Franchising in European Contract Law: A comparison between the main obligations of the contracting parties in the Principles of European Law on Commercial Agency, Franchise and Distribution Contracts (PEL CAFDC), French and Spanish law 9783866537026

Table of contents :
Frontmatter
Table of Contents
Chapter I. General Introduction
Chapter II. Main Characteristics of the French and Spanish Law on Franchising
Chapter III. Description and Comparison of the main Obligations of the Parties in Franchising Contracts in the PEL CAFDC, French and Spanish Law
Chapter IV. General Conclusions
Summary
Samenvating
Backmatter

Citation preview

Franchising in European Contract Law

Academisch Proefschrift ter verkrijging van de graad van doctor aan de Universiteit van Amsterdam op gezag van de Rector Magnificus Prof. dr. D. C. van den Boom ten overstaan van een door het college voor promoties ingestelde commissie, in het openbaar te verdedigen in de Aula der Universiteit op vrijdag 2 november 2007, te 14.00 uur door Odavia Bueno Díaz geboren te Las Palmas de Gran Canaria, Spanje Promotiecommissie Promotor: Prof. dr. M.W. Hesselink Co-promotor: Dr. J.W. Rutgers Overige leden: Prof. dr. F.A.W. Bannier Prof. dr. J.M. Barendrecht Prof. dr. J. Huet Prof. dr. M.B.M. Loos Prof. dr. E. Roca i Trías Prof. dr. A. F. Salomons Faculteit der Rechtsgeleerdheid

Franchising in European Contract Law A comparison between the main obligations of the contracting parties in the Principles of European Law on Commercial Agency, Franchise and Distribution Contracts (PEL CAFDC), French and Spanish law

Odavia Bueno Díaz

Schriften zur Europäischen Rechtswissenschaft / European Legal Studies / Etudes juridiques européennes Band 8 / Volume 8 / Volume 8 European Legal Studies Institute, Osnabrück Molengraaff Institute for Private Law, Utrecht Amsterdam Institute for Private Law Institute of European and Comparative Law, Oxford Institut für Zivilrecht, Ausländisches und Internationales Privatrecht, Graz

Schriften zur Europäischen Rechtswissenschaft / European Legal Studies / Etudes juridiques européennes herausgegeben im European Legal Studies Institute, Osnabrück von Christian von Bar im Molengraaff Institute for Private Law, Utrecht von Ewoud Hondius im Amsterdam Institute for Private Law von Martijn W. Hesselink im Institute of European and Comparative Law, Oxford von Stefan Vogenauer im Institut für Zivilrecht, Ausländisches und Internationales Privatrecht, Graz von Brigitta Lurger

ISBN 978-3-86653-075-1

The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de. © 2008 by sellier. european law publishers GmbH, Munich. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission of the publisher. Design: Sandra Sellier, Munich. Production: Karina Hack, Munich. Printing and binding: AZ Druck und Datentechnik GmbH, Kempten. Printed on acid-free, non-ageing paper. Printed in Germany.

A mis padres

Acknowledgements Acknowledgements First I would like to express my deeply felt gratitude towards the supervisor of my doctoral research, Professor Martijn Hesselink. Without his knowledge, guidance and incurable optimism I would have left for Gran Canaria long before my final conclusions were put on paper. I also have to thank Professor Hesselink for having given me the opportunity to join the Study group on a European civil code. I have been able to benefit greatly from the Study group discussions, irrespective of whether they were meetings with the teamworks, with the advisors or with the members of the Coordinating Committee. With them, I began to understand what the law was all about. I am also most grateful to my co-supervisor Jacobien Rutgers whose editing suggestions and precise sense of language contributed most significantly to this final result. Thanks to Professor Marco Loos, my boss, for his invaluable assistance in the last period of writing my doctoral research. He did all he could to help me finish my thesis. It has often been said that pleasure and work do not go together, but working with Marco Loos has proven the opposite. I wish to direct many thanks to the members of my doctorate committee for reading my manuscript with care and for providing me with valuable comments which have helped me to develop the present work further. I would especially like to acknowledge the patience, the encouragement, and a great job done by Corinne van den Berg in correcting the English text of this book. Her work has proven to be crucial. I hope she will find time to correct these last written words as well. Thanks to my colleague and friend Chantal for helping me so much during the last phase of my thesis. She helped me find my way in finishing all the details that were left. Furthermore, she translated my summary into Dutch. There are not enough words of recognition and appreciation for her. Grazie Chantal. To my colleagues in the Study Group for a European civil code, especially to the Amsterdam team: Professor Hesselink, Jacobien Rutgers, Muriel Veldman and Manola Scotton. Together with them, I found out about the advantages and disadvantages of team spirit. My special thanks to Manola. I learned from her that one should focus on the good things in life and enjoy them as much as one can. Manola, I did it! I wish you could be here to celebrate with me. Thanks also to my other dear colleagues at the department of the law faculty. It is ideal to work with gezellige mensen. I have always felt welcome and truly part of the group. Especial thanks to “the girls”. Also thanks to the

