Right of First Refusal on a French Business: The Pacte de Préférence

The pacte de préférence on a French business: a right of first refusal, French style

The owner of a French business is free to sell to whoever it chooses - unless it has promised otherwise. The instrument of that promise is the preference agreement (pacte de préférence): the contract by which a party undertakes to offer the deal first to a named beneficiary, if it ever decides to contract (C. civ. Art. 1123). On a fonds de commerce, it is the standard way a tenant-manager, a business partner, a key supplier or a neighbouring operator secures the first shot at the business if the owner ever sells.

Foreign buyers meet the pact from both sides: as the protection they want when entering a location-gérance or a partnership with a future purchase in mind, and as the hidden right that can undo their acquisition when someone else holds one. The pact is short to sign and long to live with. It is valid without a price and without a deadline; it survives, in principle, for as long as no one renounces it; and its breach can cost a third-party buyer the business itself - annulment, or outright substitution of the beneficiary into the purchase. This guide covers what the pact is and is not, how the preference is triggered and purged, why the town hall outranks it, the remedies for breach, and the clauses that turn a bare statutory pact into a workable one.

What the pacte de préférence is - and what it is not

The definition is narrow and worth holding onto. The pact obliges the owner, if it decides to sell, to deal first with the beneficiary - at the price proposed by an interested buyer or at a price already fixed. Three consequences follow.

It creates no obligation to sell. The owner keeps entire freedom over whether to sell, and when. A beneficiary holding a pact holds a priority, not an option - the difference with the unilateral promise of sale, where the owner is already committed and only the beneficiary's decision is missing.

It is valid almost bare. The pact needs neither a stated sale price nor a deadline for exercising the priority (Cass. 1re civ. 6 June 2001; Cass. 3e civ. 15 January 2003; Cass. 3e civ. 29 January 2008). And where no deadline is fixed, the beneficiary can demand performance whatever the time elapsed since signature, unless it has renounced (Cass. 1re civ. 22 December 1959). An owner who signed a casual preference clause twenty years ago may still be bound by it today - which is an argument for drafting deadlines, made below.

It is not a promesse de vente. The two instruments sit at different depths of commitment, and mixing them up costs money. Under a unilateral promise, the owner has already consented to the sale - only the beneficiary's option is missing, and the promise must be registered within ten days of acceptance on pain of nullity. Under a pact, the owner has consented to nothing except an order of priority: no sale is on foot until the owner decides to sell, no registration formality applies, and no immobilisation indemnity is typical, because the beneficiary has been granted no exclusivity over a deal - only a first place in the queue if a deal ever comes. A buyer who wants the business locked pays for a promise; a buyer who wants the first call pays much less for a pact.

It binds only the person who gave it. The pact is a personal claim against the promisor (Cass. 3e civ. 24 March 1999; Cass. com. 13 February 2007; Cass. com. 31 May 2011). If the owner sells the business, properly, after purging the preference, the beneficiary cannot demand that the new owner honour the pact on a later resale. A preference meant to survive successive owners must say so, and bind them contractually at each transfer; the statute will not do it for you.

Triggering the pacte de préférence: notification, acceptance, purge

The pact springs to life when the owner decides to sell. From that moment the sequence is fixed:

• The notification. The owner must notify the beneficiary of the planned sale: the identification of the business, the price, and any other terms of the sale - required guarantees, delivery arrangements. The identity of the interested buyer does not have to be disclosed, unless the pact says so (Cass. 3e civ. 10 July 2002).
• Acceptance closes the deal. If the beneficiary accepts the project on the notified terms, the sale is perfect (Cass. 3e civ. 16 June 1999; Cass. 3e civ. 22 September 2004) - there is no second negotiation.
• Refusal purges the preference - at those terms. If the beneficiary refuses, the owner may sell to a third party at the same conditions (Cass. 3e civ. 12 May 2004).
• Better terms revive it. As long as the business is unsold, the owner cannot deal with a third party at a more advantageous price or on more advantageous conditions without making a fresh offer to the beneficiary - even after earlier refusals (Cass. 3e civ. 29 January 2003).

The discipline this imposes on a selling owner is real: every improvement conceded to a third-party bidder reopens the beneficiary's priority. Sellers should build the notification into the deal calendar from the start; buyers negotiating on a business known to carry a pact should assume every concession they extract will be offered to someone else first.

Keep the paper. The notification, its date, its exact terms, and the beneficiary's refusal are what later prove to the third-party buyer, and its bank, that the preference was purged. A purge that lives in a phone call is a purge the beneficiary can dispute years later; a purge in two registered letters closes the question. The same file protects the beneficiary in the mirror case: a notification that omitted terms later granted to the third party is the proof of the re-offer that never came.

