Franchise agreements and the corona crisis – dated March 20, 2020 – mr. AW Dolphin

A time of draconian measures with far-reaching consequences. Legal
there is a lot of ambiguity, also in franchise relations. On the one hand there are
forced shop closures in the hospitality industry. The franchisee cannot handle this
the obligations under the franchise agreement, such as a purchase obligation,
to fulfil. On the other hand, supermarket entrepreneurs, for example, are struggling with a
explosive demand and shortages on the shelves. The franchisor can
cases do not meet demand and are not delivered on the
orders. Extreme conditions! 

Extreme circumstances such as force majeure?

There will be few franchise agreements in which expressly
it has been laid down what the rights and obligations of the parties are in times of the
emergency measures, as currently under discussion. Yet it is as well
possible that agreements have been laid down in the contracts. On the first
Instead, it is important to examine the content of the agreements. For whose
risk comes the impossibility to fulfill?

In principle, contractual agreements take precedence over the law. If there is none
agreements, then the law applies. The law stipulates that force majeure no
causes malpractice.

“A shortcoming cannot be attributed to the debtor if they
is not due to his fault, nor by law, legal act or
prevailing views in traffic is at his expense.”

If a franchise contract is no longer due to an (emergency) law of the government
can be exercised, there may be force majeure. The
franchisee who is required to open the doors of his store on weekdays
to keep open (operating obligation), can be difficult to do as a
emergency measure prohibits this. The franchisor who is not the extreme demand
can handle for practical reasons, that can perhaps not be faulted.

An (emergency) law can also contain rules on how risks are distributed
and when force majeure can be invoked.
Furthermore, the judge can be asked to intervene and make a case
adapt to unforeseen circumstances.

Under certain circumstances, despite force majeure, a
obligation from the agreement be suspended, or an agreement
be terminated prematurely. This greatly depends on the circumstances of
the case.

What to do in extreme conditions

It totally depends on the contractual arrangements and the specific
circumstances, but a guideline is the following:

1. Find out if there are force majeure provisions;

2. If you invoke force majeure: share with the contractual counterparty
(motivated) also that there is force majeure and cannot be done
fulfilled;

3. Are you confronted with an appeal to force majeure: ask how long
cannot be fulfilled;

4. Is damage covered by insurance?

5. It may be considered to review whether obligations from the contract
can be suspended;

6. Consideration may be given to whether the contract can be dissolved;

7. Start the conversation and discuss!

It is important to act with caution and a reasonable attitude is of
required everyone! For further information you can contact us at any time
consult.

mr. AW Dolphijn – franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Want
you respond? Go to dolphijn@ludwigvandam.nl