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Update - Franchise agreements under Dutch law

 

Franchising in The Netherlands - Dutch law on franchise

A franchise agreement is a contract by which a company (“the franchisor”) licenses its trade name and/or business system and practices for a fee to an independent company ("the franchisee").

Franchise agreements under Dutch law

Franchise agreements are not specifically addressed in Dutch law. Therefore the general rules of contract- and competition law applies. There are various forms of franchising, for example hard and soft franchise formulas. Considering the complexity of a franchising agreement, a franchise agreement is general in written form. The following general principles should be taken into account when drafting a franchise agreement under Dutch law:
 
franchise agreements are not regulated in Dutch law. General Dutch contract law applies 
the principles of reasonableness and fairness (in Dutch: “redelijkheid en billijkheid”) are the guiding principles 
the Dutch party needs to register its business with the Trade Register of the Dutch Chamber of Commerce.

Recent case law on Franchisor liability

In a recent case the Dutch Supreme Court (Hoge Raad) was faced with the question of what liability franchisors have in regards to inaccurate sales forecast provided to their franchisee (ECLI:NL:HR:2017:311). The franchisee alleged that it had been provided with an inaccurate sales forecast and that the franchisor had knowingly provided faulty prognosis for a store and therefore claims damages from the franchisor. The sales forecast has an internal report, which had been composed by the franchisor itself.
 
The case ended up at the Dutch Supreme Court, because the lower court had stated in its judgement that the franchisor “should have known” about the faulty information and was therefore partially liable for the damages. The franchisor appealed that decision because the Supreme Court had stated in an earlier decision, Paalman/Lampenier (ECLI:NL:HR:2002:AD7329) , that franchisors are liable in the circumstances when they actually “knew that the reports contained serious flaws”. The Supreme Court decided that the case only applied when the sales forecast was prepared by a third party and was not an internal report, as it was the case here. This means that franchisors are held to a higher standard of care, when they conduct the sales forecasts internally, meaning they have to make sure that the reports do not contain inaccurate information, before they provide it to the franchisee.
 
The Supreme Court rejected the franchisor’s appeal, since in this case no destination between what the franchisor ought to know and what the franchisor actually knows must be made.
 
For more information on franchisor obligation and termination of franchise agreements please refer to this earlier blog entry: https://www.blenheim.nl/blogs/903/franchise-agreement-termination-dutch-lawyer

Dutch attorney in Amsterdam, specialized in franchise agreements under Dutch law

If you have any questions about a franchise agreement under Dutch law, please do not hesitate to contact Lisa Jie Sam Foek Blenheim Attorneys in Amsterdam. We can assist in all kinds of issues regarding franchise agreements when Dutch law applies. Regarding the complexity of Dutch franchise law, we advise you to contact a lawyer before entering into a franchise agreement. Our lawyers (inter alia Lisa) can assist you in assessing the agreement, drafting the franchise agreement or assisting you in legal proceedings.
 

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