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 Franchise+ – Franchisees enjoy the same protection as employees and commercial agents with regard to a non-competition clause – dated 7 May 2020 – mr. RCWL Albers
It often happens that, especially by franchisees, the validity of a post-contractual non-compete clause is considered too lightly.
The support agreement for the Retail sector in this Corona crisis – dated 15 April 2020 – mr. K. Bastian
On April 10, 2020, the Ministry of Economic Affairs, together with a number of landlords, retailers and banks, reached a support agreement.
Court rules that corona crisis does not constitute force majeure – dated April 10, 2020 – mr. AW Dolphin
If payment cannot be made due to a decrease in income, then there is not always a force majeure situation.
Important information for directors of franchisees associations: Online meetings and decision-making in times of corona – dated April 10, 2020 – mr. J. Strong
Emergency law provisions for legally valid decisions without physically meeting within the association structure.
Unilateral amendment of the franchise agreement by the franchisor allowed? – dated April 7, 2020 – mr. K. Bastian
Is the franchisor allowed to implement certain announced changes/adaptations to the formula on the basis of the franchise agreement agreed between the parties?
Legal scientific publication: “Collective actions of franchisees” – dated April 2, 2020 – mr. AW Dolphin
An article by mr. Alex Dolphin