||Court of Cassation, Commercial Chamber Application for Review No. 00-21620 Case Société Nancienne Varin Bernier v M. X and Mme. Y
||In a period of financial and economic engineering, this interesting case illustrates several of the peculiarities of French law. A bank loaned a sum of money to M. X. against the security of mortgages, it being provided that the money would be made available as working capital to the company of which the latter was the managing director. The loan was evidenced in a notarised document. When the company went into liquidation, the borrower claimed that the loan was a sham involving fraud on the company’s creditors and that the real borrower was the company. The judgement relies on a somewhat elliptical provision of the Civil Code, Article 1321, which lays down that occult agreements containing contrary provisions to those of a principal agreement (“contrelettres”) bind only those who are parties to them. Abundant case law has created a rich doctrine about sham agreements on the basis of this provision. The judgement also considers the binding effect of facts stated in a notarised document, which, pursuant to Article 1319 of the Civil Code, is deemed to be absolute evidence of its contents until an action is brought (involving both the document and the notary who drafted it) to have it declared false.