Mitigation fine of franchise agreement at supermarket

On 22 April 2015, the District Court of East Brabant (ECLI:NL:RBOBR:2015:2333) ruled on a dispute between a franchisee and a franchisor (Emté Franchise BV). about the settlement of a terminated cooperation under the supermarket formula of Emté

The franchisee and franchisor terminated the partnership and entered into a termination agreement. This stipulates that the franchisee will receive an additional amount of € 200,000 from the franchisor. It was agreed that this amount could be set off against outstanding amounts. It has also been stipulated that the party acting in violation of the termination agreement must pay a penalty to the other party of €  100,000 and an amount of € 1,000 for each day that the violation continues.

The franchisor deducts a portion of approximately € 24,000 from the amount to be paid of € 200,000. This amount related to an earlier discussion about an unpaid (part of) an invoice to the franchisee. This had also been discussed when the termination agreement was drawn up and, at the insistence of the franchisee, it was deleted from the termination agreement that the relevant invoice would be deducted from the amount of € 200,000 to be subsequently paid.

The court rules that the franchisee was right to assume that the amount of approximately € 24,000 would not be deducted from the additional payment of € 200,000, despite the remaining general provision in the franchise agreement that settlement could be made with outstanding amounts. At the insistence of the franchisee, the chargeability of the relevant invoice had been removed from the termination agreement. The franchisee’s claim for payment of the amount of approximately € 24,000 plus statutory interest is granted.

The franchisee also claimed payment of the agreed fine, which is said to have risen to approximately €  410,000. The court ruled that the ratio between the damage and the fine is disproportionately large. The court also considers that the franchisor is a more professional party with its own legal department, which has drafted the penalty clause itself. All things considered, the court sees reason to moderate the fine to 20% and therefore to € 82,000 plus the statutory interest.

A contractual penalty may be moderated under special circumstances. It can also be deduced from this ruling that any mitigation of a contractual fine may be considered to the detriment of the franchisor by the fact that the franchisor is a more professional party than the franchisee, with its own legal department, for example.

Mr AW Dolphijn – Franchise lawyer

Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl