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
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.
Supermarket letter – 26
Supermarket Newsletter No. 26
Link franchise agreement and rental agreement uncertain? – dated October 14, 2019 – mr K. Bastiaans
It is no exception within a franchise relationship that the parties agree that the franchise agreement and the rental agreement are inextricably linked.