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
Advance on compensation after an unsound prognosis
In a beautifully substantiated summary judgment of the Northern Netherlands Court of 9 April 2014, the question was whether an advance should be paid for the damage assessment procedure.
Collection point requires shopping destination
In my supermarket newsletter of July 11, 2013, I already predicted that the establishment of collection points for goods ordered via the internet would set the judicial pens in motion.
Developments and sales via the internet.
Developments and sales via the internet.
Supermarket letter – 4
Developments and sales via the internet
Nightlife Franchise
Few nightclubs are affiliated with a chain. That is quite remarkable. We see that quite a lot in the general catering industry.
mr. Th.R. Ludwig gives a course for franchisees at the NFV
mr. Th.R. Ludwig gives a course for franchisees at the NFV