The alleged scam came to light after a disciplinary committee decided last month to expel the boy.
"The father said to the committee 'I don't understand why he is being expelled when I'm paying so that he isn't'," said Bernard Beffy, prosecutor in the northern town of Avesnes-sur-Helpe.
The boy first got into trouble in December 2011, for throwing scrunched-up paper at the teacher now under investigation. Six months later, the teacher contacted the parents and asked for 10,000 euros compensation for the "serious traumatic impact" of the boy's "attack".
As the parents could not come up with the cash, negotiations followed which resulted in the two parties agreeing a knocked down fee of €7,500, which the family would pay the teacher and his partner in monthly installments of €300.
A contract was signed and the parents began paying to keep the child in school. "The deadlines for the payments were made quite clear," said the prosecutor. "They even stipulated that the February payment will be handed over on the 28th rather than the 20th."
The supply teacher denied any accusations of wrong doing to police. He and his partner face prison terms of up to seven years if convicted.
Appearing in court on Friday the teacher claimed he was the "victim" and that the boy's family was behind the "financial arrangement".
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"They wanted it to avoid their son getting in trouble with the police and so that it would not have any impact on the father's career', he said.
The teacher has been barred from approaching the school.