Arbitration clause in general terms and conditions/franchise agreement

Court of Amsterdam

Recently, the Amsterdam Court of Appeal ruled on a matter centering on the question of whether the arbitration clause included in the general terms and conditions had been legally agreed upon. Before going into the concrete circumstances of the judgment, I will first give a number of general considerations with regard to the inclusion of an arbitration clause in general terms and conditions. Finally, I will also indicate the importance of the present issue for franchise agreements.

Parties may agree that disputes arising between them from a particular legal relationship will be subject to arbitration. If an arbitration clause has been validly agreed between the parties, the consequence of this is that the civil court – except in the case of, in short, urgent matters – is not authorized to take cognizance of a dispute.

The law does not impose any requirements on the formation of an arbitration clause, for example arbitration can be agreed verbally. However, it is wise to agree to arbitration in writing. If one of the parties disputes the existence of an arbitration clause, the arbitration agreement must be proven in writing. A document that provides for arbitration or that refers to general terms and conditions that provide for arbitration and which has been expressly or tacitly accepted by or on behalf of the other party is sufficient for this.

An arbitration clause can therefore be included in general terms and conditions. For the applicability of the intended arbitration clause, the provisions regarding general terms and conditions are of paramount importance. For example, the stipulation may not be unreasonably onerous and the other party must be given a reasonable opportunity to take note of the general terms and conditions.

The applicability of general terms and conditions, including an arbitration clause in general terms and conditions, is often under discussion between parties. This was also the case in the case that was ultimately submitted to the Amsterdam Court of Appeal. What was the issue?

The parties had concluded an assignment agreement, about which the parties subsequently got into a dispute. One of the parties (the client) subsequently brought its claims to court. The other party (the contractor) immediately put forward that the civil court was not competent to hear the dispute, because the contract for services concluded between the parties contains an arbitration clause. In the order confirmation and the invoices sent, the contractor had explicitly declared the general terms and conditions of the Association of Dutch Architects (the SR 1997) to be applicable, as well as expressly noted that an arbitration clause was included in those general terms and conditions. The client had initialed and signed the order confirmation and returned it to the contractor. In addition, when concluding the contract for services, the client was assisted by an expert with regard to construction contracts, who had access to the relevant general terms and conditions and was familiar with their contents and with the fact that architects generally declare these terms and conditions applicable.

Based on the aforementioned considerations, the Court of Appeal was of the opinion that the client was familiar with the arbitration clause in the general terms and conditions declared applicable to the agreement, or at least could be deemed to have been aware of it. On this basis, the client was not entitled to invoke the voidability of the arbitration clause and the civil court was not authorized to take cognizance of the dispute, the Court of Appeal ruled.

Although in the said procedure it turned out well for the contractor in the sense that the arbitration clause was deemed to be legally valid, it is good that you – if you wish to include an arbitration clause in your general terms and conditions – be wary of the aforementioned issues and the arbitration clause in a legally correct manner.

Under certain circumstances, a franchise agreement can be regarded as a standard contract and, due to the so-called ‘reflex effect’, the  provisions regarding general terms and conditions apply to it. The above-mentioned problem must therefore (also) be taken into account by franchisors who wish to include an arbitration clause in the franchise agreement.

Mr DL Vermeer – Franchise Attorney

Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to vermeer@ludwigvandam.nl