Void franchise agreement due to violation of standstill period
What are the consequences if the standstill period is violated? This was ruled on in a judgment of the Belgian Court of Cassation of June 2, 2023 (C.22.0408.N). This Belgian case is also important for Dutch legal practice, as the regulation on the standstill period in the Franchise Act (Article 7:914 of the Dutch Civil Code) is based on Belgian regulations (Article X.27 WER). See House of Representatives, session year 2019–2020, 35 392, no. 3, p. 9 and 34.
Under Belgian law, in a period prior to the conclusion of the franchise agreement, a contract may not be entered into with the franchisee that could be disadvantageous for the intended franchisee. If this does happen, the franchise agreement concluded subsequently could be null and void.
A franchisee of the Belgian supermarket formula Carrefour had prematurely ceased the operation of his company due to persistent losses. The predetermined turnover forecast was not achieved. The franchisor demanded payment of the outstanding rental invoices. In its counterclaim, the franchisee relied on the nullity of the franchise agreement, because the franchise agreement had already been signed too soon after the pre-contractual information had been provided.
The court of appeal ruled that the franchisor was not only obliged to make restitution but also to make full compensation for the damage suffered by the franchisee as a result of the void agreements. The franchisor appealed against this.
However, the Court of Cassation of Belgium confirmed that with the annulment of the franchise agreement, a related rental agreement is also annulled. It was also confirmed that in addition to the refund of the amounts paid by the franchisee to the franchisor, the franchisee can additionally claim compensation for damages, as failure to observe the standstill period is a mistake (an unlawful act) on the part of the franchisor. This includes costs incurred by the franchisee in terms of investments and energy.
According to Belgian law, the violation of the standstill period also appears to imply unlawful conduct that entitles the right to compensation for damage, in addition to the obligation to repay franchise fees paid to the franchisor. It is not inconceivable that the Dutch court will rule in a similar manner in such cases.
Ludwig & Van Dam lawyers, franchise legal advice.
Do you want to respond? Then email to dolphijn@ludwigvandam.nl
Other messages
Does a franchisee have to accept a new model franchise agreement?
On 31 March 2017, the District Court of Rotterdam, ECLI:NL:RBROT:2017:2457, ruled in interlocutory proceedings on the question whether franchisor Bram Ladage had complied with the franchise agreement with its franchisee.
Mandatory (market-based) purchase prices for franchisees
To what extent can a franchisor change agreements about the (market) purchase prices of the goods that the franchisees are obliged to purchase?
Director’s liability of a franchisee after failing to rely on an unsound prognosis.
On 11 July 2017, the Court of Appeal of 's-Hertogenbosch made a decision on whether the franchisor could successfully sue the director of a BV for non-compliance with the
Liability accountant for prepared prognosis?
In a judgment of the Court of Appeal of 's-Hertogenbosch of 11 July 2017, ECLI:NL:GHSHE:2017:3153, it was discussed that franchisees accused the franchisor's accountant of being liable
How far does the bank’s duty of care extend?
Some time ago the question was raised in case law what the position of the bank is in the triangular relationship franchisor – bank – franchisee.
Burden of proof reversal in forecasting as misleading advertising?
In an interlocutory judgment of 15 June 2017, the District Court of Zeeland-West-Brabant, ECLI:NL:RBZWB:2017:3833, ruled on a claim for (among other things) suspension of the non-compete clause.