A recent judgment of the French Cour de Cassation has clarified an issue which had been the source of some confusion.
Under general principles of French law, a party can normally rely on the nullity of a contract at any time, provided the contract has not been performed; in such circumstances no time bar applies.
Under the French Insurance Code, a two year time bar applies to claims under insurance contracts. An insurer may also seek the annulment of an insurance contract in cases of wilful misrepresentation.
Inconsistent decisions from the French courts have nevertheless created uncertainty on certain key issues, including the effect of performance of the contract on an insurer's entitlement to raise nullity, and whether the two year time bar applies where an insurer seeks to have a contract annulled, or also to nullity raised as a defence to a claim by an insured.
The recent judgment of the Cour de cassation (Ben's Garage du Stade v. AXA – 4th December 2008 – 2nd Civil Chamber) has clarified the position somewhat.
The insured had comprehensive cover with AXA. A fire broke out at the insured's premises. Provisional payment was made by the insurers; they thereafter denied cover on the grounds that the insured had wilfully misrepresented the risk, and sought reimbursement of the sums paid on a provisional basis. The insured sued its insurers, who alleged that the contract was null.
In the final appeal to the Cour de cassation, the insured argued that nullity cannot be invoked where a contract has been partially performed, in this case where provisional payment has already been made.
The Cour de cassation held that an insurer is always entitled to rely on nullity as a defence, even where the insurer has performed the contract by paying the indemnity, provided nullity is raised within the two year bar. This judgment therefore clarifies at least one area of law, even if others are left in abeyance.
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