Public Contract or Private Contract? The Boundary Redefined by the Court of Cassation

Imagine: you own a building in Draguignan, and your neighbour, the municipality, decides to build a multi-purpose hall. It entrusts the work to a private company, but the contract contains clauses never found in a contract between private individuals — for example, the possibility for the municipality to unilaterally modify the schedule or to terminate without compensation. You wonder: is this contract a public contract? And above all, is it an administrative contract, with special rules? This question, which seems technical, has concrete consequences: if the contract is administrative, disputes fall within the jurisdiction of the administrative court, and the procurement rules are much stricter. The decision of the Court of Cassation of 4 October 2017 (No. 16-21.693) provides a nuanced answer that directly impacts owners, tenants and real estate professionals.

In this case, a municipality had signed a contract with an economic operator for the performance of construction works, but without itself acting as project manager (i.e., without directing the works). The question was twofold: could this contract be classified as a public works contract? And if so, was it thereby an administrative contract? The Court of Cassation answers yes to the first question, but no to the second: a public works contract is not necessarily an administrative contract. For it to be so, the works must be carried out on behalf of the public entity for a purpose of general interest, or their object must be the very performance of a public service. In other words, the administrative nature of the contract does not automatically follow from its classification as a public contract; it depends on the object and purpose of the works.

This decision is a reminder for all property actors. Whether you are a developer in Sanary-sur-Mer, a social landlord in Toulon, or a simple owner, understanding the distinction between a public contract and an administrative contract can save you many disappointments. In this article, we break down the Court's reasoning, its practical implications, and give you concrete advice to avoid legal pitfalls.

The Facts: A Story That Happens Every Day

The case begins in Draguignan, where the municipality wishes to build a property complex including housing and shops. Rather than managing the works itself, it entrusts the operation to a private operator via a contract which provides that the operator will construct the buildings, manage them for a certain period, then hand them back to the municipality at the end of the contract. This type of arrangement, known as a "partnership contract" or "works concession", is common in urban development projects.

The contract contains a clause that is unusual under ordinary law (a clause not found in private law contracts, as it would be illegal between private individuals): at the end of the lease, the municipality may become the owner of the constructions without compensation. This clause is typical of administrative contracts, but here, the municipality does not have project management (it does not direct the works). A competing contractor challenges the award of the contract before the judicial court, arguing that the contract is a public works contract subject to advertising and competition rules, and that it should have been notified. The municipality retorts that the contract is not a public contract because it does not provide project management.

The judicial court of Draguignan, then the court of appeal of Aix-en-Provence, examine the question. Finally, the Court of Cassation is seized. It must decide: can a contract be a public works contract even if the public entity does not manage the works? And if so, is this contract thereby administrative?

The Court's Reasoning — Analysed

The Court of Cassation relies on Article 1 of Directive 2004/18/EC (now replaced by Directive 2014/24/EU), which defines a public works contract as a contract for pecuniary interest concluded between a contracting authority (here, the municipality) and an economic operator, whose object is the execution of construction works. The Court specifies that the concept of project management (directing the works) is not a necessary element for the classification as a public contract. In other words, even if the municipality does not manage the site, the contract may be a public contract if the works are carried out on its behalf and meet its needs.

But the Court adds a crucial distinction: the classification as a public contract is not sufficient to make the contract an administrative contract. For a contract to be administrative, it must either involve the execution of construction works carried out on behalf of the public entity for a purpose of general interest (for example, building a school), or have as its object the very performance of a public service (for example, waste management). In this case, the contract provided for the construction of housing and shops, but it was not shown that these works were carried out for a purpose of general interest (such as social housing) or that they constituted the performance of a public service. Consequently, the contract, although a public contract, remained a private law contract, falling within the jurisdiction of the judicial court.

What few people know is that this decision is a confirmation of previous case law, particularly the "Commune de La Garde" decision (Council of State, 2014), which had already established the principle that project management is not a determining criterion. The Court of Cassation thus aligns its position with that of the Council of State, creating a certain harmony between the two orders of jurisdiction. However, note that this decision only concerns contracts concluded before 2014. Since then, European directives have been transposed, and the concept of "public works contract" has been broadened.

What This Changes for You — Practically

For a landlord owner in Sanary-sur-Mer, this decision means that if you lease a property to a municipality to carry out works, the contract may be a public contract (and therefore subject to advertising and competition), but this does not make it administrative. In practice, if you are the private operator building on behalf of the municipality, you will be subject to public procurement rules (advertising, appeal deadlines, etc.), but the contract will remain governed by private law, which may influence the jurisdiction of the judge in case of a dispute.

For a purchaser of a property built under such an arrangement, be vigilant: if the contract is administrative, the procurement rules are stricter, but this may also offer additional guarantees (for example, the municipality cannot terminate without cause). If the contract is private, the relationship is more flexible, but also riskier.

undefined, I have encountered cases where property developers in Toulon signed contracts with municipalities without realising they were entering into a public contract, with advertising obligations they had ignored. Result: claims for nullity, construction delays, and additional costs. If you are in this situation, you must check whether your contract contains an unusual clause or whether it is for the general interest. If so, it could be reclassified as an administrative contract, with all the consequences that entails.

In figures: a public works contract must be published in the BOAMP (Official Bulletin of Public Procurement Notices) and comply with advertising deadlines of at least 15 days for small contracts, up to 52 days for larger ones. Failure to comply with these rules exposes the parties to fines and annulment of the contract.

Four Tips to Avoid This Type of Dispute

• Check for unusual clauses: review your contract with a lawyer. If you find clauses that are never found in a private law contract (unilateral termination, unilateral modification, ownership of constructions without compensation), the contract is probably administrative, even if not labelled as such.
• Comply with advertising rules: if you are a public entity, publish your call for tenders in the BOAMP or the OJEU (Official Journal of the European Union) depending on the amount. For private operators, require proof of advertising before signing.
• Determine the competent court in advance: in case of a dispute, know that if the contract is administrative, the administrative court has jurisdiction; if it is private, the judicial court has jurisdiction. A mistake in jurisdiction can cost months.
• Anticipate the end of the contract: in long-term contracts (concession, emphyteutic lease), clearly provide for the fate of the constructions at the end of the contract. If the municipality becomes owner without compensation, this can represent a huge loss for the private operator.

Further Reading: Related Case Law and Developments

This decision is part of a consistent line of case law. The Council of State, in the "Commune de La Garde" decision (2014), had already held that project management was not a criterion for classifying a public contract. More recently, the CJEU (Court of Justice of the European Union) specified in the "Helmut Müller" decision (2010) that the "direct economic benefit" of the public entity is an important criterion. The current trend is towards relaxation: the concept of public contract is broadening, while the classification of administrative contract remains more restrictive, requiring a strong link with the general interest or public service.

For the future, expect judges to look more at the content of the contract than its label. If the contract contains unusual clauses or if the works meet a general interest need, it will likely be reclassified as an administrative contract, regardless of its title.

Checklist Before Acting

• Before signing a contract with a public entity: request a legal analysis to determine whether it is a public contract and whether it is administrative. Check for unusual clauses.
• During performance: keep all written exchanges. If the municipality unilaterally modifies the contract, note it and challenge if necessary.
• In case of a dispute: immediately identify the competent court. If you believe the contract is administrative, bring the matter before the administrative court within two months of the contested decision.
• If you are a disappointed competitor: you can challenge the award of the contract before the contract judge (pre-contractual summary proceedings) within a very short period (11 days after publication of the award notice).

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 →