Joint and Several Group of Companies: When One Signs a Subcontractor, All Are Bound

You are an owner in Sedan and you have entrusted the renovation of your building to a group of four companies. One of them, designated as "lead", has signed a contract with a subcontractor for the plumbing work. The work is poorly executed. Who do you contact? All the companies in the group, or only the lead? The answer from the French Supreme Court, given in 1968, remains a reference: when the companies are jointly and severally liable, the lead binds all the others to the subcontractor, even if they did not sign the contract.

This decision is crucial for any project owner (the client who orders the work) or any professional working with a group of companies. Imagine: you are a craftsman in Épernay, contacted by a lead company to carry out part of the finishing work. You deliver, you invoice, but none of the other companies wants to pay, arguing that they did not sign with you. The 1968 ruling protects you: if the lead had the authority to represent you, all the joint and several companies are bound.

But be careful: this authority must be established. The group contract must clearly provide that the lead can act "in all circumstances" for the contract. That is what the French Supreme Court held in the case commented on today. So, how can you secure your contractual relationships? Follow the guide.

The Facts: A Story That Happens Every Day

We are in the 1960s. A developer entrusts the construction of a property complex to four companies: Violamer et Cie, and three other companies. They sign a tender indicating that they are acting "jointly and severally" and designate Violamer as "lead of the group". The contract specifies that the lead has the authority to represent the others "in all circumstances" for the awarded contract.

Violamer, as lead, places an order with a subcontractor, company X, for various works provided for in the contract. The subcontractor is approved by the project owner (the developer), as is customary. The work is carried out. Violamer gives the subcontractor a negotiable instrument (a cheque or draft) in payment, but the instrument is dishonoured. The subcontractor then turns against the other three companies in the group to obtain the balance of its invoice.

The latter refuse to pay. Their argument: they never signed the subcontract, they did not give authority (mandate) to Violamer to bind them individually. They consider that only Violamer is the debtor. The subcontractor sues them in court (pursues them) to obtain payment. The Court of Appeal rules in favour of the subcontractor: all companies are jointly and severally liable and must pay. The three companies appeal to the French Supreme Court (pourvoi en cassation). The French Supreme Court dismisses their appeal and upholds the Court of Appeal's decision. The decision is final.

The Reasoning of the Court — Analysed

The French Supreme Court relies on the principle of joint and several liability (obligation for each co-debtor to pay the entire debt) and on apparent authority (the appearance of the power given to the lead). In this case, the group contract stipulated that the lead represented the others "in all circumstances" for the contract. This means that the three companies had given Violamer general authority to bind them vis-à-vis third parties, including subcontractors.

The Court specifies that, as soon as the subcontractor has been approved by the project owner (a mandatory step in construction), and the lead acted within the scope of its mission, the other companies are bound. It does not matter that they did not sign the subcontract: joint and several liability and the mandate are sufficient. The legal basis is former Article 1202 of the Civil Code, which provides that joint and several liability is not presumed but must be expressly stipulated. Here, it was.

The trial judges (the Court of Appeal) had also noted that the lead had received a settlement instrument "as lead of the group", which demonstrated that the other companies were informed and had accepted this method of operation. The French Supreme Court validates this reasoning. There is no reversal: the decision confirms settled case law on the scope of joint and several liability in groups of companies.

What This Changes for You — Concretely

If you are a landlord owner in Épernay and you entrust work to a group of companies, this decision protects you: you can deal with the lead company alone, and all the others will be jointly and severally liable. For example, if the lead disappears, you can claim payment of delay penalties or repair of defects from the other companies.

If you are a subcontractor (craftsman, supplier), this ruling is a valuable tool. You have carried out work for an amount of €15,000 ordered by the lead, but the other companies refuse to pay by invoking the lack of signature? Go to the judicial court: you will obtain a joint and several conviction. Beware, however: you must prove that the lead had the authority to bind them. Demand a copy of the group contract before starting work.

For real estate professionals (developers, project managers), this decision reminds of the importance of properly drafting the joint and several liability clause and the lead's authority. Without an express clause, each company might only be liable for its own share. If you are a buyer in a building under construction (copropriété), know that the developer can jointly and severally bind all companies for site defects, even if only one of them caused the damage.

Four Tips to Avoid This Type of Dispute

• Require a written and precise group contract: before signing with a group, ask to see the document that designates the lead and specifies the extent of its authority. Check that joint and several liability is expressly mentioned ("jointly and severally").
• Have your subcontractor approved by the project owner: if you are a subcontractor, do not start any work without written approval from the final client. This strengthens your right to payment against all companies.
• Keep all exchanges with the lead: emails, letters, work orders. In case of a dispute, these documents will prove that the lead was acting on behalf of the group.
• Act quickly in case of non-payment: joint and several liability allows you to sue all companies at the same time. But beware of limitation periods (5 years for a payment action). In Épernay as elsewhere, an interim payment order (référé provision) can obtain an advance on the amount due.

Further Reading: Related Case Law and Developments

This 1968 ruling is part of a consistent line of authority. The French Supreme Court has repeatedly confirmed that the mandate given to the lead company jointly and severally binds the co-contractors, even for acts not provided for in the original contract, as long as they are necessary for its execution (Civ. 3e, 17 March 2010, n°09-10.000). Conversely, if the group contract limits the lead's authority to certain acts, the other companies will not be bound beyond that.

The recent trend is towards protecting the subcontractor: the Spinetta law of 1975 requires the project owner to have the subcontractor approved and to require a surety bond (payment guarantee). But joint and several liability between the companies of the group remains an additional safety net. For the future, we can expect the courts to continue to interpret the lead's authority broadly, especially if the contract does not expressly limit it.

Key Points to Remember

• Express joint and several liability: the contract must mention "jointly and severally" for all companies to be bound.
• Lead's authority: if the contract gives it authority "in all circumstances" for the contract, it can alone bind all the others.
• Approval of the subcontractor: approval by the project owner reinforces the joint and several obligation.
• Direct action: the subcontractor can sue each company in the group directly for the full amount of its claim.
• Evidence: keep all documents proving the lead's mandate and the approval.

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