Late notification that no franchise agreement will be concluded
On 11 April 2017, the Court of Appeal of Amsterdam-Leeuwarden, EQLI:NL:GHARL:2017:3104, not only assessed the question of whether the termination of negotiations on a franchise agreement to be concluded was unlawful, but also whether the franchisor was sufficiently has broken down.
In the first instance, the District Court of Gelderland ruled on 6 May 2015, EQLI:NL:RBGEL:2015:4708, that it was clear in advance to the aspiring franchisee that 9 steps would have to be completed in order to eventually become a franchisee. See my earlier comment on that statement here.
While going through the necessary steps, the shares in the franchisor are taken over by another party. The new policy is that no new franchisees will be recruited. Going through the next steps to reach a franchise agreement is therefore terminated by the franchisor. The court ruled in favor of the franchisor. The Court of Appeal follows that view of the District Court.
However, the court ruled that the subject of the dispute is not only the termination of the franchise agreement negotiations, but that other conduct during the negotiations could also be unlawful. The franchisee’s contention is that the franchisor must have known shortly after acquiring its stock that there was a new policy not to hire any more new franchisees. Nevertheless, the aspiring franchisee would only be made clear to the aspiring franchisee after a considerable period of time that it would not come to a franchise agreement. According to the court, the aspiring franchisee has been kept on the line for too long, which is contrary to social decency. The Court of Appeal refers the case to a damage assessment procedure to determine the extent of the damage.
This ruling shows that although breaking off negotiations may be justified, the way in which this breaking off is implemented may be contrary to social decency.
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?