Price Apportionment Clause: When a Buyer's Declaration Does Not Bind the Seller

Imagine: you own a building in Rezé, near Nantes. You sign a preliminary sale agreement with a couple of buyers. Everything seems clear: the price is fixed, the property identified. But when it's time to go to the notary, the buyers present a deed containing a price apportionment clause that you never accepted. What to do? Accept under pressure? Refuse and risk cancellation of the sale?

This question was decided by the Court of Cassation on 21 March 1990 (appeal no. 88-19.924) in a case opposing sellers and buyers about to complete the sale. The High Court rendered a decision that directly concerns all property actors, from owners in Saint-Herblain to developers in Nantes.

In essence, the Court held that a price apportionment clause contained in the buyers' declarations, but not provided for in the preliminary agreement, only binds the buyers and is unenforceable against the seller. This means that the seller can legitimately refuse to sign a deed containing such a clause, without this affecting the validity of the sale. But then, what are the rights and obligations of each party? Analysis.

The facts: a story that happens every day

Mr and Mrs Y... are owners of a building in Nantes. They sign a preliminary sale agreement with Mrs Z... for an amount of 500,000 francs (about €76,000). The preliminary agreement provides for the usual conditions: price, description of the property, deadlines. Nothing about a price apportionment. The parties agree to complete the sale by notarial deed before a notary.

But when the signing day arrives, Mrs Z... does not appear. The Y... spouses send her a summons to appear. In response, Mrs Z... demands that the notarial deed contain a price apportionment clause, i.e., a breakdown of the total price between the building and the land, for example 70% for the building and 30% for the land. This clause was not in the preliminary agreement. Mrs Z... justifies this requirement for tax reasons: she wants to depreciate the building and reduce her taxes.

The sellers refuse. For them, the contract is already concluded: the price and the property are determined, the apportionment is not a condition of the sale. They sue Mrs Z... to have the sale declared and to obtain damages. The Tribunal de Grande Instance of Nantes rules in their favour. Mrs Z... appeals, but the Rennes Court of Appeal upholds the judgment. It considers that the apportionment clause had not been agreed and that Mrs Z... cannot impose it unilaterally.

Mrs Z... appeals to the Court of Cassation. She argues that the apportionment clause is essential to the agreement on the price and that its absence vitiates consent. The Court of Cassation dismisses her appeal. It holds that the apportionment clause, appearing among the buyers' declarations in the draft deed, only binds them and is unenforceable against the seller. Consequently, it has no bearing on the validity of the agreement on the property and the price. The sale is perfect, and Mrs Z... must perform it.

The reasoning of the court — analysed

The Court of Cassation relies on Articles 1583 and 1589 of the Civil Code. Article 1583 provides that the sale is perfect as soon as the parties agree on the property and the price, even if the property has not yet been delivered nor the price paid. Article 1589 specifies that a promise of sale is equivalent to a sale when there is mutual consent on the property and the price. In short, upon signing the preliminary agreement, if all essential elements are fixed, the sale is already legally concluded. The completion by notarial deed is merely a formality.

In this case, the judges find that the preliminary agreement contained all essential elements: the building was identified, the price was determined (500,000 francs). The price apportionment clause, which consists of breaking down this price between land and building, is not an essential element of the sale contract. It relates to tax or accounting considerations specific to the buyer. The seller does not have to worry about it, unless he has expressly accepted it.

The lower courts (tribunal and court of appeal) had already held that Mrs Z... could not impose this clause on the seller. The Court of Cassation confirms: the apportionment clause appears in the "buyers' declarations" — it is a unilateral declaration, not a negotiated clause. It only binds the person making it, in this case the buyer. The seller can ignore it. Consequently, the seller's refusal to sign a deed containing this clause is not a refusal to sell, but a refusal to add an unagreed condition. The sale remains perfect.

The Court rejects Mrs Z...'s argument that the clause is necessary for the determination of the price. It recalls that the price is a whole, and its apportionment does not affect its total amount. Moreover, the Court notes that in the draft deed, the clause was presented as a simple declaration of the buyers, without mention of the seller's agreement. This reinforces the idea that it is not an element of the contract.

This decision is part of consistent case law: price apportionment is an ancillary matter, unless the parties make it a condition of the sale. It protects the seller against unilateral modifications of the contract, but may destabilise the buyer who had structured his financing or tax affairs on this basis. Moral: if you want an apportionment clause, negotiate it in the preliminary agreement, not at the time of signing the notarial deed.

