The Court:

…

Given that article 1121 Code civil, containing the rules relating to contracts for the benefit of third parties, falls to be applied to a contract of life assurance when the policy is stated to be for the benefit of an identified third party, and given that to contend, as does the decision under attack, that the third party beneficiary cannot invoke article 1121 in as much as the insured is contracting only for his own benefit is futile, since first, there are certain situations when the benefit of the policy may indeed enure to the insured and secondly, the moral benefit of favouring the persons designated is enough to constitute a personal interest for the insured in the policy, and furthermore the insured promises to pay the insurer annual premiums, so that from no point of view is it possible to maintain that the insured contracts for his own benefit only and that article 1121 is therefore inapplicable;

Given that, in accordance with the final words of the article, the beneficiary designated in the policy who has intimated that he wishes to take advantage of the stipulation in his favour acquires an irrevocable personal right to have the insurer pay him the value of the policy on the death of the insured, provided that the premiums have been duly paid, by the insured or else by the third party himself, and given that the posthumous bankruptcy of the insured cannot affect this right or justify a claim by the syndic in bankruptcy that the policy is simply an asset which remains vested in the insured and is available for distribution to his general creditors;

…

Given that in ordering Depretz, the beneficiary, to hand over the policy to the syndic of the bankruptcy of Bény-Delobeau, the insured, the Court violated the article cited above as well as the principles relating to the contract of life assurance;

For these reasons QUASHES the decision below…

Subsequent Developments

This note on subsequent developments reflects the legal situation as of October 2004.

Civ 16 January 1888: A contract of life assurance which confers the benefit of the assurance on a determined person, constitutes a stipulation for the benefit of another (stipulation pour autrui), joined to a stipulation for oneself, within the conditions of article 1121 of the Code civil, either because the material benefit of the assurance can, in certain contingencies, revert to the insured, or because the moral benefit resulting for him from the advantages created for a beneficiary of his choice give him a personal interest in the agreement. The third party named by the policy of assurance who declares that he wishes to benefit from the stipulation made in his favour has an established personal right, by virtue of which the company is bound to pay him the assured sum at the moment that the insured dies, on condition that the premiums have been paid by the insured or, in default, by the third party himself. The insured's bankruptcy does not authorise the trustee (syndic) to consider, contrary to the third party's established right, that the policy of assurance constitutes a transferable security remaining in the bankrupt's estate, and ought consequently to revert to his creditors. Cour de cassation, civil chamber, 12 July 1956: although the third party beneficiary of a stipulation made for the benefit of another acquires as against the promisor a direct right of his own, the insured nonetheless has from it an action in execution under the promise signed by the debtor: case law maintained.

The judgment of the 16 January 1888 is the first of a series of famous judgments given in 1888 by which the Cour de cassation decided that the assured who contracts for an assurance for the benefit of a third party makes a valid stipulation for the benefit of another. For this it suffices that the insured has an interest in the transaction, whether it is material (Civ 3, 28 March 1968, Bull no 145) or purely moral (Civ 1, 12 April 1967, Bull no 125). When this interest exists, a stipulation for the benefit of another is valid, without the insured needing to have likewise contracted for himself. It is therefore unnecessary for the stipulation for the benefit of another to be linked to a reciprocal (synallagmatique) contract between the insured and the promisor, or to a gift. The stipulation for the benefit of another thus declared valid gives rise to a direct right for the benefit of the third party beneficiary which comes into existence on the date of the contract, and becomes irrevocable by its acceptance, creating an obstacle, in this case, to the claims of the trustee, when the insured became bankrupt. More generally, the existence of this direct right prevents giving satisfaction to the insured's creditors (a solution since repeated by a law of the 13 July 1930 relating to contracts of assurance: Assurance Code, art L 132-12 ff).

As to the judgment of the 12 July 1956, according to Gerard Legier (Jurisclasseur civil, arts 1121 and 1122, no 168), "it has been acknowledged for a long time that the beneficiary has a direct right against the promisor. Plentiful case law simply affirms that the stipulation for the benefit of another "immediately confers a right on the third party for whose benefit it takes place" (Cf in particular Cass civ 16 January, 8 February and 7 August 1888, Req 30 April 1888, and more recently Civ 1, 12 July 1956, stating that it is a question of a "direct right of one's own" and Civ 3, 30 October 1969, Bull no 696). Nevertheless, by this judgment the Cour de cassation affirms for the first time the principle that the insured has an action in execution under the promise signed by the debtor for the benefit of the third party; case law maintained since then (Com 14 May 1979, no 153, Civ 1, 7 June 1989, Bull no 233, 15 December 1998, Bull no 362: "the signatory to a contract of assurance involving a guarantee for the benefit of a third party necessarily has the capacity to demand performance of this guarantee"; 14 December 1999, Bull no 341: "A company which has stipulated for the benefit of designated third party beneficiaries has the capacity to demand performance of the contract to which it is the signatory").

Translation by Mr Raymond Youngs

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This page last updated Thursday, 15-Dec-2005 09:05:51 CST. Copyright 2007. All rights reserved.