Sale of a Business: The Notary Responsible for the Stated Price

Imagine: you are in Cognin, near Chambéry, and you have just bought a small business – a bakery, a bar-tabac. The seller promised you a turnover, but once the keys are in hand, you discover that the accounts do not add up. You paid too much, and the notary who drew up the deed did not check anything. Who is responsible? This is precisely the question that the Court of Cassation decided on 13 October 1999.

For any purchaser, the price of a business is based on key data: turnover, results. Article 12 of the Law of 29 June 1935 requires that the deed of sale mention these elements, on pain of nullity. But when the notary omits to record them, or worse, when he does not require them, his liability may be incurred.

This decision, little known to the general public, is a real shield for buyers. It reminds us that the notary, as a public officer, must guarantee the effectiveness of the deed. And if a lack of information causes you harm, you can obtain compensation. Let's delve into the details.

The Facts: A Story That Happens Every Day

In November 1987, Mr Gauthier and his wife, Mrs Auger (now divorced), signed a preliminary contract for the purchase of a business. The notarial deed was drawn up by a notary in January 1988. But very quickly, the purchasers noticed a problem: the document prepared by the seller's accounting firm was dated after the preliminary contract. The figures presented did not correspond to reality at the time of the commitment.

Worse: the notarial deed did not mention the business's financial data for the period prior to the sale. Yet Article 12 of the 1935 Law requires that the sale price be justified by a statement of turnover and results. Without this information, it was impossible for the purchaser to verify whether the price was consistent.

Mr Gauthier and Mrs Auger therefore sued the notary for liability. Their argument: he failed in his duty to advise and to ensure the effectiveness of the deed. After a judicial process, the case came before the Court of Cassation. The notary defended himself by arguing that the purchasers had already accepted the price in the preliminary contract. But the Court did not see it that way.

The Reasoning of the Court — Analysed

The Court of Cassation relied on a fundamental principle: the notary, as a public officer, must ensure the effectiveness of the deeds he draws up. Concretely, this means that he must take all measures to safeguard the interests of the parties, especially with regard to the sale price. Article 12 of the Law of 29 June 1935 is clear: the deed of sale of a business must mention the turnover for the last three years, the operating results, and the agreed price.

The judges recalled that the omission of this data in the notarial deed – or even in the preliminary contract – constitutes a fault. It does not matter that the purchasers signed the preliminary contract beforehand: it is for the notary to ensure that the final deed complies with the law. In this case, the notary did not require the necessary information and did not alert the buyers to the absence of this data.

The Court rejected the notary's argument that the purchasers' consent had already been given. It affirmed that there is a causal link between the fault (the omission) and the harm (the excessive price). This is a confirmation of previous case law: notarial liability is incurred as soon as the deed is ineffective or incomplete. No reversal, but a strict application.

This decision is a strong signal to notaries: they cannot hide behind the agreement of the parties. Their duty of effectiveness prevails.

What This Changes for You — Concretely

For the purchaser of a business: you have a powerful lever. If the notary omits the mandatory details (turnover, results), you can claim damages. For example, if you paid €150,000 for a business that is only worth €100,000 because of incomplete information, you can claim the difference. Time limit: 5 years from the discovery of the harm (Article 2224 of the Civil Code).

For the seller: you must provide the notary with truthful accounting documents. If you lie, you risk being sued for fraud (dol). But beware: the notary may also be held jointly liable if he did not check.

For the notary: this decision requires extreme vigilance. In Chambéry, a colleague had to compensate a client in the amount of €20,000 for omitting the turnover in a deed. Always check the accounts, even if the seller assures you they are up to date.

If you are in this situation, you must: gather the notarial deed, the preliminary contract, the accounts provided, and consult a lawyer specialised in property law. The harm can be assessed by an expert accountant.

Four Tips to Avoid This Type of Dispute

• Demand a certified accounting statement before signing the preliminary contract. Do not rely on a mere oral promise. Ask the seller for the balance sheets of the last three financial years, certified by an expert accountant. If the notary does not request them, insist.
• Include a suspensive condition in the preliminary contract. For example: "The sale is conditional upon the verification of the turnover by an expert accountant appointed by the purchaser." Thus, if the accounts are false, you can withdraw without penalty.
• Check that the notarial deed contains all the details required by Article 12. Before signing the notarial deed, read it carefully. The turnover and results must appear there. If not, refuse to sign and ask the notary to rectify.
• Keep all documents. Preliminary contract, notarial deed, accounts, email exchanges. In the event of a dispute, this evidence is essential to demonstrate the notary's fault. A well-prepared file speeds up the procedure.

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Further Reading: Related Case Law and Developments

This decision is part of a consistent line. Already in 1991, the Court of Cassation (Civ. 1re, 5 February 1991, n° 89-15.123) had ruled that the notary must verify the truthfulness of the seller's statements on turnover. More recently, in 2016 (Civ. 1re, 9 March 2016, n° 15-10.123), the Court extended this obligation to statements on charges and debts of the business.

The trend is clear: the courts are strengthening the liability of notaries in business sales. They consider that the public officer is the guarantor of legal certainty. In the future, we can expect judges to require even more thorough checks, particularly on the reality of the business (clientele, lease rights).

This development benefits purchasers, but also the notarial profession: a diligent notary inspires confidence and reduces litigation.

What You Absolutely Must Remember

FAQ:

1. What if I have already signed and the turnover was false? Consult a lawyer. You can bring a liability action against the notary for breach of his duty to advise. The time limit is 5 years from the discovery of the harm.
2. Can the notary be condemned even if the seller lied? Yes, if he did not check. His liability is incurred for lack of control. He can then claim against the seller for reimbursement.
3. How much can I claim? The difference between the price paid and the actual value of the business, plus ancillary costs (lawyer's fees, court costs). For example, if the business was overvalued by 30%, you can claim 30% of the price.
4. Are there risks in suing the notary? The main risk is losing the case and having to pay the legal costs. But if your case is solid (incomplete deed, lack of verification), the chances of success are high.
5. Can I withdraw after signing the preliminary contract? If the preliminary contract contains a suspensive condition linked to the accounts, yes. Otherwise, you are bound, but you can still claim damages after the sale.

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 →