Broken Property Negotiation: When Loss of Chance Is Not Compensable

Imagine: you are the owner of a commercial premises in Cabestany, near Perpignan. You have been negotiating for months the assignment of your lease with a serious buyer. Discussions are progressing, hopes are high. Then, suddenly, the other party pulls out without valid reason. You have already turned down other offers. You think you can claim damages for the lost profit? Think again.

This question, which owners and tenants in Roussillon ask themselves every day, was answered by the Court of Cassation on 7 January 2009 in a landmark decision (no. 07-20.783). The principle is clear: even if the breaking off of negotiations is wrongful, the loss of chance to realise the benefits of the final contract is not directly linked to that fault. In other words, you cannot claim compensation as if the contract had been signed.

So, what can you obtain when you are the victim of an abusive breaking off of negotiations? And above all, how can you avoid finding yourself in this delicate situation? I explain everything, drawing lessons from this decision and from my practice with clients in Canet-en-Roussillon and elsewhere.

The facts: a story like many others

In 2002, a SCI (property company) owning a commercial building in Lezennes (Nord) granted a lease of a unit to the company Regal Lezennes. Shortly after, a certain Mr X approached the SCI to negotiate the assignment of this lease. The SCI agreed in principle, but expressed reservations: the assignment of the leasehold interest was subject to the landlord's consent and other conditions. Meanwhile, another company, Animal Food & System, also expressed interest in the unit.

Negotiations stalled. Mr X considered that the SCI had wrongfully broken off negotiations, causing him loss: he had turned down other opportunities and was counting on this assignment to develop his business. He sued the SCI for damages, in particular for loss of chance to realise the expected gains.

The Commercial Court partly upheld his claim, but the Court of Appeal of Amiens overturned that judgment. Mr X appealed to the Court of Cassation. The Court of Cassation had to decide: can fault in breaking off negotiations be the direct cause of the loss consisting in the loss of a chance to realise the gains of the contract?

The reasoning of the court — explained

The Court of Cassation, in its decision of 7 January 2009, answers in the negative. It relies on Article 1240 of the Civil Code (formerly Article 1382), which provides that "any act of a person which causes damage to another obliges the person by whose fault it occurred to compensate for it". But the damage must be directly linked to the fault.

For the Court, the loss of chance to realise the gains that the conclusion of the contract would have allowed is not a consequence of the wrongful breaking off of negotiations. Why? Because, as long as the contract is not signed, there is no acquired right. Negotiations are a non-binding process, and each party remains free to withdraw, even without reason. The fault cannot therefore be considered as the cause of the loss related to the absence of a contract.

However, wrongful breaking off may give rise to compensation for costs incurred in the context of negotiations (studies, advice, travel) and, in some cases, lost time. But not the expected profits. This is a crucial distinction, often misunderstood by the parties.

This decision confirms consistent earlier case law (notably a decision of 26 November 2003, no. 00-18.202) and rules out any evolution towards broader compensation. The judges thus recall that contractual freedom prevails: one can break off negotiations, provided that no loss other than the loss of chance is caused.

What this changes for you — concretely

For the landlord owner: if you break off negotiations with a candidate for the assignment of your lease, you are not at risk of being ordered to pay them the gains they would have made. You will only have to reimburse their incurred costs (for example, €2,000 in legal or accounting fees). In Canet-en-Roussillon, an owner who dragged out an assignment for six months had to compensate the buyer to the tune of €3,500 for market studies and time spent, but not the €50,000 of expected turnover.

For the potential tenant or buyer: you cannot claim loss of chance to realise profits. However, if the other party acted in bad faith (for example, by dangling a sale to push you away from a competitor), you can obtain compensation for moral damage or expenses incurred. If you are in this situation, you must keep all evidence of your expenses (invoices, emails, meeting minutes).

For the property professional: this decision secures transactions. It encourages formalising key stages of negotiations through written documents (letters of intent, conditional promises) to avoid disputes. It also reminds that the pre-contractual period is risky: better not to incur significant costs before signing.

Four tips to avoid this type of dispute

• Draft a confidentiality and negotiations agreement: at the start of exchanges, sign a document that sets the rules of negotiation, particularly on sharing costs in case of failure. This avoids surprises.
• Limit costs incurred before signing: do not order costly studies or deposit a guarantee until the conditions precedent are lifted. If you are in Cabestany, a simple notary estimate for €500 may suffice for a first assessment.
• Prefer unilateral or synallagmatic promises: a written commitment, even conditional, creates a right to compensation if the other party withdraws without legitimate reason. This transforms the loss of chance into certain damage.
• Keep all records of exchanges: emails, letters, meeting minutes, handwritten notes. In case of a dispute, you will be able to demonstrate the reality of the costs incurred and, if necessary, the other party's bad faith.

Further reading: related case law and developments

The decision of 7 January 2009 is part of a consistent line of case law. Already in 2003 (Civ. 3e, 26 November 2003, no. 00-18.202), the Court of Cassation had held that the breaking off of negotiations, even wrongful, did not give rise to compensation for lost profit. More recently, a decision of the Commercial Chamber of 11 February 2014 (no. 12-29.107) confirmed that only expenses incurred and moral damage could be compensated.

This position is criticised by some authors who see it as excessive immunity for the party breaking off. But it remains the majority view. Is an evolution possible? Perhaps, if European case law or a reform of contract law (like the 2016 Ordinance) were to establish broader pre-contractual liability. For now, remember that the loss of a chance to conclude an advantageous contract is not compensable.

Frequently asked questions

Can I obtain damages if the other party breaks off negotiations without reason?
Yes, but only for the costs you incurred (fees, studies, travel) and, possibly, for moral damage if the breaking off is sudden or abusive. However, the profits you expected from the contract are not compensable.

What if I have already spent money on a transaction that does not go through?
Gather all invoices and proof of expenses. Consult a lawyer to assess your chances of recovering them. You can also negotiate a settlement with the other party to cover part of your costs.

Is there a time limit to bring legal action after a breaking off of negotiations?
Yes, the limitation period is 5 years from the day you became aware of the breaking off (Article 2224 of the Civil Code). After this period, you can no longer claim.

Is a simple verbal agreement sufficient to be protected?
No, a verbal agreement is difficult to prove and does not create a strong legal obligation. Better to have a written document, even a simple one, like a letter of intent or a summary email.

Can I include a penalty clause in the promise of sale to deter the other party from withdrawing?
Yes, it is even recommended. A penalty clause provides for the payment of a fixed sum in case of abusive withdrawal. It must be proportionate to the actual loss to be valid.

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 →