Definitely a violation of the standstill obligation.

In a judgment of the Rotterdam District Court of 15 May 2024, ECLI:NL:RBROT:2024:4598, it was ruled that – even if the franchisee deliberately did not want to observe the standstill period – the concluded franchise agreement is nevertheless voidable.

The court ruled that the statutory regulation of the standstill period in franchise agreements (laid down in Article 7:914 of the Dutch Civil Code) stipulates that the franchisor has an obligation to provide information prior to the conclusion of the franchise agreement: it must provide certain information about the intended franchise collaboration (as specified). in Article 7:913 paragraph 2 of the Dutch Civil Code) to the intended franchisee “in a timely manner”. This information must be provided at least four weeks before the conclusion of the franchise agreement. During that period, the franchisor may not conclude the franchise agreement or any agreement inextricably linked to it. During that period, it may also not encourage the intended franchisee to make payments related to the agreement yet to be concluded.

In the present case, the standstill obligation has not been observed. The franchise agreement was concluded well within the period of four weeks after the parties came into contact with each other, nor was the prescribed information about the intended franchise collaboration provided in a timely manner. The franchise agreement was therefore concluded in violation of the legal regulations regarding the standstill period obligations.

Pursuant to Article 7:922 of the Dutch Civil Code, the legal regulations regarding the standstill period may not be deviated from to the detriment of the franchisee. In the present case, the franchisor believed that the franchisee himself insisted on expeditiousness and that the parties (according to the franchisor) had explicitly discussed the standstill obligation at the start of their contact and how to deal with it in the given circumstances. According to the franchisor, the franchisee would therefore have deliberately not wanted to observe the standstill period.

According to the court, the legal rules on this point should also be deemed to be intended to protect an overenthusiastic franchisee from himself. The deviation from the standstill provision is therefore to the disadvantage of the franchisee. This means that the franchise agreement is voidable and has been legally annulled by the franchisee. It is also ruled that the franchisor has acted unlawfully. Further litigation is ongoing regarding the extent of the damage.

In a ruling by the Northern Netherlands District Court of February 21, 2024, ECLI:NL:RBNNE:2024:548, it was ruled that – despite the fact that the legal standstill period of at least 4 weeks had not been observed – the franchisee had not reasonably had an interest in invoking the statutory scheme. See more about this:

mr. A.W. Dolphijn
Ludwig & Van Dam lawyers, franchise legal advice.
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