Promise of Sale: Substitution of a Third Party Is Not an Assignment of a Debt

In Marseille, a property developer signs a unilateral promise of sale for a plot of land in Martigues. The contract provides that he may substitute a real estate civil company (SCI) before exercising the option. He does so. However, the seller, once informed, refuses to sell to the SCI, arguing that this substitution is an assignment of a debt that was not served in accordance with the rules. Result: the property project is blocked, study costs have already been incurred, and legal proceedings drag on for years.

This question troubles every real estate professional: when you have the right to substitute a third party in a promise of sale, is it simply a contractual right or an assignment of a debt subject to strict formalities? The Court of Cassation ruled in 1990, and its answer is remarkably clear.

In this article, we dissect the judgment of 27 November 1990 (No. 89-11.385) to explain why the substitution of a third party for the beneficiary of a promise of sale, when provided for in the contract, is not an assignment of a debt and does not require the formalities of Article 1690 of the Civil Code. We will examine the facts, the judges' reasoning, and what this changes for you, property owners, buyers, or investors.

The Facts: A Story That Happens Every Day

Mr. X, owner of a plot of land in Martigues, signs a unilateral promise of sale with a developer, Mr. Y. The contract stipulates that Mr. Y may substitute any natural or legal person of his choice before exercising the option. Mr. Y decides to substitute an SCI he has set up for the transaction. He informs the seller by registered letter, without complying with the formalities of Article 1690 of the Civil Code (service by bailiff or acceptance in a notarised deed).

The seller, unhappy (perhaps because she did not wish to sell to an SCI, or for other reasons), refuses to sell to the SCI. She argues that the substitution is a void assignment of a debt for lack of formalities. The developer sues the seller for specific performance of the sale.

The court of first instance rules in favour of the developer: the substitution is valid. The seller appeals. The Besançon Court of Appeal, in a judgment of 22 November 1988, reverses the decision: it considers that the substitution constitutes an assignment of a debt, and that for lack of service, it is unenforceable against the seller. The developer appeals to the Court of Cassation.

Before the Court of Cassation, the question is clear: is the substitution of a third party for the beneficiary of a promise of sale, when provided for in the contract, an assignment of a debt subject to the formalities of Article 1690 of the Civil Code?

The Reasoning of the Court — Explained

The Court of Cassation quashes the appeal judgment. Its reasoning is encapsulated in one sentence: "the substitution of a third party for the beneficiary of a promise of sale providing for this right does not constitute an assignment of a debt and does not entail the obligation to carry out the formalities provided for in Article 1690 of the Civil Code." In other words, if the contract provides for the right of substitution, the beneficiary may freely designate a third party to exercise the option in his place, without having to serve or have this substitution accepted by a notarised deed.

To understand, one must distinguish between an assignment of a debt and a substitution. An assignment of a debt (Article 1690 of the Civil Code) is the transfer of a right of claim from one person (the assignor) to another (the assignee). It is subject to publicity formalities (service on the debtor or acceptance by notarised deed) to be enforceable against the debtor. Substitution, on the other hand, is a contractual right: the beneficiary of a promise of sale has the right to designate a third party to exercise the option in his place. It is not a transfer of a debt, but simply a change of person in the exercise of a right.

The judges of the Court of Cassation therefore held that the Court of Appeal had confused the two concepts. They emphasised that the promise of sale itself provided for this right, and that the developer had merely exercised it. Consequently, no additional formalities were required.

This decision is part of a consistent line of case law: substitution is a mechanism distinct from assignment, and it is valid as long as the contract provides for it. It does not require the consent of the promisor (seller) if the latter has already accepted the substitution clause in the promise.

What This Changes for You — Practically

For buyers and investors, this decision is a major legal safeguard. If you sign a promise of sale with a substitution clause, you can freely substitute an SCI, a civil company, or another person without fear of the seller blocking the transaction. For example, in Marseille, an investor can sign a promise for a rental property, then substitute a family SCI at the time of exercising the option, without costly formalities.

For sellers, be vigilant: if you accept a substitution clause, you will not be able to object to the buyer designating a company or a third party. Nor can you require that the substitution be served by a bailiff. However, you can limit the substitution in the contract (for example, by requiring that the substitute has sufficient financial capacity).

For notaries and lawyers, this decision simplifies the drafting of deeds: it suffices to include a clear substitution clause, without fear of a procedural defect. However, note: if the promise does not provide for a right of substitution, then any substitution would be an assignment of a debt, subject to formalities.

A concrete example: imagine a flat in Martigues promised at €200,000. The buyer substitutes an SCI. Without this case law, he would have had to pay a bailiff to serve the substitution (about €150) and risked a refusal by the seller. With the 1990 judgment, everything is done by simple registered letter, saving time and money.

Four Tips to Avoid This Type of Dispute

• Include a clear substitution clause in the promise of sale: draft it expressly, stating that the beneficiary may substitute any natural or legal person, without any particular formality, until the option is exercised.
• Notify the substitution in writing: even if the law does not require it, send a registered letter with acknowledgement of receipt to the seller to inform them of the substitution. This will avoid any later challenge.
• Check that the contract does not limit the substitution: some sellers impose conditions (approval, guarantee). Comply with them to avoid a refusal.
• Keep a record of the date of substitution: if you substitute before exercising the option, ensure that the date is before the deadline. Doubt about the timeline can lead to litigation.

Further Reading: Related Case Law and Developments

The Court of Cassation confirmed this solution in a subsequent judgment of 13 December 1994 (No. 92-20.840), ruling that substitution provided for in a promise of sale is not an assignment of a debt, but the exercise of a contractual right. This case law has been consistent since 1990.

However, if the promise does not include a substitution clause, the beneficiary cannot substitute a third party without the seller's consent. In that case, any substitution would be considered an assignment of a debt, subject to the formalities of Article 1690. The boundary is therefore clear: everything depends on the drafting of the contract.

The courts are strict on proof of the existence of the clause. If the contract is ambiguous, judges may reclassify the transaction as an assignment. Hence the importance of precise drafting by a professional.

Summary and Next Steps

FAQ

Can I substitute a third party in a promise of sale without an express clause? No, without a clause, it is an assignment of a debt subject to Article 1690.

What formalities are required for a substitution with a clause? No legal formalities, but written notification is recommended.

Can the seller refuse the substitution if it is provided for? No, unless the contract imposes conditions (approval).

What if the seller refuses to sell to the substitute? You can sue for specific performance of the sale and claim damages.

Does this case law apply to synallagmatic promises (compromis de vente)? Yes, if the contract includes a substitution clause.

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 →