Commercial lease termination clause and the defence of non-performance

Termination clause in a commercial lease: the tenant may still rely on the defence of non-performance, even after the one-month period

The Cour de cassation has just handed down a landmark decision for the balance of commercial lease relationships. In a decision of 5 March 2026 (Cour de cassation, 3rd Civil Chamber, No. 24-15.820, published in the Bulletin), the Third Civil Chamber states clearly that the expiry of the one-month period following service of a payment demand (commandement de payer) invoking the termination clause (clause résolutoire) of a commercial lease does not prevent the tenant from relying on the defence of non-performance (exception d'inexécution), including where the tenant has neither paid the rent nor applied to the court within that period. This decision redraws the lines of one of the most frequent types of lease litigation.

Context: the payment demand, the commercial landlord's usual weapon

In commercial lease relationships, non-payment of rent is the favourite ground for lease litigation. Faced with a defaulting tenant, the landlord has a formidable mechanism: the termination clause, systematically included in commercial leases, which provides for the lease to be terminated automatically if the tenant fails to perform its obligations.

To set this mechanism in motion, the landlord must serve a payment demand expressly invoking the termination clause, by a deed of a commissaire de justice (bailiff). Article L. 145-41 of the French Commercial Code provides that a period of one month runs from that demand: during this period, the clause cannot take effect. After this period, if the tenant has not paid or has not obtained from the court time to pay and suspension of the clause, termination is in principle established. The formalities of this deed, on which termination depends, are set out in our article on the payment demand invoking the termination clause.

In the case brought before the Cour de cassation, the commercial premises suffered from major defects that made them unfit for their purpose. The tenant had suspended payment of the rent, considering that the landlord was not performing its obligation of delivery. The landlord then served a payment demand. The tenant neither paid nor applied to the court within the one-month period. The Cayenne Court of Appeal had concluded that the termination clause had taken effect, and that the defence of non-performance, raised later, was ineffective, the lease having already come to an end.

The Cour de cassation overturns this analysis.

The previous legal framework: an incorrect interpretation of the one-month period

The termination clause in a commercial lease: a reminder of the mechanism

Article L. 145-41 of the Commercial Code governs the operation of the termination clause in commercial leases. It requires that the payment demand be served by an extrajudicial deed, and that the one-month period elapse before the clause can take effect. The same provision, in its second paragraph, is decisive: termination may be "recorded or ordered" only by a court decision that has acquired the force of res judicata. Until such a decision is given, the tenant may apply for time to pay and for suspension of the clause.

The Court of Appeal's error: treating the one-month period as a forfeiture period

The Cayenne Court of Appeal had held that the tenant's inaction within the one-month period resulted in forfeiture (forclusion) of any defence. This reading turned the statutory waiting period, which is merely a safety net for the tenant's benefit, into a genuine procedural guillotine. This interpretation is contrary to the settled case law of the Cour de cassation, which had already held as early as 1992 that the tenant may apply to the court for time to pay even after the expiry of the month (Cour de cassation, 3rd Civil Chamber, 15 January 1992, No. 90-16.059), including for the first time before the court of appeal (Cour de cassation, 3rd Civil Chamber, 14 June 2006, No. 05-12.042).

More remarkable still: the Cour de cassation had held that the two-year limitation period cannot be raised against the tenant's application for suspension (Cour de cassation, 3rd Civil Chamber, 3 June 2021, No. 20-14.677).

The contribution of the decision of 5 March 2026: the defence of non-performance remains available

The one-month period is only a waiting period

The quashing rests on a two-stage reasoning. First, the Court reaffirms that the one-month period is not a forfeiture period. Its expiry does not deprive the tenant of the possibility of challenging the payment demand, on the merits as well as on form, or of applying for time to pay and for suspension of the termination clause. These rights remain open as long as termination has not been recorded or ordered by a decision that has become final, in accordance with the second paragraph of Article L. 145-41 of the Commercial Code.

The defence of non-performance, an autonomous mechanism that remains available

Second, the Court upholds recourse to the defence of non-performance, codified in Article 1219 of the French Civil Code since the Ordinance of 10 February 2016 reforming contract law: "A party may refuse to perform its obligation, even where it is due, if the other party does not perform its own and if that failure is sufficiently serious." Before the reform, this rule derived from case law.

