Interim termination (franchise) agreement

On 3 February 2015, the Court of Appeal of ‘s-Hertogenbosch rendered judgment (ECLI:GHSHE:2015:33) in a case that may also be relevant for franchise practice. At first glance, the case is far from it. It concerns a license agreement with regard to the development and production of fiber boards by applying a special adhesive technology. The core of the debate, however, lies in the question of whether the cooperation may also be terminated prematurely if the agreement has been entered into for a definite period of time, in this case 20 years. That is to say, if interim termination has not been agreed, or, as is the case in this case, is limited to specific grounds stated in the agreement itself, which did not arise in that case. Referring to a judgment of the Supreme Court (HR 21 OCTOBER 1988, NJ1990, 439), the court concludes that “that such cooperation cannot, in principle, be terminated prematurely, but that an exception to this can be accepted if it is based on unforeseen, i.e. not discounted in the agreement, circumstances that are not for the account of the terminating party and that are of a serious nature that, according to standards of reasonableness and fairness, the other party cannot expect the agreement to be concluded until the agreed time”. According to the court, this situation arose in this case because there was no longer any interest in the adhesive technology to be developed and the agreement therefore lost its right to exist. However, such a situation can also be translated into franchise relationships. More specifically, the question can be asked to what extent continuation of the franchise agreement can still be required in the event of loss-making operations, the cause of which must be found in unexpected external calamities. The judgment of the Court of Appeal therefore seems to confirm that, in the event of unforeseen circumstances, early termination, even if not agreed, must always be possible in exceptional cases.

Mr J. Sterk – Franchise lawyer

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