French property buyers have a limited duration right of withdrawal which, once used, cannot be rescinded without entering into a new contract, a French court has ruled.

The operation of this 'droit de rétractation' is subject to frequent litigation, achieving legendary status in 2010 when a Russian billionaire lost a deposit of €40 million when he withdrew from the purchase of a villa on the Cote d'Azur, which he had agreed to buy for nearly €500 million.

In that particular case the deposit was lost as the right of retraction is not available to those who purchase via a French property company, called a Société Civile Immobilière (SCI). It is only available to individuals.

However, what happens if a buyer decides to withdraw from the purchase, but later changes their mind?

This question was considered recently in the French courts, involving a buyer who signed a contract for the purchase of a property in the Basque town of Bayonne for the sum of €360,000, paying a deposit of €19,000.

The sale and purchase contract was signed by both parties on 4th April under the auspices of the selling agents. The buyer received a formal copy of the contract, together with information on her right of retraction on 7th April, the date from which the 7-day cooling off period began.

On 12th April (and so within the period allowed for withdrawal), the buyer notified the estate agent by recorded delivery letter that she had decided to withdraw from the purchase as she had discovered termites in the property which she did not know about at the time she signed the contract.

Clearly fraught with indecision, within a few days the buyer sent a further letter in which she stated she wished to now proceed with the purchase.

However, although the buyer had been successful in obtaining a mortgage for purchase of the property (a conditional clause of the contract), she failed to turn up for signing of the deed of sale, the acte authentique, on the scheduled date of 9th July.

As a result both the seller and the estate agents commenced a legal action for compensation, the former seeking payment of the desposit and the latter their sale commission.

Initially the lower courts judged that the seller was entitled to damages, but this decision was ultimately overturned by the French Supreme Court, the Cour de Cassation.

They found that the decision to use the right of withdrawal meant that the contract was automatically annulled, and that it was impossible to retract the retraction!

In these circumstances, the sale and purchase could only proceed on the basis of a new contract. As this had not occurred, the seller was not entitled to damages.

In neither hearing did the courts find in favour of the estate agents, as under French law the commission is only due if the sale is completed, although there are limited circumstances when the seller might be still liable for damages to the agent if they do not proceed with the sale.