In practice, it often happens that in the event of conflicts between franchisors and franchisees, the franchisee involved proceeds to unilaterally suspend fee payments and sometimes also deliveries and rent payments. The reasoning is usually that this creates a settlement in connection with the damage suffered by the franchisee, which the franchisor, again in his view, should compensate.
In itself, in the case of a so-called reciprocal agreement, that is, an agreement that imposes rights and obligations on both parties, such as a franchise agreement, it is possible to use the so-called right of suspension, as included in Article 6 :262 of the Civil Code. For a successful appeal to that right of suspension, it must be established, or at least determined by the court in a later procedure, that the franchisor in question has committed such attributable shortcomings in the fulfillment of the franchise agreement that it justifies suspension of the opposite performance, namely the fee payment. However, it already follows from this wording that the right of suspension is a serious remedy, which should certainly not be treated lightly. Moreover, such suspension should in principle be limited to the direct consideration. This implies that if a franchisee also has to pay rent to his franchisor for his business premises, a defect in the delivered goods can never lead to a suspension of the rent payments. These are matters arising from other legal relationships with other rights and obligations. When invoking a right of suspension, such distinctions must be strictly observed. If a franchisee, in this example, is not entitled to invoke the right of suspension, then he commits an attributable shortcoming, which can have serious consequences. If a right to suspend is therefore considered, it is necessary to check with the utmost care what exactly is being suspended and for what reason and whether the performance to be suspended has any logical and reasonable connection with the alleged shortcoming on the other side.
Furthermore, an appeal to suspension should not be made raw: the other party must at all times first be given adequate opportunity to still fulfill its obligations and be given a reasonable term to do so, the so-called notice of default. This can only be different if it is immediately clear that the other party cannot or will not fulfill its obligations in any way, for example as a result of force majeure or a notification to that effect from the other party.
The moral of this story is that it may be possible under certain circumstances to make suspensions by, for example, reversing payments, but that this means must be handled with extreme caution and reasoned and another must also be announced to the contractual counterparty well in advance. . Look there thou beginth therefore.
Ludwig & Van Dam franchise attorneys, franchise legal advice