Territorial jurisdiction of courts: when a promise to sell is not a services contract

Imagine: you own a flat in Montpellier, near Place de la Comédie, and you sign a preliminary contract (a promise to sell) with a buyer located in Mauguio. Everything goes well until the buyer wrongfully withdraws. You want to sue them to obtain payment of the penalty clause (a sum of money provided for in case of breach of contract). But before which court should you bring the claim? In Montpellier, where the property is located? In Mauguio, where the buyer lives? Or elsewhere? This seemingly technical question can have disastrous consequences: a mistake as to the court can lead to your claim being dismissed, forcing you to start again, with additional costs and delays. The decision of the French Supreme Court of 27 June 2019 (n° 18-19.466) provides a clear answer: the territorial jurisdiction option provided for in Article 46, paragraph 2, of the Code of Civil Procedure applies only to contracts involving the delivery of a thing or the performance of a service. However, a promise to sell does not fall into this category. In clear terms, you cannot choose the court of the place of delivery or performance of services, but you must turn to the court of the defendant (the person you are suing) or the place where the property is situated (for real actions relating to immovable property). This decision, which directly concerns property professionals and individuals, deserves a detailed analysis. So, how to find your way around? And above all, how to avoid a judicial misstep?

The facts: a story like those that happen every day

The case begins with a unilateral promise to sell (a 'preliminary contract') concerning an immovable property located in Mauguio, a commune in the Hérault department near Montpellier. The seller, a company named Mas Gestion, undertakes to sell the property to private individuals, Mr and Mrs D..., and to a company Home Passion. But the sale does not go through. The seller considers that the buyers refused to sign the notarial deed (the final deed before the notary) without valid reason, thereby triggering the penalty clause provided for in the preliminary contract: a sum of money by way of liquidated damages (a fixed indemnity). Mas Gestion then decides to sue the buyers before the Tribunal de grande instance of Saintes, a town located within the jurisdiction (the area of competence) of that court, on the grounds that the penalty clause was to be performed in Saintes (perhaps because the seller's registered office or a place of payment was located there). The buyers immediately challenge the jurisdiction of the Saintes court. According to them, the competent court is the court of the place where the property is located, i.e., Montpellier or Mauguio. The seller retorts that Article 46 of the Code of Civil Procedure allows the claimant (the person suing) to choose, in contractual matters, between the court of the defendant and that of the place of delivery of the thing or performance of the service. It argues that the preliminary contract is a contract, and that the penalty clause constitutes a service. But the French Supreme Court does not follow this reasoning. It reminds that the territorial jurisdiction option in Article 46, paragraph 2, only concerns contracts involving the delivery of a thing or the performance of a service. However, a preliminary contract, even if it is a contract, does not have as its object the delivery of a thing or a service; its object is the transfer of ownership of an immovable property. Consequently, this option is not available. The competent court is the court of the place where the property is located (territorial jurisdiction in property matters) or that of the defendants' domicile. The judgment of the Court of Appeal, which had confirmed the jurisdiction of the Saintes court, is therefore quashed (annulled).

The reasoning of the court — dissected

To understand this decision, one must look at Article 46 of the Code of Civil Procedure. This provision provides, in contractual matters, several options for the claimant: they can bring the case before the court of the place where the defendant resides (general principle), or, if the contract provides for a delivery of a thing or a service, the court of the place of that delivery or performance. The French Supreme Court interprets this option strictly: it only benefits contracts that physically involve a delivery or a service. For example, a contract for the sale of a chattel (delivery of a thing) or a services contract (plumbing, IT) falls within this framework. But a promise to sell an immovable property, even if it can be qualified as a contract, does not entail delivery of a thing within the meaning of Article 46: the immovable property is already located in a specific place, and the main obligation is to transfer ownership, not to deliver an object. The Court also clarifies that the penalty clause (sum due in case of non-performance) does not change the nature of the contract: it does not make it a service. In other words, one cannot 'choose' a court based on the performance of a penalty clause. This reasoning is in line with constant case law: the French Supreme Court protects litigants against 'forum shopping' (seeking the most favourable court) by limiting the options of jurisdiction. However, note: this decision only concerns promises to sell, not final sales. In a final immovable property sale, if the contract provides for delivery (e.g., handing over the keys), the option could be available. But in practice, delivery is often linked to handing over the keys, which is ancillary. What few people know is that the French Supreme Court has already had occasion to rule on mixed contracts (sale + services): in that case, it examines the main object of the contract. If the main object is the sale of an immovable property, the option in Article 46 does not apply, even if services (such as renovation work) are included. In this case, the preliminary contract only concerned the sale of the property, without substantial service.

