Exclusivity Clause in a Lease: When the Shopping Centre Expands, What Happens to Your Right?

Imagine: you are a shopkeeper in Castelnau-le-Lez, in a shopping centre. Your lease guarantees you exclusivity for your trade. Then the shopping centre expands, and a competitor sets up in the new part. Does your exclusivity, which you paid for, still hold? This question is asked by dozens of landlords and tenants every year. The French Supreme Court (Cour de cassation), in a judgment of 8 January 1997, has ruled: it all depends on the wording of the clause. A decision to know absolutely before signing or contesting.

The Facts: A Story Like Many Others

In 1973, the company Euroexpansion (later Euromarché, then Carrefour) granted a commercial lease to the company Natalys, specialising in baby products, for premises located in the shopping centre adjacent to its hypermarket. The lease contained a professional exclusivity clause: Natalys was the only shop authorised to sell baby articles in the centre. Fifteen years later, in 1988, Carrefour decided to extend the centre: a new shopping area was built, connected to the old one. And Carrefour leased a unit there to a direct competitor of Natalys. Natalys then sued Carrefour for breach of its exclusivity, seeking an injunction and damages. The commercial court ruled in its favour, but the Montpellier Court of Appeal reversed that judgment. For the appeal judges, the exclusivity clause, drafted in 1973, only covered the existing centre at that date, not the new extension. Natalys appealed to the Supreme Court.

The Reasoning of the Court — Analysed

The Supreme Court dismissed Natalys' appeal. It approved the Court of Appeal for having 'correctly noted that an exclusivity clause, whose validity is subject to its being limited in time and space, must be interpreted restrictively'. In other words, the judges recall a fundamental principle: a clause that restricts the freedom to do business (Carrefour cannot lease to a competitor) is exceptional and must be strictly interpreted. Here, the parties had not foreseen the future extension. The clause mentioned 'the shopping centre', without further precision. However, in 1973, there was only one centre. The judges inferred that the common intention of the contracting parties was to limit the exclusivity to that centre. Natalys argued that the extension was inseparable from the original centre. But the Court of Appeal had sovereignly found the contrary, and the Supreme Court cannot reassess that factual finding. The judgment therefore confirms a consistent line of authority: exclusivity clauses are strictly interpreted, and their spatial scope must be clearly defined. Failing that, the judge refers to the intention of the parties at the time of signing.

What This Means for You — Practically

For tenant shopkeepers: never assume that your exclusivity extends to future extensions. If you are in Agde and your shopping centre expands, check your lease. If the clause does not mention extensions, you risk seeing a competitor arrive. Concrete example: a children's clothing store pays a higher rent to obtain exclusivity. If the centre adds a wing, it loses its advantage. For landlords: be precise in drafting. If you wish to limit exclusivity to part of the centre, say so. If you want it to apply to the entire site (including future extensions), state it expressly. A vague clause exposes you to litigation. For purchasers of shopping centres: during due diligence, identify these clauses. They may reduce your leasing flexibility. If the clause is too broad, you could be prevented from leasing to competing brands. In the Natalys case, Carrefour was able to install a competitor in the new centre without breaching the lease. Result: Natalys lost its de facto exclusivity, without compensation.

Four Tips to Avoid This Type of Dispute

• Draft a precise exclusivity clause: define the exact perimeter (area, lot number, building, floor) and indicate whether future extensions are included or not. Example: 'the shopping centre as existing at the date of signing, excluding any future extension'.
• Take stock of existing clauses: if you buy a business or a centre, ask your lawyer to list all exclusivity clauses. A poorly drafted clause can be a time bomb.
• Negotiate a financial counterpart: exclusivity has value. If the landlord grants it, negotiate a reduced rent or a contribution to works in exchange. If it is too broad, it may be recharacterised as an unfair term.
• Anticipate changes: a short lease (3 years) allows quick renegotiation. A long lease (9 years) commits you. If the centre plans extensions, include a clause for automatic review of exclusivity in case of expansion.

Further Analysis: Related Case Law and Developments

This decision is part of a line of strict rulings on exclusivity clauses. For example, the Supreme Court held in 1992 (No. 90-18.456) that an exclusivity clause in a residential lease was void because it disproportionately infringed the landlord's right of ownership. In commercial matters, judges are more tolerant, but they require a real counterpart and precise limitation. Since the 1997 judgment, the trend is towards enhanced scrutiny: the judge checks whether the clause creates a significant imbalance. In 2016, the Supreme Court even annulled a perpetual exclusivity clause in a commercial lease (No. 14-29.385). For the future, drafters of leases must incorporate the notion of 'relevant area': if the centre expands, should the exclusivity follow? The answer is no, unless expressly stipulated otherwise.

Key Points to Remember

• Question: My lease says 'exclusivity in the shopping centre', what does it cover? Answer: Only the centre existing at the date of signature, not extensions, unless the lease specifies otherwise.
• Question: Can I claim damages if my landlord installs a competitor? Answer: Yes, if the exclusivity clause is clear and the competitor is within the covered perimeter. Otherwise, you have no recourse.
• Question: How to prove the intention of the parties? Answer: Through documents (lease, amendments, letters) and circumstances (date, plans, configuration of the centre). A lawyer can help reconstruct the context.
• Question: What is the duration of validity of an exclusivity clause? Answer: It must be limited in time. A perpetual clause is void. In practice, it runs for the duration of the lease.

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