VIII

Acknowledgements

other people working in the faculty. I could not have wished for a better working environment. To Bas van Zelst en Muriel Veldman, my paranimfen. According to Wikipedia (one of my scientific sources) in the past, emotions sometimes ran high during the promotion ceremony. It therefore was well advised to have two strong, well-built paranimfen who could also serve as bodyguards. This explains why I chose Muriel and Bas!! Bas has been the perfect roommate and colleague. He always had the articles that I needed to read, the books that I needed to borrow, the solutions to my computer problems. Dank je Bas. Dank je Muriel for your patience all these years listening to my complaints about how difficult life is when writing a thesis. Thanks to my friends Dailos, my private ICT friend. Always ready to provide mediation in my continuous conflicts with my computer. Originally from Gran Canaria, he moved to Amsterdam for working reasons. One must be crazy to do that, but I am happy to have a bit of Gran Canaria so close by. And Merci Chiraz, for helping me with the correction of the French texts of my thesis and giving me advice on the beautiful clothes I bought for my defence ceremony. Gracias a mis amigos: a Noelia y Alba. Noelia porque siempre estaba lista para llevarme en su coche a la biblioteca de la Universidad de Las Palmas de Gran Canaria y fotocopiar en un tiempo record todos los manuales que necesité. A mi aventurera amiga Alba, por ser para mí una fuente fidedigna del Derecho español. A Charo y a Michel, por preocuparse tanto de mí y cuidarme tan bien. A Juan Carlos, porque siempre me apoyó, y me dio ánimos y fuerza para que terminara mi tesis. Juan Carlos podía transmitirme la energía positiva que necesitaba para seguir con mi trabajo. Creo que todavía recibo esa energía aunque él ya no esté. Que sepas que te echo mucho de menos. Gracias a mi familia: A Aco, mi hermana favorita, porque me conoce tanto que siempre dice las palabras que necesito oir para darme ánimo y porque fue mi proveedora “24 horas” de material sobre derecho español. A mis padres: Me alegro de tener esta oportunidad de mostrarles mi agradecimiento por escrito, que siempre es más fácil que de palabra. No puedo recompensar sus esfuerzos en dinero (para eso habrá que esperar a la edición commercial de la tesis) pero sí que puedo dedicarles este libro como pequeña muestra de todo el reconocimiento y agradecimiento por todo lo que han hecho por mí. A Marcel y a mis niños: Sara, Charli y Jordi. Por haber aguantado heroicamente mis altos y mis bajos, que son muy altos y muy bajos debido a mi acusado temperamento español, tan distinto al holandés. Especialmente a mi marido, por ser mi director de tesis casero (muchas veces lo llamé Martijn), mi diccionario ambulante, mi cocinero, psicólogo, masajista … Siempre dándome “ánimo, animo”. El haber terminado la tesis se lo debo sin duda a Marcel. Muchas Gracias Corazón.

Author’s Preface Author’s Preface My first contact with franchising was as a regular client of a chain of restaurants painted in yellow and red in which I could promptly be served French fries and a hamburger. I was attracted by the fast food but it also drew my attention to the fact that all restaurants looked the same: the same colours, the same tables and chairs, the same funny caps on the employees’ heads. All of them full of clients who were eager to eat their fast food. Were all these restaurant owned by the same businessman? Why else would they all be that uniform? Why were these restaurants so successful? Since then my culinary interest in hamburgers has diminished and has been substituted by an interest as a legal academic in the legal aspects of franchising relationships. Now I know that uniformity and success lie at the heart of franchising because in franchising relationships one businessman, called the franchisor, gives the right to other businessmen, called franchisees, to use the franchisor’s image and business method which has proven to be successful, in exchange for payment. This explains why premises, personnel and products in a franchise business all look the same and why they are (meant to be) successful. My professional interest in franchising arose in 2001 when I started working as a legal academic for the Study Group on a European Civil Code, which is one of the European academic groups that investigate the need for and feasibility of harmonising the national private laws in Europe. In 1999, the Study Group initiated an academic project with the goal of drafting European common principles concerning specific areas of private law on the basis of comparative research among the jurisdictions of the EU. Franchising was one of the subjects of this research. The formulation of European principles as to the contents of franchising relationships was left in the care of the Dutch working team within the Study Group. To be more exact, to the Amsterdam members of the Dutch working team, also called the Amsterdam Group, of which I am a member. The Amsterdam Group was responsible for drafting common principles on commercial agency, franchise and distribution agreements. The outcome of the joint research efforts of the Amsterdam team has led to the formulation of the “Principles of European Law on Commercial Agency, Franchise and Distribution contracts” (PEL CAFDC). Within the Group, I was asked to take the lead concerning the draft of Chapter 3 of PEL CAFDC, which contains the Principles of European law which deal exclusively with franchising contracts.

