A franchise agreement is created by an offer from one party (the franchisor) and the acceptance of that offer by the other party (the franchisee). In short, an agreement must be reached between both parties, after which the franchise agreement is formally concluded. In principle, the way in which an offer and acceptance are made is form-free. Unfortunately, it regularly happens that one party believed that there was an (oral) agreement, while the other party was still dubbing. “But we still had a deal” is a frequently heard statement. Unfortunately, there is no deal, just miscommunication between parties.
As indicated above, the way in which a franchise agreement is concluded is in principle free of form. In case law, however, it has often been ruled that the lack of a written record of the agreements between the parties is an indication that the necessary agreement between the parties has not been reached. This applies in particular in the case of important or large transactions, such as the conclusion of a franchise agreement or the purchase of a supermarket, or unusual transactions, such as the donation of large amounts of money. For example, in 1925 the Dutch court ruled that “every possibility of misunderstanding between the negotiators” must be excluded if a guarantee with a very large financial interest is provided that has not been laid down in writing.
To avoid misunderstandings between the parties during negotiations on major transactions, such as the conclusion of a franchise agreement, it may therefore be useful to make clear, and preferably written, agreements with each other in advance if there is agreement between the parties. This, of course, to prevent the parties from reaching an agreement unintentionally. For example, it could be agreed that there is only acceptance of the franchisor’s offer if there is agreement on all individual points on the part of the franchisee. It can also be agreed that an oral agreement from the franchisee is not sufficient, but that the franchise agreement will not come into effect until all parties have signed a written franchise agreement to that effect. In this way the parties force themselves to put their thoughts on paper, the parties can better estimate the scope of their rights and obligations and the chance of miscommunication can be reduced.
If you are confronted with a party who believes they have reached an agreement with you, while you were not aware of any wrongdoing, then it is of course useful to inform the other party clearly and as soon as possible. If you cannot come to an agreement with the other party, it is of course wise to seek legal help.
Ludwig & Van Dam franchise attorneys, franchise legal advice