Standstill period violation

On 15 March 2023, the District Court of Noord-Holland, ECLI:NL:RBNHO:2023:2636, ruled that a franchise agreement could be nullified due to violation of the standstill period.

On May 25, 2021, the franchisor had provided the franchisee with information regarding the franchise agreement to be concluded. The franchise agreement was also concluded on June 11, 2021.

The franchisor claims payment of various invoices. However, the franchisee defends itself by stating that the standstill period of 4 weeks has been violated. The franchisee therefore claims annulment of the franchise agreement.

Pursuant to Section 7:914(1) of the Dutch Civil Code, pre-contractual information must be provided at least four weeks before the franchise agreement is concluded. This is also known as the standstill period. This is a time for deliberation. During the standstill period, the intended franchisee has all the information, he can study documents, ask questions and seek advice from an expert, in order to make a well-considered decision about whether or not to sign the offered franchise agreement. (MvT, Parliamentary Papers II 2019/20, 35392.3, p. 34).

The franchisor has argued that the franchise agreement only took effect from October 1, 2021, so that at least 16 weeks have passed since the information was provided and the standstill period would have been more than met. The franchisee appeals for annulment of the franchise agreement for violation of the standstill period.

The court cannot follow the franchisor’s position now that it is clear from Article 7:914 paragraph 1 of the Dutch Civil Code that the information must be provided four weeks before the conclusion of the agreement. The parties signed the franchise agreement on June 11, 2021, as a result of which the agreement was concluded at that time. This means that the franchisor failed to observe the four-week standstill period when it should have.

In view of the foregoing, the franchisee has, according to the court, rightly invoked the nullification of the agreement pursuant to Article 3:40 paragraph 2 of the Dutch Civil Code. The court noted that the franchisor failed to ask the court to deny the annulment its effect in whole or in part, while that, in view of the working method of the franchisee, this would perhaps have been justified in this situation. Therefore, the destruction has full effect.

The annulment has retroactive effect to the time when the legal act was performed, so that the parties must be put in a situation as if no agreement had been concluded. As a result, the franchisee does not owe the invoices.

Earlier I wrote an extensive article about the standstill period. See here .