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
Other messages
Franchisor fails by invoking a non-compete clause
Although a non-compete clause is validly formulated in a franchise agreement, a situation may arise that is so diffuse that the franchisor cannot invoke it.
Acquisitions and Franchise Interest
It will not have escaped anyone's attention, certainly in the last year it can only be concluded that the Dutch economy is once again on the rise.
Which court for a rental and franchise agreement?
Which court is competent to rule on a related rental and franchise agreement?
Interview Franchise+ – mrs. J. Sterk and AW Dolphijn – “Reversal burden of proof in forecasts honored by court”
The new Acquisition Fraud Act indeed appears to be relevant for the franchise industry, according to this article from Franchise+.
Franchisor convicted under the Acquisition Fraud Act
For the first time, a court has ruled, with reference to the Acquisition Fraud Act, that if a franchisee claims that the franchisor has presented an unsatisfactory prognosis
Agreements Related to the Franchise Agreement
On 31 October 2017, the Arnhem-Leeuwarden Court of Appeal issued similar judgments for nineteen franchisees (ECLI:NL:GHARL:2017:9453 through ECLI:NL:GHARL:2017:9472).