Competing without a non-competition clause?
The franchise non-compete obligation remains a source of dispute. The Court of Appeal of ‘s-Hertogenbosch ruled on 27 May 2014 (ECLI:NL:GHSHE:2014:1502) on a matter that raised the question whether competing activities were permitted because no non-compete clause had been agreed.
A franchise entrepreneur of a funeral company sells his company to another. The buyer enters into a franchise agreement with the franchisor. After some time it turns out that the seller arranges funerals in the area where he was also active before the sale of his company.
The court, like the court, is of the opinion that the seller was not allowed to arrange funerals and was allowed to keep the profit. After all, the seller had sold that part of the company to the buyer for good money. It follows from the requirements of reasonableness and fairness that the seller must refrain from competing with the company that he has sold. This also applies if, as here, the parties have not included a non-competition clause in the purchase agreement.
The selling party is itself one of the partners of the franchisor. The franchisor is a general partnership. The franchise agreement prohibits the franchisor from entering into franchise agreements with other franchisees for a particular territory. It was therefore all the more true that the seller’s competitive activities within the territory were unacceptable.
This issue once again shows the importance of clear agreements. When transferring franchise companies, it is always wise to agree on the subject of competition. Even if it is agreed that no restriction of competition applies, it is also important to record that.
Mr AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys,franchise legal advice. Do you want to respond? Mail to dolphijn@ludwigvandam.nl
Other messages
Article Franchise+ – Franchisees enjoy the same protection as employees and commercial agents with regard to a non-competition clause – dated 7 May 2020 – mr. RCWL Albers
It often happens that, especially by franchisees, the validity of a post-contractual non-compete clause is considered too lightly.
The support agreement for the Retail sector in this Corona crisis – dated 15 April 2020 – mr. K. Bastian
On April 10, 2020, the Ministry of Economic Affairs, together with a number of landlords, retailers and banks, reached a support agreement.
Court rules that corona crisis does not constitute force majeure – dated April 10, 2020 – mr. AW Dolphin
If payment cannot be made due to a decrease in income, then there is not always a force majeure situation.
Important information for directors of franchisees associations: Online meetings and decision-making in times of corona – dated April 10, 2020 – mr. J. Strong
Emergency law provisions for legally valid decisions without physically meeting within the association structure.
Unilateral amendment of the franchise agreement by the franchisor allowed? – dated April 7, 2020 – mr. K. Bastian
Is the franchisor allowed to implement certain announced changes/adaptations to the formula on the basis of the franchise agreement agreed between the parties?
Legal scientific publication: “Collective actions of franchisees” – dated April 2, 2020 – mr. AW Dolphin
An article by mr. Alex Dolphin