What this changes for you — concretely

For the seller: you are protected. If the buyer attempts to introduce a price apportionment clause in the notarial deed without your agreement, you can refuse to sign without risking being considered in default. The sale remains valid on the basis of the preliminary agreement. However, if you accept the clause, it binds you. Be vigilant: an apportionment may have tax consequences for you as well (e.g., capital gains on land different from that on the building).

For the buyer: you cannot impose a price apportionment clause on the seller if it was not provided for in the preliminary agreement. If you need this clause to depreciate the property or for tax reasons, you must include it in the promise of sale. Otherwise, the seller can legitimately refuse. In a recent case in Saint-Herblain, a buyer had planned financing based on an 80% apportionment for the building. The seller refused, and the buyer had to renegotiate his loan, losing three months and €2,000 in fees. Lesson: anticipate.

For the notary: you must verify that the notarial deed conforms to the preliminary agreement. If a new clause appears, you must draw the parties' attention and obtain their express agreement. If the seller refuses, you cannot impose the clause. You can advise the buyer to sign a separate unilateral declaration deed, but this will not have the same legal force.

For the property professional (agent, developer): this decision reminds you of the importance of drafting comprehensive preliminary agreements. If the buyer wants an apportionment, it must be set out in black and white in the offer or preliminary agreement. Do not leave room for improvisation at the notarial signing.

Four tips to avoid this type of dispute

• Negotiate all clauses in the preliminary agreement. If the price apportionment is important to you (buyer), insist that it be mentioned in the promise of sale. Do not rely on a late introduction: the seller can refuse, and you will have no recourse.
• Have a precise clause drafted. If you are a seller and you accept an apportionment, clearly define the percentages and the calculation method. Avoid vague phrases like "according to the real market value". An example: "The sale price is apportioned as 70% for the building and 30% for the land, this breakdown being agreed between the parties."
• Consult a lawyer or notary before signing. A professional can alert you to the tax implications of the apportionment. For example, an apportionment too favourable to the building may lead to a tax reassessment if it does not correspond to reality. In Rezé, a seller had to pay €5,000 in back tax on capital gains after accepting an apportionment without advice.
• In case of dispute, do not block the sale. If the buyer refuses to sign without the clause, you can sue for specific performance of the sale (Article 1583 of the Civil Code). The judges will rule in your favour, as in this case. But it is better to avoid litigation: it costs on average €3,000 to €5,000 in lawyer and court fees.

Further reading: related case law and developments

The 1990 decision is part of a consistent line of case law. Already, in a judgment of 13 February 1985 (appeal no. 83-15.247), the Court of Cassation had held that a price apportionment clause, when not agreed between the parties, has no effect on the sale. More recently, in a judgment of 8 July 2009 (appeal no. 08-17.801), the Court specified that the apportionment may be ordered by the judge in case of a dispute over the breakdown of the price between land and building, but only if the parties have requested it. The trend is therefore clear: apportionment is not an essential element of the sale contract, unless the parties expressly intend it.

However, note: since 1990, notarial practice has evolved. Many notarial deeds now include an apportionment clause, even if it was not in the preliminary agreement, but with the seller's agreement. Notaries are more vigilant and obtain written consent. The case law remains relevant, but disputes are rarer because professionals anticipate. For the future, we can expect that the courts will continue to protect the seller against unilateral additions, while recognising contractual freedom if both parties consent.

In practice: what to do

FAQ: Frequently asked questions

Can I impose a price apportionment clause in the notarial deed if it was not in the preliminary agreement?
No. The seller can refuse, and the sale remains valid without this clause. You must have negotiated it in advance.

Can the seller refuse to sign the notarial deed if the buyer insists on adding an apportionment clause?
Yes, without risk to him. The seller's refusal is not an abusive breakdown of negotiations, because the clause was not agreed.

What are the tax risks of an apportionment clause for the seller?
The apportionment can affect the calculation of capital gains tax on property. If the land portion is undervalued, the seller may pay more tax on the gain. Consult a chartered accountant.

What if the buyer refuses to sign without the clause?
You can put him on notice to complete the sale, then sue him to have the sale declared and to obtain damages. The procedure can take 6 to 12 months.

Can a separate unilateral declaration deed by the buyer replace the clause in the deed?
Yes, but it only binds the buyer. The seller does not have to sign it. This can be used for the buyer's accounting, but does not have the same force as a contractual clause.

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