What this changes for you — concretely

This decision has immediate practical implications for several profiles. For the owner-seller: if you need to sue a buyer who withdraws, you cannot choose the court of the place where the penalty clause would be payable (e.g., your notary's office). You must bring the claim before the court of the buyer's domicile, or before the court of the place where the property is located (property jurisdiction). For example, if you sell a property in Mauguio and the buyer lives in Nîmes, you will have to bring the case before the court of Nîmes (or that of Montpellier for the property). If you make a mistake, your action will be declared inadmissible, and you will lose time and money. For the buyer: if you are sued for non-performance of a preliminary contract, you can challenge the jurisdiction of the court chosen by the seller if it does not comply with these rules. This can allow you to gain time or have the proceedings annulled. For property professionals (agents, notaries, developers): when drafting preliminary contracts, it is crucial to specify the territorial jurisdiction in case of dispute. A jurisdiction clause (which designates a specific court) is possible, provided it is accepted by both parties and is not abusive. undefined, I have come across cases where clauses assigned jurisdiction to a distant court, which was held to be abusive by the judges. If you are in this situation, you must check that the clause complies with Article 48 of the Code of Civil Procedure (it must be stipulated in a very prominent manner). Concrete example: a developer in Montpellier includes in its preliminary contracts a clause assigning jurisdiction to the Commercial Court of Paris. This clause could be annulled if it disadvantages the non-professional buyer. In summary, remember the rule: for a dispute relating to a preliminary contract for the sale of immovable property, the competent court is the court of the place of the property or of the defendant's domicile. The time limits for challenging jurisdiction are 15 days from service of the claim (subject to exceptions). The amounts at stake can be high: a penalty clause often represents 10% of the sale price, i.e., tens of thousands of euros.

Four tips to avoid this type of dispute

• 1. Check territorial jurisdiction before bringing a claim: Before starting legal proceedings, consult a lawyer to determine the competent court. A mistake can be costly: inadmissibility of your claim and unnecessary procedural costs.
• 2. Include a clear jurisdiction clause in the preliminary contract: If you are a seller or a professional, provide for a clause designating the court of the place of the property or another court acceptable to both parties. Ensure it is written in prominent characters and signed by both parties.
• 3. Keep all documents relating to the performance of the contract: In case of dispute, you will need to prove that the contract was signed, that the penalty clause was provided for, etc. Keep the preliminary contract, email exchanges, registered letters.
• 4. Anticipate limitation periods: The action for payment of the penalty clause is subject to a 5-year limitation period (general law period). Do not delay in acting. If you are in litigation, seek advice promptly.

In-depth: related case law and developments

This decision is part of a line of French Supreme Court judgments that limit the application of Article 46 to consumer contracts or contracts involving a tangible service. For example, in a judgment of 13 December 2017 (n° 16-25.088), the Court had already held that the jurisdiction option did not apply to a contract for the sale of a building to be constructed, because the main obligation is the transfer of ownership, not a service. Similarly, a judgment of 6 February 2019 (n° 17-28.146) excluded the option for a lease-purchase contract (lease with option to purchase). The trend is therefore clear: the French Supreme Court protects the defendant by preventing the claimant from choosing a distant court, which could complicate the defendant's task. For the future, it is likely that this case law will extend to other property contracts such as reservations of property or promises to purchase. Professionals must therefore be vigilant and prefer jurisdiction clauses that comply with the law. On the other hand, for construction or renovation contracts (services), the option remains available, which can create difficulties in distinguishing mixed contracts. In practice, if a contract relates both to the sale of an immovable property and to works, the main object will have to be analysed.

Summary and next steps

FAQ:

1. Can I sue the buyer before the court of my choice if the preliminary contract provides for a penalty clause payable at my home? No, the penalty clause does not transform the contract into a service. The competent court is the court of the place of the property or of the defendant's domicile.
2. What should I do if I have already brought a claim before an incompetent court? You can raise the lack of jurisdiction before any defence on the merits. If the court declares itself incompetent, you can re-claim before the correct court, but you risk losing time and costs.
3. What are the time limits for challenging jurisdiction? The defendant must raise the lack of jurisdiction before discussing the merits of the dispute, generally within 15 days of service of the claim (subject to exceptions in urgent proceedings).
4. Can I include a jurisdiction clause in my preliminary contract? Yes, provided it is accepted by both parties and is not abusive. It must be drafted in a very prominent manner (Article 48 of the Code of Civil Procedure).
5. Does this decision apply to sales of chattels? No, it specifically concerns promises to sell immovable property. For sales of chattels, the option in Article 46 generally applies (place of delivery).

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