Error in prognosis dealer agreement (or franchise agreement)

The subdistrict court in The Hague ruled on 11 November 2014 (2650159 RL EXPL 13-40354) on the question of whether an appeal to error in entering into a rental and dealer agreement succeeds. In fact, the  cooperation to be a form of franchising. 

Due to disappointing turnover and operating results, the franchisee can no longer meet his payment obligations towards the franchisor. Although the franchisor apparently still made efforts to see whether it could bring the turnover up to par, the franchisee  the  franchise agreement nullified on the basis of error, or at least dissolved due to alleged shortcomings,  and  leave the rented property. The franchisee invokes this, among other things  on the statement that prior to the conclusion of the franchise agreement, a number of connections of mobile telephone subscriptions from the previous year  has been passed on, while those numbers are not (or no longer) achieved by the franchisee. 

With this, the franchisee assumes that the franchisor has no choice but to involve the franchisee in proceedings to settle the outstanding debts.

The franchisee raises an incident, which demands access to all agreements of the franchisor  with suppliers/providers for whom the franchisee concluded subscriptions/contracts (ex Article 843a Rv). With this, the franchisee claims to be able to substantiate that the franchisor would not have fulfilled its obligation to obtain a purchasing advantage. Moreover, this could further substantiate the claim of error. Furthermore, the franchisee claims payment of several hundred thousand euros in counterclaim, apparently as a result of undue payment as a result of the appeal to  destruction for error.

The subdistrict court found that the lower turnover after entering into the franchise agreement was apparently due to the fact that the store had moved from the ground floor to the first floor in the previous year. However, the franchisor disputes this knowledge and apparently points out that they  has only first become a tenant/(sub)landlord  of the business space,  when entering into the franchise agreement with the franchisee in question. In addition, the franchisor had stated that it had no business details of the company that operated a similar store before the conclusion of the franchise agreement. At the insistence of the  (then aspiring) franchisee, the franchisor has inquired with the previous operator and  the notifications of the number of closed connections from the previous year were immediately passed on to the (then aspiring) franchisee.

It follows from the Paalman judgment (HR 25 January 2002, ECLI:NL:HR:2002:AD7329) that a franchisor is not obliged to inform the franchisee about the expected turnover or about the profit forecast. There does not seem to be any such prognosis here  to be. It is also questionable whether this concerns a (different) provision  information  originating from the franchisor, such as with regard to the number of connections concluded in the previous year. That intelligence  is not  to be counted as information  by  the franchisor, but is merely an information of  a third party who has passed on to the franchisor, the subdistrict court seems to have ruled. It follows from the judgment of the Supreme Court of 1 February 2013 (ECLI:NL:HR:2013:BY3129) that for a successful appeal on error  the information  not directly  from the other party  but also be able to reach the erring one via a detour. However, it must always be information from the other party. That does not seem to be the case in the present case. Moreover, the correctness of the communication is not disputed. The point is that the franchisee apparently assumed that the predecessor company, not being a franchise company or branch of the franchisor, had moved to the first floor earlier than expected. The franchisee believes that the franchisor had a duty of disclosure in this regard. Apparently the franchisor disputes this knowledge. The subdistrict court therefore rules that the duty of investigation of the franchisee in relation to the duty of information of the franchisor prevails in this case.

With regard to the incident, with which access is requested to all agreements that the franchisor  with suppliers/providers for whom the franchisee concluded subscriptions/contracts, this claim is also rejected. The subdistrict court ruled that Article 843a paragraph 1 Rv requires that the franchisee should be a direct party to the relevant agreements, which is not the case. In addition, the franchisee does not appear to have provided any evidence that the franchisor has failed in its obligation to obtain a purchasing advantage. The subdistrict court also added that there are other ways to get the franchisor to account and account for it. This could include, for example, a witness hearing.

All in all, an outcome that seems justified on the basis of the (process) strategy read. The manner in which the problem statement has been approached on the part of the franchisee is risky. Before embarking on such a course, the franchisee must be very sure of herself  because if this fails, there is a chance that the franchisor will be inexorable  will “hit back”. It is therefore extremely important to conduct a careful and thorough investigation into the success rate of a forecasting issue before it is deployed. A different approach to the case might have generated a different outcome.

Mr AW Dolphijn – Franchise lawyer

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