Franchisor convicted under the Acquisition Fraud Act
For the first time, a court has ruled, with reference to the Acquisition Fraud Act, that if a franchisee claims that the franchisor has presented an unsatisfactory forecast, the franchisor must prove that the forecast is sound. Our office has represented the interests of the franchisee in court in this regard. The court ruled that the franchisee may appeal to a reversal of the burden of proof pursuant to the Acquisition Fraude Act (Section 6:195(1) of the Dutch Civil Code). This reversal of the burden of proof also applies to situations prior to the introduction of the Acquisition Fraud Act on 1 July 2016, according to the court.
The problem with forecasts that do not materialize is that it is often difficult for franchisees to determine why the expectations raised are not being realised. If a franchisee suspects that a mistake has been made by the franchisor, this will be difficult for the franchisee to prove. Cooperation from the franchisor cannot always be counted on and the franchisor may refuse to divulge trade secrets. The Acquisition Fraud Act came into effect on 1 July 2016 for these and other issues. If there is a sufficiently substantiated argument that there is a case of deception, the burden of proof can be reversed. If the evidence is not successful, the wrongful act can be established.
The court of Zeeland-West-Brabant recently applied the Acquisition Fraud Act for the first time to a forecast issue. The franchisee had accused the franchisor of having acted unlawfully by providing an unsatisfactory forecast. The franchisor was then sentenced to prove that the prognosis had been drawn up properly.
Although the Acquisition Fraud Act entered into force on 1 July 2016, the court ruled in its judgment that the reversal of the burden of proof also applies to forecasts issued before 1 July 2016. The court considered that the legislator did not make any distinction at the time of entry into force in the applicability of the provisions to agreements concluded before or after the entry into force of the law. According to the court, freely translated, this would moreover fit within the legal opinions already applicable in the Netherlands about the franchisor’s duty of care.
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
Article Mr. C. Damen – “When does the obligation to provide proof apply for the submission of the franchise agreement?” dated August 17, 2020
Does the obligation to produce information apply to showing a (franchise) agreement in proceedings if the parties to the proceedings do not have a legal relationship to the (franchise) agreement?
Article Mr. AW Dolphijn – “How do you value a franchise company with a discharge loan?” – dated August 14, 2020
A discharge loan is a proven means of franchisors to find long-term franchisees.
Article De Nationale Franchise Gids: “Information obligations of the intended franchisee under the Franchise Act” – dated August 7, 2020 – mr. AW Dolphin
Although the purpose of the Franchise Act is to protect franchisees against franchisors, a number of obligations have also been laid down for franchisees.
Legislative text of the Franchise Act – dated July 24, 2020 – mr. AW Dolphin
The legal text of the Franchise Act was published in the Staatsblad on 1 July 2020. The full legal text reads as follows:
Law Franchise – dated July 23, 2020 – mr. AW Dolphin
The Franchise Act will have a considerable impact on both franchisors and franchisees.
Contractual dissolution requirements not observed? No legal dissolution of the franchise agreement – dated July 23, 2020 – mr. C. Damen
Can a franchisor terminate the franchise agreement if it has failed to comply with its own contractual requirements?