Dissolution of the franchise agreement justifies dissolution of the related lease agreement

Court of Gelderland

By judgment of 22 January 2014 (ECLI: NL. RBGEL: 2014: 377), the District Court of Gelderland reached a remarkable judgment for the franchising practice regarding the lease agreement between various parties associated with a franchise agreement.

In short, the court upholds the franchisee’s appeal for dissolution of the franchise agreement for breach of contract. Simultaneously with the franchise agreement, the franchisee entered into a lease agreement with regard to so-called cardio scan equipment. Although the lease agreement was entered into with an independent leasing company and it was expressly stipulated in the franchise agreement that the lease agreement would continue regardless of the termination of the franchise agreement, the court nevertheless reached a different conclusion.

Because the leasing company, without verifying the actual situation, allowed a large number of lease agreements to be concluded within a relatively short period of time, it accepted the risk that the intermediaries involved would give rise to the expectation that this was a total package in terms of combination with a franchise agreement. An additional factor was that the leasing company stated that it was aware of the franchisor’s payment problems. The court therefore concludes that there are such related agreements that the dissolution of the franchise agreement can also lead to the dissolution of the lease agreement.

The court also disregards an appeal to the general terms and conditions with regard to the exclusion of the power to suspend the lease installments due to the unreasonably onerous nature thereof.

In this judgment, the court thus attributes part of the duty of care to the leasing company and accuses it as a whole of adopting an attitude that is too passive, which ultimately justifies dissolution. In fact, this constitutes an extended duty of care at the expense of those who also benefit from the franchise relationship.

Now that operating assets for the operation of franchise companies are increasingly being leased instead of being purchased with a bank loan, this requires a more active attitude on the part of the leasing company. The question arises to what extent such a liability claim could also be extended to other financiers of franchise operations. After all, the line is thin between a leasing company and other financiers. Under certain circumstances, other financiers may also be expected to adopt an active attitude in relation to the franchise proposition and the financial obligations to be entered into, whether or not in relation to forecasts and/or the financial strength of the franchising organisation. On the other hand, it is dogmatically possible to bargain with the rather far-reaching reasoning of the District Court of Gelderland.

Mr J. Sterk – Franchise lawyer

Ludwig & Van Dam Franchise attorneys,franchise legal advice. Do you want to respond? Mail to Sterk@ludwigvandam.nl