Incorrect forecasts: no dissolution of the franchise agreement
Franchise lawyer, franchise agreement, forecast
On 6 January 2010, the preliminary relief judge of the District Court in The Hague rendered a judgment that could have major consequences for the franchise practice. Based on this judgment, it will become considerably more difficult for a franchisor to terminate a franchise agreement with a franchisee if the franchisor previously, at the time of entering into the franchise agreement, provided unsatisfactory forecasts to this franchisee.
A dissolution of an agreement can only take place if various elements are met, such as, in certain cases, default on the part of the other party. If a franchisor has previously provided an unsatisfactory forecast to a franchisee, the franchisor will automatically be in default by operation of law because it commits an unlawful act against the franchisee. As a result, the franchisee will not in turn be in default, so that the franchisor cannot pronounce the dissolution as a result.
This is important for the legal development of the case law in the area of franchising, because it has never before been so clearly established by a court that, due to the franchisor’s automatic default, a dissolution invoked by the franchisor is ineffective. In practice, this will mean that franchisees who have been provided with unsatisfactory forecasts by their franchisee at the time of concluding the franchise agreement can more easily defend themselves against an attempt to dissolve the franchise agreement by the same franchisor.
Franchisors are therefore – also for this reason – well advised to ensure that all forecasts they provide to potential franchisees are sound. Franchisees – in turn – should be aware of the implications of the foregoing should they find themselves in such a situation.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
The bank’s duty of care in franchise agreements
On 23 May 2017, the Court of Appeal in The Hague, EQLI:NL:GHDHA:2017:1368, had to rule on the question whether the bank should have warned a prospective franchisee in connection with the
Article in Entrance: “Standing up”
“Can I fire an employee with immediate effect if he steals something trivial, such as food that has passed its expiration date?”
Arbitration clause in franchise agreement sometimes inconvenient
On 20 July 2016, the District Court of Gelderland, ECLI:NL:RBGEL:2016:4868, ruled on the validity of an agreement in a franchise agreement, whereby disputes would be settled
Supermarket letter – 18
Can an entrepreneur be obliged to operate a different supermarket formula?
Article in Entrance: “New owner”
“The catering company where I work has been taken over. The new owner now says that I no longer have to work for him, but can he refuse me as an employee?”
Directors’ liability in the settlement of a franchise agreement
Privately, can the director of a franchisee legal entity be liable to the franchisor if the franchisee legal entity wrongfully fails to provide business to the franchisor?