Obligation to sell back at the end of the franchise agreement
Franchise agreements sometimes provide that the franchisee is required to sell back purchased assets at the end of the franchise agreement. What if the franchisee sold the assets to another before the end of the franchise agreement? The preliminary relief judge of the District Court of Central Netherlands ruled on this question on 29 December 2017, ECLI:NL:RBMNE:2017:6793.
Pursuant to the franchise agreement, the franchisee is obliged to purchase certain equipment for the operation of the franchise formula. The franchise agreement stipulates that the franchisee must sell the purchased equipment back to the franchisor.
The franchisee, on the other hand, argues that it sold the equipment to a third party (in good faith) which would prevent it from meeting the sell-back obligation. In that case, the former franchisee could perhaps only be ordered to pay replacement compensation in proceedings on the merits.
However, the preliminary relief judge does not believe that the former franchisee actually sold the equipment to a third party. The preliminary relief judge considers that the story of the former franchisee is implausible, partly because the sale allegedly took place to the brother of the former franchisee, the former franchisee continued to use the equipment and that the equipment was only very recently moved to the new location of the former franchisee.
The conclusion is that the former franchisee is ordered to make the equipment available to the franchisor.
mr. AW Dolphin – franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to dolphijn@ludwigvandam.nl .
Other messages
Franchise arbitration: too high a threshold? – mr. M. Munnik
When entering into an agreement, it is possible for the parties - contrary to the law - to designate a competent court. This also applies to the franchise agreement. Of this possibility
Franchise appeal for error due to incorrect forecasts and lack of support rejected – dated April 25, 2019 – mr. K. Bastian
The Court of Appeal of 's-Hertogenbosch ruled (ECLI:NL:GHSHE:2019:697) on the question whether the mere fact that forecasts did not materialize justifies the conclusion that the franchisee has been shortchanged...
Article De Nationale Franchise Gids: “Increasing protection against recruiting franchisees” – dated 2 April 2019 – mr. AW Dolphin
It is becoming increasingly apparent that recruited franchisees can be protected on the basis of the Acquisition Fraud Act.
The Franchise Association and Franchise Binding – Contracting 2019, No. 1
A contribution on common provisions in franchise agreements that require a franchisee to be a member of a franchisee's association.
Deception in recruiting a franchisee?
A ruling on whether the franchisor had made a misrepresentation when recruiting a franchisee.
Franchisor liable for forecasts from third parties – dated March 6, 2019 – mr. M. Munnik
According to settled case law, a franchisor acts unlawfully towards its franchisee when a franchisor independently conducts research in a careless manner and as a result...