Suspensive condition for obtaining a loan: when the buyer loses their deposit

Imagine the scene: in L'Isle-sur-la-Sorgue, a couple dreams of taking over the small haberdashery in the town centre. The seller accepts a promise of sale with a suspensive condition (a clause that suspends the sale pending a future uncertain event) of obtaining a loan of 920,000 francs. The couple ultimately applies for a loan of 1,200,000 francs from the bank, without submitting a detailed file. The loan is refused, the sale falls through. The seller, who has tied up their business for months, demands the deposit (sum paid as a guarantee) of 92,000 francs. Who is right?

This question, which property owners and buyers ask themselves every day, finds a clear answer in a judgment of the Court of Cassation of 23 November 1993. The judges considered that the buyer, by applying for a loan higher than that provided for and by not carrying out any specific formalities, had failed in their obligation of diligence (duty to do everything possible to obtain the loan). Result: the suspensive condition is deemed fictitiously fulfilled, and the buyer loses their right to restitution of the deposit.

In short, if you are a seller, this decision protects you against bad faith buyers. If you are a buyer, it requires you to prove your steps. But what exactly does this change in everyday life? That is what we will see.

The facts: a story like many that happen every day

Mr. X, owner of a business in L'Isle-sur-la-Sorgue, signs on 1 March 1991 a promise of sale with the Y spouses, buyers. The price is 1,150,000 francs, with a suspensive condition of obtaining a loan of 920,000 francs over 10 years at a rate of 11%. The buyers pay a deposit of 92,000 francs, i.e., 8% of the price.

The Y spouses go to the bank and apply for a loan of 1,200,000 francs, without providing a business plan or guarantees. The bank refuses. The sale is not completed. Mr. X, who has refused other offers in the meantime, is furious: he has lost six months and a sale opportunity. He sues the buyers for payment of the deposit.

The Commercial Court of Avignon rules in favour of Mr. X. The Y spouses appeal. The Court of Appeal of Nîmes confirms the judgment in 1992. The buyers appeal to the Court of Cassation, but the Court of Cassation dismisses their appeal on 23 November 1993.

What is striking in this case is the behaviour of the buyers: they did not apply for the loan provided for in the contract, but for a higher amount, and did not carry out any specific formalities. In other words, they did not do what was necessary for the condition to be fulfilled. The Court of Cassation considered that this was a breach of their obligation of diligence, preventing the fulfilment of the suspensive condition.

The reasoning of the court — broken down

The legal basis of this decision is Article 1240 of the Civil Code (formerly 1382), which provides that "any act of a person which causes damage to another obliges the person by whose fault it occurred to make reparation". The Court of Cassation here applies the theory of the suspensive condition (Article 1304 of the Civil Code) combined with civil liability.

In law, a suspensive condition is a clause by which the sale is subject to the occurrence of a future and uncertain event. If the event does not occur, the sale is void and the parties are restored to their previous positions. But beware: the party who has an interest in the condition not being fulfilled must not prevent its fulfilment. This is called the obligation of loyalty and diligence.

In this case, the judges analysed the behaviour of the buyers. They noted that:
- The loan applied for (1,200,000 francs) was higher than that provided for (920,000 francs);
- No specific formalities had been carried out (no complete loan file, no supporting documents).

The Court deduced that the buyers had "prevented the fulfilment of the suspensive condition", i.e., they had voluntarily prevented the obtaining of the loan. Consequently, the condition is deemed fulfilled (legal fiction), and the deposit remains with the seller.

This reasoning is a strict application of previous case law: the buyer must prove that they have taken all reasonable steps to obtain the loan. Here, they did not. What few people know is that this obligation of diligence exists even if the contract does not specify it: it is a requirement of contractual good faith (Article 1104 of the Civil Code).

What this changes for you — concretely

For sellers (owners, landlords, traders): this decision is a valuable weapon. If your buyer does not take the necessary steps to obtain their loan, you can keep the deposit. Example: in Pertuis, an owner of commercial premises saw his buyer apply for a loan twice the amount provided for, without proof of income. The sale failed, but the seller kept the €15,000 deposit.

For buyers: you must prove your diligence. Keep all evidence of your steps (loan application, refusal, correspondence). If you apply for a loan different from that provided for, you risk losing your deposit. undefined, I have come across cases where the buyer simply phoned their bank without submitting a file: the court considered that this was not sufficient.

For real estate professionals (agents, notaries): draft clear suspensive conditions, with a precise amount, a duration, and an obligation to justify the steps taken. This will avoid disputes.

In figures: if the amount of the deposit is generally 5 to 10% of the price, the loss can be substantial. For a business valued at €200,000, the deposit can reach €20,000.

Four tips to avoid this type of dispute

• Draft a precise suspensive condition: indicate the exact amount of the loan, the duration, the rate, and the lending institution. Avoid vague formulas like "any loan necessary for the acquisition".
• Require proof of steps taken: the seller or notary can ask the buyer to provide a copy of the loan application, acknowledgement of receipt, and any refusal.
• Respect the loan amount stipulated: if you apply for a different loan, even a higher one, you risk not being covered by the suspensive condition. It is better to request a modification of the contract.
• Carry out concrete formalities: do not settle for a phone call. Submit a complete file, with a business plan if necessary, and keep the evidence.

Further reading: related case law and developments

This decision is part of consistent case law. Already, in a judgment of 30 June 1992 (No. 90-21.002), the Court of Cassation had held that a buyer who does not prove any serious steps to obtain the loan is considered to have prevented the condition. Conversely, in a judgment of 14 December 2004 (No. 03-16.978), the Court protected a buyer who had submitted several applications in accordance with the contract, even though they had been refused.

The trend is clear: judges are demanding on proof of diligence. Since 1993, case law has even become stricter: now, the buyer must prove that they have approached several banks if the contract so provides, or that they have respected a reasonable time limit. For the future, expect courts to require more and more transparency in financing steps.

Summary and next steps

FAQ:

• Can I lose my deposit if my loan is refused? Yes, if you have not taken the necessary steps or if you have applied for a loan different from that provided for. You must prove your good faith.
• What should I do if I am a seller and the buyer does not justify their steps? You can refuse to return the deposit and take the matter to court. Keep evidence of the lack of diligence (e.g., refusal to provide supporting documents).
• What are the time limits for action? In matters of sale, the action for payment of the deposit is subject to a five-year limitation period from the date of non-fulfilment of the condition. But act quickly to avoid prescription.
• Can I modify the suspensive condition after signature? Yes, by a written amendment signed by both parties. But beware: any modification must be clear and precise.
• Does this decision also apply to the sale of real estate? Yes, the same rule applies to any type of sale subject to a suspensive condition of obtaining a loan.

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