Nuanced franchise agreement on the grounds of error is a nuanced consideration
The Court in preliminary relief proceedings in Rotterdam recently ruled that a franchisor cannot simply be held responsible for any incorrect statement made by the franchisor.
In principle, an agreement can be annulled if there is a mistake. That is to say, if the franchise agreement was concluded due to such an incorrect statement from the franchisor or if relevant information was omitted, the franchisee would not have entered into the franchise agreement if he had been aware of that inaccuracy.
However, the preliminary relief judge ruled that this should be assessed in a nuanced manner and that certainly not every incorrect statement can be a reason to nullify the franchise agreement lightly. First of all, it goes without saying that the statements must have been made by the franchisor itself, prior to the conclusion of the franchise agreement. Furthermore, the adverse effect of that communication must also be really visible. It is interesting, however, that the preliminary relief judge adds that a limited exaggeration in material that is mainly promotional in nature is allowed. The case concerned the success rate of a formula that, in the franchisee’s view, presented the case too optimistically. However, according to the preliminary relief judge, the franchisee must be aware that the promotional texts used by the franchisors, especially if they are aimed primarily at the consumer, the customer of the franchisee, cannot be translated one-on-one as hard promises. According to the preliminary relief judge, franchisees should be aware that, according to general empirical rules, it is customary that promotional texts often contain some degree of exaggeration and that this is also permitted.
The judgment endorses that an appeal of error should not be lightly invoked, but should be carefully assessed. All the more so now that the consequences can be considerable for both parties. After all, if the agreement is annulled, it will be deemed never to have existed and all performances will have to be undone again. The damage to both sides is then considerable.
Ludwig & Van Dam franchise attorneys, franchise legal advice
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