Can multiple promises of debt repayment and failure to fulfil a contractual obligation be regarded as fraudulent?

According to Article 228(1) of the Penal Code, the criminal offence of business fraud is a special form of fraud that can only be perpetrated when carrying on a business activity, whereby for the legal elements of this crime to be met the offender must have sought to defraud. The offender must deceive another person in order to give this person the impression that certain circumstances exist or mislead them into thinking so. Deceit can manifest itself by showing that the obligations have been fulfilled or concealing that the obligations will not be fulfilled.

In the above-mentioned case before the Supreme Court, the description of the criminal offence envisioned that the defendant “agreed on the form and conditions of business” and “promised in each case a regular payment”. However, such claims (and subsequent failure to fulfil their contractual obligations) do not meet the proof for the legal element of deceit, since it is impossible to deduce the existence of the legal elements of deceit based on the content and nature of the aforementioned commitments – namely because such commitments are commonplace in all contractual relationships. Because the fulfilment of the assumed obligations is a fundamental duty of all parties to the contractual relationship, the contractual commitments or promises of payments by a given debtor do not in themselves constitute the legal element of deceit nor the criminal offence of business fraud.

Therefore, in order to precisely define the legal element of deceit one must prove that the offender was aware that, despite having given contractual commitments and promises to the other party, the obligation would not be fulfilled. This Supreme Court explanation will undoubtedly affect a number of criminal charges already filed arising from debtors’ promises of regular payments, promises of debt repayment, non-payment of contractual obligations, etc.

This Supreme Court decision thus represents an important milestone when considering the criminal act of business fraud in general and in particular regarding the treatment of debtors’ liabilities, where one of the contracting parties fails to fulfil its obligations within the agreed deadline.