Suspensive Condition of Loan: When the Buyer Fails in Their Obligations

You have signed a preliminary sale agreement to buy a house in Anglet. The agreement provides that you must obtain a loan of 300,000 francs (approximately €45,734). You ultimately apply for a loan of 400,000 francs. The bank refuses, and the sale does not go through. The seller claims damages from you. Is this lawful? This is precisely what the Court of Cassation had to decide in a judgment of 19 May 1999.

Many buyers think that the suspensive condition (a clause that suspends the sale pending the obtaining of a loan) protects them completely. But beware: this protection is not absolute. If you do not comply with the terms of the agreement, you may be held liable for the failure of the sale.

This decision clarifies the buyer's obligations: to apply for a loan corresponding exactly to the amount and characteristics defined in the deed. Let us decipher together what this means concretely for you, whether you are a seller, buyer or property professional.

The facts: a story that happens every day

Let us imagine the situation: Mr and Mrs Y. wish to acquire a business and the premises where it is operated. They sign a preliminary sale agreement with the sellers, Mr and Mrs X. The deed contains a suspensive condition (a clause making the sale conditional on obtaining a loan) of 300,000 francs. An addendum reduces this amount to 150,000 francs. But what do the buyers do? They apply for several loans of an amount greater than 150,000 francs. The bank ultimately refuses, and the suspensive condition is not fulfilled within the stipulated period.

The seller, determined not to lose this sale, sues the buyers. He alleges that they failed to comply with their obligation to apply for a loan conforming to the characteristics defined in the agreement. The buyers, for their part, consider that they have taken all necessary steps and that the refusal of the loan releases them from any commitment.

The Court of Appeal upholds the seller's claim. The buyers appeal to the Court of Cassation. The Court of Cassation confirms the appellate decision: by applying for loans of an amount exceeding that provided for, the buyers failed in their obligation and prevented the fulfilment of the suspensive condition. Result: the condition is deemed fulfilled, and the buyers must compensate the seller.

The reasoning of the court — broken down

The Court of Cassation relies on the general principle of the Bail commercial : l'engagement solidaire des copreneurs ne survit pas à la résiliation">obligation of good faith in the performance of contracts (Article 1104 of the Civil Code, formerly Article 1134). Concretely, the buyer must do everything possible to obtain the loan conforming to the terms of the agreement. If they deviate from these terms, they commit a fault.

In this case, the Court of Appeal had found that the amount of credit provided for in the deed was 300,000 francs, reduced to 150,000 francs in an addendum. However, in reality, the buyers had applied for loans of a higher amount. From this fact alone, the judges inferred that the buyers had prevented the fulfilment of the suspensive condition.

Note however: would the outcome have been different if the buyers had applied for a loan of a lower amount? No, the principle is the same: the agreed amount must be respected. But here, the amount applied for was higher, which changes the credit risk for the bank and may explain the refusal.

What few people know is that the burden of proof lies with the buyer: it is for them to demonstrate that they did apply for a conforming loan and that its refusal was not due to their fault. In this case, the buyers failed to prove that they had complied with their obligation.

In other words, the suspensive condition is not a mere formality. It imposes a reinforced obligation of means: the buyer must not only make an application, but an application exactly conforming to the terms of the agreement.

What this changes for you — concretely

For the buyer: You must read the preliminary sale agreement carefully before signing. If the loan amount is fixed, you cannot apply for a different one. For example, if you buy a flat in Tarbes for €150,000 and the agreement provides for a loan of €120,000, you must apply for exactly that amount. If you apply for €130,000, you run the risk that the condition will be deemed fulfilled and that you will be forced to buy without a loan, or to compensate the seller.

For the seller: If the buyer does not comply with their obligation, you can claim damages. undefined, I have come across cases where the seller obtained 10% of the sale price as compensation. But the buyer's fault must be proved.

For the estate agent: You must ensure that the suspensive condition is clearly drafted and that the buyer understands their obligations. A lost commission can be claimed from the buyer if they are at fault.

If you are in this situation, you must act quickly. The limitation period (time limit for taking legal action) is 5 years from the date of the failed sale.

Four tips to avoid this type of dispute

• Strictly comply with the loan amount provided for in the agreement. Do not apply for more or less, unless there is a written addendum signed by all parties. Any modification must be formalised.
• Keep all evidence of your steps. Keep the loan application letters, acknowledgements of receipt, bank refusals. In the event of a dispute, you will need to prove that you did apply for the conforming loan.
• Respect the deadlines. The suspensive condition must be fulfilled within a fixed period (often 30 to 45 days). If you delay, you may be at fault.
• Consult a lawyer before signing. A professional can check that the clause is well drafted and advise you on your obligations. This is an investment that can save you years of litigation.

Besoin d'un conseil personnalisé ? Contactez Maître Zakine — première consultation 30 min à 45€.

Further reading: related case law and developments

This decision is part of a consistent line of case law: the Court of Cassation requires the buyer to perform loyally their obligation to apply for a loan. One can cite a judgment of 13 February 1996 (No. 93-21.740) where the Court held that a buyer who applies for a loan of an amount lower than that provided for without the seller's consent also commits a fault.

Since 1999, the courts have strengthened this requirement. For example, the buyer must demonstrate that they have applied to several banks if the loan is not obtained. But the trend is clear: the suspensive condition is not an escape route for the buyer who does not honour their commitments.

In the future, with the evolution of interest rates and more frequent loan refusals, this case law could be invoked even more often by sellers.

Summary and next steps

FAQ:

1. What to do if my loan is refused? First check that you did apply for a loan conforming to the agreement. If so, the suspensive condition applies and the sale is cancelled without penalty. If not, you risk damages.
2. Can I apply for a loan of a different amount? No, unless there is an addendum. Any unilateral modification exposes you to a fault.
3. What are the time limits for action? You have 5 years from the date the condition should have been fulfilled to bring legal proceedings.
4. What is the amount of damages? Generally, it corresponds to the loss suffered: loss of chance to sell, agency fees, etc. This can range from 5% to 10% of the price.
5. Should I consult a lawyer? Yes, especially if the seller is claiming sums from you or if you want to take action. A lawyer specialised in property law will help you assess your rights.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of litigation — and often much more. Book an appointment →