Deferred Agricultural Remuneration: A Gift-Transfer Does Not Settle Everything (Cass. 2015)

Imagine: you are a farmer in Mimizan, you have worked all your life on the family farm, without pay. Your father promises you a gift to compensate for these years of unpaid work. But after his death, your brothers and sisters contest: did this gift not already constitute payment of the deferred agricultural remuneration (a debt that the law grants to descendants who have worked on the farm without remuneration)? The question every landowner asks: how can you be sure that a gift deed extinguishes the deferred remuneration debt definitively? And if the gift was merely a simple present, without connection to the work provided?

This decision of the Court of Cassation of 11 February 2015 (No. 13-27.923) answers precisely this question. It reminds that the farmer can, during his lifetime, pay the deferred remuneration by means of a gift-transfer, but subject to a mandatory condition: the common intention of the parties (the father and the child) to make this payment must be clearly established. In other words, it is not enough to give a property to extinguish the debt; the donor and the donee must have intended to settle what was owed.

This solution, which may seem technical, has very concrete consequences for farming families. A son who has received a gift during his father's lifetime may later be required to pay the deferred remuneration if the link between the gift and the debt is not demonstrated. Conversely, the heirs can contest a gift which, in their view, does not correspond to a payment. Let us delve into the facts to understand.

The Facts: A Story Like Many Others

Mr. X, a farmer in Tarnos, had a modest-sized farm (a few hectares) and, in parallel, a commercial business (bar-hotel-restaurant). His son, Y, helped him for years, both on the farm and in the business. To reward him, the father, during his lifetime, made a gift to his son of the commercial goodwill and other advantages (including the use of a car for the commercial activity). The son was thus able to acquire shares in the family commercial company.

A few years later, the father died. The other children (Y's brothers and sisters) then claimed payment of the deferred agricultural remuneration for the period when Y had worked on the farm without being paid. Y retorts that he was already paid by the gift received during his father's lifetime. The conflict was brought before the courts.

The Court of Appeal of Pau ruled in favour of the brothers and sisters: it held that the gift made to Y was not intended to pay the deferred remuneration, but to favour him in the commercial context. Y appealed to the Court of Cassation. But the Court of Cassation dismissed his appeal on 11 February 2015. It confirmed that the mere existence of a gift does not automatically constitute payment of the deferred remuneration; the parties must have had the common intention to pay that specific debt.

The Reasoning of the Court — Deconstructed

The legal basis is Article L. 321-17 of the Rural and Maritime Fishing Code. This article provides that the deferred remuneration (a debt owed to a child who has worked on the farm without pay) may be paid during the farmer's lifetime, notably by gift-transfer. But, the Court of Cassation specifies, this presupposes that the common intention of the parties to make such a payment is established.

In other words, it is not enough that the father gave a property to his son for the debt to be extinguished. It must also be shown that both intended by that act to settle what was owed as deferred remuneration. If the gift was made for another purpose (commercial advantage, pure gift, etc.), it cannot be set off against the deferred remuneration claim.

The trial judges (the Court of Appeal) had noted that the son's help related both to the farm and the commercial business, but that the gift of goodwill and the acquisition of shares concerned exclusively the commercial side. They inferred that the parties did not intend to pay the agricultural deferred remuneration by this gift. The Court of Cassation approved this reasoning: it reminds that it is for the trial judges to assess the common intention of the parties.

This decision is neither a development nor a reversal: it confirms previous case law (Civ. 1re, 6 May 1997, No. 95-14.197) which already required a clear intention to pay. It reminds a common sense rule: one cannot rely on a gift made for another purpose to extinguish a specific debt, unless it is proved that the parties so intended.

What This Changes for You — Concretely

For owner-farmers: if you wish to pay your child's deferred remuneration by way of a gift, you must do so expressly. Draft a deed that clearly states that the gift is made in payment of the deferred remuneration, for a specific amount, and that the child accepts this allocation. A simple advantage (gift of property, sum of money) without explicit link to the debt risks being recharacterised as a pure liberality, and the deferred remuneration claim will subsist.

For children who have worked on the farm: if you have received a gift from your parents, do not assume that it extinguishes your deferred remuneration. Check the terms of the deed and, if necessary, have a written acknowledgment drawn up that the gift is allocated against that claim. Otherwise, at the succession, your brothers and sisters may demand payment of your deferred remuneration, and you will have to repay.

Let us take a concrete example: suppose a child has worked for 10 years on the farm in Mimizan, without pay. The deferred remuneration is valued at €80,000. The father gives him a plot of land worth €80,000, but the deed does not mention that it is in payment of the deferred remuneration. The father dies. The other heirs can demand payment of the deferred remuneration claim (€80,000) and the donee will have to return the land or its equivalent, unless he proves the common intention. This is a dangerous trap.

Four Tips to Avoid This Type of Dispute

• Draft a clear gift deed: State expressly that the gift is made in payment of the deferred remuneration, with the exact amount of the claim and the child's renunciation of any further right in this respect. Use a notary to secure the transaction.
• Establish a statement of claims before any gift: Before making a gift, make an inventory of the sums owed as deferred remuneration. This will allow the gift to be allocated transparently to the debt.
• Prefer a subrogative receipt: Instead of a classic gift, use a deed of payment of the deferred remuneration with a receipt. This avoids any ambiguity as to the nature of the transaction.
• Inform the other heirs: To avoid disputes after death, it is prudent to involve all children in the process, or at least inform them of the allocation of the gift to the deferred remuneration. This can be done by a written document annexed to the gift.

Further Details: Related Case Law and Developments

The Court of Cassation had already ruled, in a decision of 6 May 1997 (Civ. 1re, No. 95-14.197), that a gift inter vivos can extinguish the deferred remuneration only if the parties intended to pay that debt. The 2015 decision confirms this position without overruling it.

Another interesting decision is that of the Court of Cassation of 19 November 2014 (No. 13-24.796), which specifies that the deferred remuneration can be paid by any means, including by dation en paiement (transfer of property), but always on condition that the intention to pay is clear.

The trend of the courts is therefore towards strictness: they do not easily accept that a gift constitutes payment of the deferred remuneration. For the future, it is likely that the judges will continue to require explicit proof of the parties' intention. Farming families therefore have an interest in formalising their agreements in writing.

In Practice: What to Do

Checklist: What to do if you want to pay the deferred remuneration by gift

1. [ ] Verify the exact amount of the deferred remuneration claim (calculated according to years of work and the SMIC).
2. [ ] Draft a deed of gift or payment expressly mentioning the allocation to the deferred remuneration.
3. [ ] Have the deed signed by the donor and the donee, with mention of their common intention.
4. [ ] Register the deed with a notary to give it a definite date.
5. [ ] Keep a copy of the deed and communicate it to the other potential heirs.

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