Indemnification II – Failed Forecasts
A special form of indemnification consists of exoneration clauses that attempt to indemnify the franchisor against incorrect forecasts. Most of the clauses in this framework are so absolute and rigid in nature that they are legally powerless. The court passes such clauses more than once effortlessly, because of the completely unreasonably onerous nature of the clause, or because the rigid clause in question no longer bears any relation to the culpability of the franchisor, in case there is there is actually conscious, deliberate reinforcement of incorrect forecasts.
Is nothing possible at this point? Anyway. A nuanced exoneration can indeed protect the franchisor against incorrectly provided forecasts. However, such a nuanced regulation is based on a number of elements:
– both the franchisor and the franchisee are involved in the location survey, from which the forecasts are derived;
– the franchisee is advised to convince himself of the correctness of the forecasts, for example by engaging a professional adviser who is not the franchisor’s adviser;
– the franchisor does not exclude its liability, but limits it to clearly incorrect information provided.
This creates a nuanced approach, in which both franchisor and franchisee take on a shared responsibility. Such an approach promotes the franchisee’s obligation to investigate, whereby the franchisor’s duty of care is substantiated and nuanced. Such a regulation becomes even stronger if the franchisor and franchisee also include in the regulation how to deal with each other in the unlikely event that a significant deviation from reality in relation to the forecast nevertheless emerges. If the parties still cannot reach an agreement and legal proceedings actually take place, a court will indeed detain the conduct of the parties against the nuanced regulation, as included in the franchise agreement.
Ideally, the franchisor and franchisee will strive to achieve clarity about this in advance and should actually behave accordingly in the pre-contractual phase – and afterwards.
Ludwig & Van Dam franchise attorneys, franchise legal advice
Other messages
Bankrupt because the franchisor refused to sell the franchise company – dated January 28, 2020 – mr. AW Dolphin
The District Court of The Hague has dealt with a request from a franchisor to declare a franchisee bankrupt.
Prescribed shop fitting – dated January 28, 2020 – mr. AW Dolphin
The Midden-Nederland District Court has ruled on whether a franchisee is obliged to carry the shop fittings prescribed by the franchisor.
Ludwig & Van Dam attorneys summon Sandd and PostNL on behalf of the Sandd franchisees – dated 9 January 2020 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) has today summoned Sandd and PostNL before the court in Arnhem. The VFS believes that Sandd and PostNL are letting the franchisees down hard.
Article The National Franchise Guide: “Why joint and several liability, for example, next to private?” – dated 7 January 2020 – mr. AW Dolphin
Franchisees are often asked to co-sign the franchise agreement in addition to their franchise, for example. Sometimes franchisees refuse to do so and the franchise agreement is not signed.
Ludwig & Van Dam Advocaten assists Sandd franchisees: Franchisees Sandd challenge postal monopoly in court – dated 12 November 2019 – mr. AW Dolphin
The Association of Franchisees of Sandd (VFS) is challenging the decision of State Secretary Mona Keijzer to approve the postal merger between PostNL and Sandd before the court in Rotterdam.
Franchisee trapped by non-compete clause? – dated October 21, 2019 – mr. AW Dolphin
The District Court of East Brabant has ruled that a franchisee was still bound by the non-competition clause in the event of premature termination of the franchise agreement.