete terms, an SME that benefits from an ad nutum mandate can:

• Terminate the mandate instantly, by simple clear notification to the mandatary.
• Do not give reasons for your decision, except for a more demanding contractual clause.
• Refuse any compensation other than those provided for in the contract or resulting from possible abuse (for example, sudden termination while the SME was benefiting from a specific investment by the agent).

However, even in the presence of ad nutum revocability, judges control the way in which the revocation is implemented: a revocation carried out under vexatious, unfair or brutally disorganizing conditions may be sanctioned in the field of civil liability, with damages awarded to the mandatary.

Revocation of the mandate of common interest: what are the particularities?

La Revocation of the mandate of common interest is much more comprehensive than that of the ordinary mandate. Jurisprudence requires a legitimate cause of revocation, unless both parties agree or specific contractual stipulations.

In practice, this means that:

• The principal cannot freely revoke the mandate without serious reason, when the mandatary has a specific interest in maintaining the mandate (customers, specific investments, co-promotion of the brand).
• The legitimate cause may lie in serious breaches, significant shortcomings, an objectively justified loss of confidence or a profound change in circumstances that make it impossible to continue with the mandate.
• The contract may organize, in detail, the reasons for the revocation, the prior procedure (formal notice, cure period) and the financial consequences.

A revocation taking place without legitimate cause, or in violation of the provisions provided for, exposes the SME to potentially significant compensation, in particular in the reimbursement of investments and in compensation for the loss of future margin.

Revocation ad nutum and for good reason: how to articulate the two concepts?

The expressions “revocation ad nutum” and “revocation for just cause” refer to two distinct regimes:

• Ad nutum revocation: the mandate can be revoked at any time, without reason, by the sole will of the principal.
• Revocation for just cause: revocation is subject to the existence of a serious, objectively appreciable reason (management error, serious breaches, paralyzing disagreement), otherwise it is irregular or abusive.

In some areas (for example, for corporate officers), positive law combines these regimes according to the corporate form, the applicable text and the statutes: some directors can be revoked ad nutum, while others can only be revoked for just cause, under the possible control of the judge.

The practical joint is as follows:

• When the law or contract provides for an ad nutum revocation, the manager benefits from great flexibility, provided that he does not commit abuse.
• When the law, case law or the qualification of a mandate of common interest require just cause, the SME must document the breaches of the mandatary and respect a fair procedure, otherwise it is liable to a conviction for unjust or abusive dismissal.

Lack of mandate: what are the effects on revocation?

THEabsence of mandate refers to two different situations:

• Lack of a valid mandate (null or non-existent mandate): in reality, the mandatary never had powers to act on behalf of the mandator. The question of revocation is then theoretical, but there is the question of the validation of past acts, the responsibility of the “intermediary” and the protection of bona fide third parties.
• Apparent mandate: a third party could reasonably have believed in the existence of a mandate, due to the attitude of the alleged mandator. In this case, the company may be bound by the actions of the intermediary, under the theory of appearance, despite the absence of a real mandate.

For an SME manager, the absence of a mandate is less a problem of revocation than a problem of Clarification of powers : it is essential to accurately document the delegations and mandates given (or not) to collaborators and partners, to prevent a third party from being able to take advantage of an apparent mandate. When removing powers from an employee, it is often prudent to inform the main partners concerned (banks, key customers, strategic suppliers) in writing, so that the “revocation” is unquestionable in the future.

The material of Revocation of mandate is, by nature, technical and largely shaped by case law (mandate of common interest, abusive revocation, ad nutum dismissal of corporate officers, procedural effects of the dismissal of a lawyer). It is part of a highly regulated legal environment, in constant evolution, where each situation (social form, type of mandate, contractual clauses, sector of activity) calls for a tailor-made analysis. The personalized advice of a lawyer is therefore essential to anticipate the risks specific to your SME, draft adapted revocation clauses and secure the concrete implementation of a revocation of mandate, whether ad nutum or subject to just cause.

Article written by Guillaume Leclerc, lawyer in commercial contracts and commercial litigation in Paris.

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