The town hall outranks the pacte de préférence

Where the business sits in a municipal safeguard perimeter, the commune's right of pre-emption takes priority over the rights the beneficiary draws from the pact. The beneficiary can only validly exercise its preference subject to the condition that the commune does not exercise its right - or renounces it.

Practically, the two mechanisms stack: the owner who decides to sell notifies the beneficiary under the pact and files the declaration of intent to sell (DIA) with the town hall, and the beneficiary's acceptance completes only once the commune's two-month window has closed without pre-emption. A pact-holder counting on the priority should check the perimeter early - a commune that wants the business takes it ahead of every private arrangement.

The DIA machinery runs on its own rules, unchanged by the pact: filed before the sale on pain of nullity, the annulment action open for five years, with the commune holding two months from receipt to decide, its silence counting as renunciation. A beneficiary who accepts a notified project therefore accepts, in substance, under the condition that the town hall stands aside; the deal file should say so in terms.

Your position on a pacte de préférence - and the next step

Pick your seat at the table - the check shows what the pact does for you, and against you.

Breach of the pacte de préférence: annulment, substitution or damages

When the owner sells in disregard of the pact, the beneficiary's remedies split on one question: what did the third-party buyer know?

The buyer knew of the pact and of the beneficiary's intention to invoke it. The beneficiary can have the sale annulled - or be substituted for the buyer in the sale (C. civ. Art. 1123, al. 2). Substitution is the remedy with teeth: the beneficiary takes the business on the terms the third party negotiated. Both remedies demand double proof, knowledge of the pact's existence, and knowledge of the beneficiary's intention to rely on it, which in practice turns on letters, recorded exchanges and what circulated in the deal file.

The buyer did not know - or the double proof fails. The beneficiary's remedy is damages against the promisor (same article). The business stays sold.

Where do these pacts come from in practice? Rarely from a stand-alone document. They sit inside commercial leases, location-gérance contracts, partnership and shareholder arrangements - a clause granted years earlier, in another negotiation, by someone who may no longer remember it. That is exactly why the diligence on any French business purchase asks the question expressly, and why the interrogatory demand below exists.

Two rules sharpen the picture. The breach can occur before any completed sale: an owner who signs a unilateral promise of sale with a third party before the pact's term violates the pact, even where the option can only be exercised after that term (Cass. 3e civ. 6 December 2018) - the priority attaches to the decision to deal, not to the final deed. And the statute arms the careful third party with a cure: the interrogatory demand (Art. 1123, al. 3 and 4), a written notice asking the presumed beneficiary to confirm, within a reasonable period fixed in the notice, the existence of the pact and its intention to invoke it. Silence within the period costs the beneficiary the annulment and substitution remedies - leaving damages only. On any acquisition where a preference right is rumoured, that demand belongs in the pre-signing checklist. Send it early - the beneficiary's "reasonable period" to answer must have run out before you sign, or the cure arrives after the disease.

Drafting the pacte de préférence: the clauses the statute leaves to you

Everything the statute leaves open is a decision for the drafting - and each open point maps to a dispute the case law has already seen:

• Duration. Without a deadline the pact lives indefinitely, invocable years later. Fix a term - and what happens at its end.
• Price mechanism. The pact is valid without a price, which leaves the beneficiary priced by the market offer. If the beneficiary wants predictability, a formula, an expert determination, it must be written.
• Notification and response. Form of the notice, its required content beyond the statutory minimum (including, if wanted, the buyer's identity), and a response deadline for the beneficiary - the statute sets none, and an open-ended response right paralyses the sale.
• Scope. Does the priority cover only the outright sale of the whole fonds, or also partial transfers, contributions to a company, or a sale of the shares of the owning company? A pact silent on indirect routes invites the dispute.
• Successors. The pact binds only the promisor. If the preference should survive a transfer of the business, the pact must oblige the promisor to impose it on its buyer - renewed at each link, since the statute carries nothing forward.
• Renunciation and purge records. A refusal purges the priority at the notified terms; papering the notification and the refusal is what later proves the purge to the third-party buyer and its bank.

Two more decisions belong in the text. Who pays what if the beneficiary accepts - the pact can align the sale's costs and guarantees in advance, so the notified project leaves nothing open to argue about. And how the pact ends - by its term, by a stated renunciation procedure, or by the owner's decision never to sell; an exit the pact does not organise is an exit the parties will litigate.

A pact of three lines is valid; a pact of three lines is also how an owner ends up re-offering the business twice and a buyer ends up substituted. The drafting is the protection.

The pacte de préférence was ignored - what can you get?

Pick the scenario - the check names the remedy the case law gives you.

Frequently Asked Questions

This article is for general information only and states French law as published in the sources available at the date shown above. It does not constitute legal advice. What a pact gives, or costs, depends on its wording and the facts. Always seek qualified legal advice before granting or invoking one.