Franchise contract not signed? Still bound…

District Court of the Northern Netherlands

Recently, the court in the Northern Netherlands ruled on the question of the status of the franchise relationship between franchisee and franchisor on the basis of the factual cooperation without the franchise agreement having been signed. The court considers the following. It is relevant that the franchisee, when entering into the franchise relationship, has not expressed any objections to the content of the franchise agreement submitted. Nor has it emerged that the franchisee would have set as a suspensory condition that a franchise agreement would only have existed if both the franchisee and the franchisor had actually signed the franchise agreement. If it then turns out that the franchisee will in fact operate the store in accordance with the provisions of the franchise agreement, the court finds that the franchisee in question has all in all tacitly accepted the franchise agreement and that he has therefore concluded a full franchise contract – entirely in accordance the contents of the franchise agreement submitted to the franchisee. The fact that the franchise contract was sent to the franchisee by the franchisor much later, and even the fact that the franchisee did not want to sign the franchise contract, does not change this.

The parties are therefore advised, in order to avoid any misunderstanding, to actually sign the franchise agreement well before the start of the actual cooperation. Indeed, if both the franchisee and the franchisor act in accordance with the content of the franchise agreement, both parties, despite the lack of signature, are fully bound by the written document. An interesting question is whether the court’s position can be extended to the extent that the former franchisee is also bound by the post-contractual non-competition clause. If this were the case, then provisions that would take effect after the end of the franchise agreement in signed contracts would also have far-reaching consequences for both the franchisee and the franchisor.

Mr Th.R. Ludwig – Franchise lawyer

Ludwig & Van Dam Franchise attorneys,franchise legal advice. Do you want to respond? Mail to vandam@ludwigvandam.nl