Duty of care of the financing bank with regard to forecast and franchise agreement
On 16 March 2016, the District Court of Rotterdam, ECLI:NL:RBROT:2016:1769, rendered a judgment on the question to what extent the
bank could have provided financing to a franchisee for entering into a franchise agreement and operating the
Franchise formula.
The bank had provided financing to the franchisee for operating a franchise formula under a franchise agreement with the franchisor. Because the franchisee fails to meet its payment obligations to the bank, the bank has demanded the financing provided. The franchisee accuses the bank of violating its banking duty of care. The court ruled that the banking duty of care serves to protect borrowers against their own rashness and lack of insight. The extent of this duty of care depends on the circumstances of the case, such as the expertise and experience of the borrower and the complexity and risks of the credit product. If a lender has failed in its duty of care, this may lead, among other things, to Article 6:248(2) of the Dutch Civil Code preventing the claim for (full) repayment of the credit taken out.
The franchisee points to a number of circumstances that would cause the bank to breach its duty of care, including the existence of the franchise agreement. However, the court is of the opinion that the nature and content of the franchise agreement does not mean that the bank has a more far-reaching duty of care than described above. The nature and content of the franchise agreement were irrelevant here, as it would concern a regular financing agreement whereby the risks for the franchisee were clear.
It does not appear from the judgment that the franchisor had provided the franchisee with a prognosis and furthermore it does not appear whether the bank also took a prognosis into account in its decision to provide the financing. It is not inconceivable that in that case the bank should (also) have protected the franchisee against its own rashness and lack of insight. If the prognosis was unsound, and the bank (seen
her expertise), the franchisee might have been more successful in defending the bank. Perhaps a parallel can be drawn here between the banking duty of care and the duty of care that under certain circumstances is also imposed on a franchisor.
mr. AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice.
Do you want to respond? Go to dolphijn@ludwigvandam.nl
Other messages
Damage estimate after wrongful termination of the franchise agreement by the franchisor
In a judgment of the Supreme Court of 15 September 2017, ECLI:NL:HR:2017:2372 (Franchisee/Coop), it was discussed that supermarket organization Coop had not complied with agreements, as a result of which the franchisee
Franchisor is obliged to extend the franchise agreement
On 6 September 2017, the Rotterdam District Court ruled, ECLI:NL:RBROT:2017:6975 (Misty / Bram Ladage), that the refusal to extend a franchise agreement by a franchisor
The (in)validity of a post-contractual non-competition clause in a franchise agreement: analogy with employment law?
On 5 September 2017, the District Court of Gelderland, ECLI:NL:RBGEL:2017:4565, rendered a judgment on, among other things, the question of whether Bruna, as a franchisor, could invoke the prohibition for a
Column Franchise+ – mr. J Sterk: “Court orders fast food chain to extend franchise agreement
The case is set to begin this year. For years, the franchisee has been refusing to sign the new franchise agreement that was offered with renewal, as it would lead to a deterioration of his legal position
Not a valid non-compete clause for franchisee
On 18 November 2016, the interim relief judge of the Central Netherlands District Court, ECLI:NL:RBMNE:2016:7754, rendered a judgment in the issue concerning whether the franchisee was held
Franchise & Law No. 5 – Acquisition Fraud and Franchising Act
The Acquisition Fraud Act came into effect on 1 July 2016. This includes amendments to Section 6:194 of the Dutch Civil Code.