Beneficiary of Breach of Noncompete Clause Must Prove Losses Suffered – French High Court

In a recent ruling, the Commercial Chamber of the French High Court (Cour de Cassation) reiterated that the beneficiary of a noncompete obligation alleging its breach by the other party must establish the existence and extent of the losses for which compensation is sought. Unlike the presumption of loss in unfair competition cases in torts, loss does not automatically result from the breach of a noncompete clause.

THE ABSENCE OF PRESUMPTION OF AUTOMATIC LOSS RESULTING FROM A BREACH OF A NONCOMPETE CLAUSE

In a commercial contract, a party can be prohibited from competing with another party, not only during the contract term but also after the relationship ends. However, case law specifies that this clause must be proportionate—that is, justified by legitimate interests related to the contract’s purpose—and limited both timewise and geographically. [1] Otherwise, the clause would constitute an excessive infringement on the freedom of enterprise and be deemed null and void. [2]

In certain cases, the law may also establish conditions for the validity of a noncompete agreement. For instance, such agreement may be included in a commercial agency contract, provided that (1) it is in writing, (2) it lasts for a maximum period of two years, and (3) it concerns only the territory, clientele, and goods or services for which the agent represented the principal. [3]

In the present case, following the termination of a commercial agency contract, the agent entered into a partnership with a competing company, violating the post-contractual noncompete clause. The Paris Court of Appeal ordered the agent to pay 50,000 euros in damages, assuming that a commercial disruption related to the disorganization of the sales network inevitably resulted from the breach of the clause. [4]

This decision was overturned by the French High Court on December 3, 2025 based on former Article 1147 of the French Civil Code (now Article 1231-1), finding that the Court of Appeal had failed to determine whether the breach “had actually caused a loss resulting from the disruption of the sales network” of the principal. [5] In this regard, the Court of Cassation states that “the creditor of a non-compete obligation who alleges its breach by the debtor must establish the existence and extent of the loss for which he seeks compensation.”

This ruling aligns with the principle of contractual liability, which requires proof of loss caused by a breach of contract. In other words, merely violating the noncompete clause does not automatically entail a loss or a right to compensation.

A HEAVIER BURDEN OF PROOF COMPARED TO TORTS

In tort law, an act of unfair competition (such as denigration, confusion, disruption, or parasitism) necessarily causes a loss, even if it is only non-pecuniary or moral damage. [6] The French High Court has emphasized that such non-pecuniary loss “is irrefutably presumed.” [7] Compensation for the loss is assessed by considering the undue advantage gained by the perpetrator of unfair competition at the expense of affected parties [8]. In its December 3, 2025 ruling, the French High Court indirectly reiterates that noncompete clauses do not benefit from this presumption.

The burden of proof is therefore greater in contractual matters than in tort law.

Nonetheless, in contractual matters, parties can circumvent evidentiary difficulties by including a liquidated damages clause, allowing compensation without the creditor of the noncompete clause needing to prove loss. [9] However, while this clause ensures a compensation mechanism, it may be revised by the court if it is deemed excessive or insufficient.

Law clerk Lizy Kim contributed to this LawFlash.