Malpractice as a means of pressure: not a good idea

The starting point when entering into a franchise relationship is, of course, that this relationship benefits both the franchisor and the franchisee, both financially and from an organizational point of view. That, in general, is the idea behind the franchising phenomenon. However, sometimes things in a franchise relationship don’t go as expected or hoped. Although on balance an exception, conflicts also occur in franchise organizations, in which the mutual interests can sometimes be considerable. This section has already discussed the various types of conflicts that can arise. At this point we should consider another, related phenomenon, namely the case that sometimes occurs in practice that (usually) a franchisee no longer fulfills its obligations under the franchise agreement in order to force its franchisor to do so. the performance or omission of acts that the franchisee concerned deems desirable in this case. This often involves non-payment of the agreed fees.

Under certain circumstances, if the franchisee is of the opinion that the franchisor is not adequately complying with the franchise agreement, it can invoke the so-called right of suspension of Article 6:52 of the Dutch Civil Code, which means that the franchisee does not perform as long as the franchisor does not perform. That sounds simple, but for a successful appeal to such a right of suspension, the necessary things must be established about the alleged breach of contract on the part of the franchisor. Furthermore, where suspension is not indicated, the franchisee may hold the franchisor in default and, where necessary, liable, in order to effect the latter’s default. This can be the introduction to reclaiming what has been paid, whether or not in court, or instituting a claim for correct compliance with the franchise agreement. Here too, the correct formal route must be followed. There are various requirements attached to notices of default and the like. In any case, the law offers various options.

In practice, however, franchisees sometimes use the option of ‘just’ stopping payments, without invoking one of the above-described schemes. That is playing your own judge and in general is therefore not recommended. A course of action such as this sometimes occurs, for example, when there is a collective dissatisfaction with the actions of the franchisor and a joint decision is subsequently made by the franchisees involved to suspend payments. If, it must be repeated, one of the above legal regulations is not invoked, this will result in a direct unilateral and serious breach of contract on the part of the franchisees involved. After all, they will then no longer comply with the franchise agreement without right or title, which, now that it also affects a core obligation of that franchise agreement when it comes to payments, can lead to serious consequences such as dissolution. The credo therefore also applies here: “Look before you leap”. If problems have arisen in the franchise relationship to such an extent that non-compliance with the franchise agreement is seriously considered, it is primarily obvious to engage a legal adviser to prevent worse.

Ludwig & Van Dam franchise attorneys, franchise legal advice