Void franchise agreement due to violation of standstill period

What are the consequences if the standstill period is violated? This was ruled on in a judgment of the Belgian Court of Cassation of June 2, 2023 (C.22.0408.N). This Belgian case is also important for Dutch legal practice, as the regulation on the standstill period in the Franchise Act (Article 7:914 of the Dutch Civil Code) is based on Belgian regulations (Article X.27 WER). See House of Representatives, session year 2019–2020, 35 392, no. 3, p. 9 and 34.

Under Belgian law, in a period prior to the conclusion of the franchise agreement, a contract may not be entered into with the franchisee that could be disadvantageous for the intended franchisee. If this does happen, the franchise agreement concluded subsequently could be null and void.

A franchisee of the Belgian supermarket formula Carrefour had prematurely ceased the operation of his company due to persistent losses. The predetermined turnover forecast was not achieved. The franchisor demanded payment of the outstanding rental invoices. In its counterclaim, the franchisee relied on the nullity of the franchise agreement, because the franchise agreement had already been signed too soon after the pre-contractual information had been provided.

The court of appeal ruled that the franchisor was not only obliged to make restitution but also to make full compensation for the damage suffered by the franchisee as a result of the void agreements. The franchisor appealed against this.

However, the Court of Cassation of Belgium confirmed that with the annulment of the franchise agreement, a related rental agreement is also annulled. It was also confirmed that in addition to the refund of the amounts paid by the franchisee to the franchisor, the franchisee can additionally claim compensation for damages, as failure to observe the standstill period is a mistake (an unlawful act) on the part of the franchisor. This includes costs incurred by the franchisee in terms of investments and energy.

According to Belgian law, the violation of the standstill period also appears to imply unlawful conduct that entitles the right to compensation for damage, in addition to the obligation to repay franchise fees paid to the franchisor. It is not inconceivable that the Dutch court will rule in a similar manner in such cases.