Notice of Formal Notice: 15 days—is that too short a period?
A bank grants a mortgage loan to an individual.
Following several missed payments, the financial institution then serves the borrower with a formal notice to remedy the situation within fifteen days. At the end of this period, it declares the loan due and payable and sues the borrower in court for payment of the amounts and contractual interest owed.
The borrower contested the claim. In support of his argument, he asserted that the clause in a mortgage loan agreement providing for acceleration of the term following an unsuccessful fifteen-day formal notice was unfair. He ultimately prevailed in court.
Upon reviewing the case, the Court of Cassation reiterated that “in contracts concluded between professionals and non-professionals or consumers, clauses are unfair if they have the effect of creating, to the detriment of the non-professional or consumer, an imbalance between the rights and obligations of the parties to the contract.”
Thus, it held that a clause providing for automatic termination following a formal notice with a notice period of only fifteen days is not of reasonable duration, since it “creates a significant imbalance between the rights and obligations of the parties to the detriment of the consumer, who is thereby exposed to a sudden worsening of the repayment terms.”