The tenant had good reason not to pay: the premises were unfit for their purpose, which amounted to a serious breach by the landlord of its obligation of delivery under Article 1719 of the Civil Code. The tenant was therefore under no obligation to pay rent that it legitimately considered not to be due. The continuing nature of this obligation and its effects on limitation are analysed in our article on failure to deliver and obsolescence in commercial leases.

The Court also relies on a recent decision of 18 September 2025 (Cour de cassation, 3rd Civil Chamber, No. 23-24.005), under which the tenant may rely on the defence of non-performance without having first served formal notice on the landlord. This point is important: the defence of non-performance is not subject to any particular prior formality where the landlord's defective performance is manifest.

Practical consequences for the parties

For the commercial tenant

This decision is a significant procedural shield. A tenant faced with defects making the premises unfit for their purpose may legitimately suspend payment of the rent, and may rely on this defence of non-performance even if, once the payment demand has been served, it did not act within the one-month period. It is not enough for the landlord to have started the termination clause procedure for the tenant to be definitively found in default. The defence of non-performance remains open to the tenant until termination is definitively recorded by the court. The opposite situation, in which the tenant itself seeks to end the lease, is dealt with in our article on the termination clause and termination by the tenant.

For the landlord

The decision recalls that the termination clause, however powerful, is not an automatic mechanism. Where the tenant can rely on a serious breach by the landlord of its obligations, in particular the obligation to deliver and maintain the premises (Articles 1719 and 1720 of the Civil Code), the payment demand may prove ineffective. A landlord who neglects the condition of the premises while seeking to obtain the benefit of the termination clause exposes itself to failure in the litigation.

Identified litigation risks

First risk: the blocking of the termination clause. Since the defence of non-performance may be raised at any stage of the proceedings, up to the final decision, the landlord can never treat termination of the lease as established until the court has ruled. Proceedings may be significantly prolonged.

Second risk: requalification of the breach. The seriousness of the landlord's breach is assessed by the lower courts at their sole discretion. A defect judged not serious enough will not allow the tenant to justify the total suspension of rent. Rigorous evidence of the defects and of their impact on the business will need to be established.

Third risk: the accumulation of arrears. If the tenant suspends the rent on the basis of the defence of non-performance without that suspension being later upheld, it will be exposed to an order to pay the rent that has fallen due plus interest. The suspension strategy must therefore be documented and proportionate.

Fourth risk: the two-year limitation period for actions challenging the demand. If the tenant intends to challenge the payment demand itself, on its form or its substance, it must remain mindful of the limitation periods (two years for actions relating to the commercial lease, five years for ordinary-law actions depending on the nature of the complaint).

Strategies and recommendations

For the tenant facing defects

First, immediately document the defects affecting the premises, on an adversarial basis: reports by a commissaire de justice, an amicable expert's report, written notifications to the landlord by registered letter with acknowledgement of receipt. The evidential force of the defence of non-performance rests entirely on demonstrating the landlord's serious breach.

Second, do not wait for a payment demand to be served before acting: serve formal notice on the landlord to remedy the defects, or even apply to the summary proceedings judge (juge des référés) for an order for works or for the rent to be paid into escrow.

Third, where a payment demand is served, do not remain passive: apply to the court for time to pay and for suspension of the termination clause, and expressly raise the defence of non-performance. The decision of 5 March 2026 confirms that this course remains open even after the expiry of the one-month period.

For the landlord

Maintain the premises and respond without delay to the tenant's notifications. A landlord who lets the premises deteriorate while serving a payment demand runs the risk of the court paralysing the termination clause. If works are necessary, start them promptly and show their progress in order to reduce the scope of the defence of non-performance.

Before serving a payment demand, check carefully that the tenant cannot plead a serious breach of the obligation of delivery. A prior audit of the condition of the premises, together with a possible joint inspection report, makes it possible to anticipate this risk.

Conclusion

The decision of 5 March 2026 recalls a fundamental rule of reciprocal contracts: the obligation of one party cannot be demanded independently of that of the other. In a commercial lease, the obligation to pay rent cannot be imposed on the tenant if the landlord seriously breaches its obligation of delivery. The termination clause, a formidable instrument, cannot neutralise this principle.

For the practitioner, the lesson is twofold: termination clause proceedings must be conducted rigorously, but also with a clear-sighted assessment of the landlord's contractual position. And for the tenant, the defence of non-performance remains a robust defence, provided it is based on a serious and properly documented breach.

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