Case: The house of Mr. and Mrs. M. was confiscated by the bank after they failed to pay the installments of the real estate loan. A clause in the loan agreement, for good reason, provided that the banker could demand immediate payment of the entire loan, without delay or prior notice. Can Mr. and Mrs. M. retain this forfeiture clause?
Lawyer’s response: No, because when applying Article L. 212-1 of the Consumer Code, provisions whose aim or effect “create, to the detriment of the consumer, a significant imbalance between the rights and obligations of the contracting parties” are offensive and therefore considered unwritten.
The Court of Cassation annulled (1st Civil Law Chamber, judgment no. 21-16.476 of March 22, 2023) the appeal judgment, which did not rule on the “abusive nature of the clause, authorizing the bank to immediately recover the entire amount owed on the basis of the loan in the event of non-payment by the due date in day thereof, without formal notice or prior notice or notice of a reasonable period. Before any application of this clause, it was still necessary to assess whether it was an abuse or not, which the Court of Appeal failed to do. This case will go back to the new Court of Appeals and there is a good chance that the judges will qualify the disputed clause as unfair to the extent that it creates a significant imbalance between the parties. Therefore, such a clause cannot be imposed on consumers.
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