X

Author’s Preface

The relevance of the PEL CAFDC as the first proposal for a panEuropean comprehensive regulation regarding the main rights and obligations of the parties involved in commercial agency, franchising and distribution contracts inspired in me the wish to deepen my analysis on PEL CAFDC in this, my comparative law doctoral research. Due to my close ties with the issue of franchising I chose to focus my study on the principles on franchising in the PEL CAFDC. This means that I do not describe the Principles as an outsider to the work which has been done. I hope, however, that I have not taken my insider information for granted, as my intention has been to provide the reader with a description of the Principles that is as complete and neutral as possible. In this I hope I have succeeded, but I will let the reader judge for himself. Amsterdam, September 29, 2007 Odavia Bueno Díaz

Table of Contents Table of Contents Acknowledgements Author’s Preface Table of Contents (extended)

VII IX XVII

Chapter I. General Introduction Section 1. The Europeanisation of private law 1.1 European private law at present: sectoral harmonisation by the EU 1.2 The future of European private law

1 2

Section 2. The Europeanisation of the law on franchising 2.1 The law on franchising in Europe at present 2.2 A proposal for a future European regulation on franchising

19 21

Section 3. Aim, scope, method and structure of the research 3.1 3.2 3.3 3.4

Aim of the research Scope of the research Method Structure of the study

27 27 29 31

XII

Table of Contents

Chapter II. Main Characteristics of the French and Spanish Law on Franchising Section 1. The legal framework for franchising in France 1.1 1.2 1.3 1.4 1.5 1.6

French statutory law on franchising French case-law on franchising French literature on franchising Non-binding regulations on franchising Legal nature of franchising Main obligations of the parties: theory of the causa in French law

33 34 35 35 36 37

Section 2. The legal framework for franchising in Spain 2.1 2.2 2.3 2.4 2.5 2.6

Spanish statutory law on franchising Spanish case-law on franchising Spanish literature on franchising Non-binding regulations Legal nature of franchising Main obligations in franchising: theory of the causa in Spanish law

39 41 42 42 43 44

Chapter III. Description and Comparison of the main Obligations of the Parties in Franchising Contracts in the PEL CAFDC, French and Spanish Law Section 1. Scope of franchising 1.1 1.2 1.3 1.4

PEL CAFDC: Article 3:101 France Spain Comparison

47 48 52 56

Table of Contents

XIII

Section 2. Franchisor’s obligation to give pre-contractual information 2.1 PEL CAFDC: Article 3:102 2.2 France

58 61

2.3 Spain 2.4 Comparison

83 94

Section 3. Franchisor’s obligation to license Intellectual Property Rights 3.1 3.2 3.3 3.4

PEL CAFDC: Article 3:201 France Spain Comparison

101 104 111 120

Section 4. Franchisor’s obligation to communicate Know-How 4.1 4.2 4.3 4.4

PEL CAFDC: Article 3:202 France Spain Comparison

126 128 140 147

Section 5. Franchisor’s obligation to give Assistance 5.1 5.2 5.3 5.4

PEL CAFDC: Article 3:203 France Spain Comparison

152 154 165 172

Section 6. Franchisee’s obligation to pay 6.1 6.2 6.3 6.4

PEL CAFDC: Article 3:301 France Spain Comparison

177 180 190 193

XIV

Table of Contents

Section 7. Franchisee’s obligation to follow Business Method and Instructions 7.1 7.2 7.3 7.4

PEL CAFDC: Article 3:303 France Spain Comparison

197 199 205 208

Chapter IV. General Conclusions 1.

Introduction

2.

Differences and similarities between the compared systems

2.1 A general difference: the sources of the law 2.2 Differences and similarities as to the main obligations of the parties 3.

214 215

Underpinning policies: autonomy-friendliness? Legal certainty?

3.1 Franchisors’ autonomy-friendliness 3.2 Legal certainty 4.

213

221 225

The likely reactions of the parties if the Principles were to apply

4.1 Franchisors 4.2 Franchisees 4.3 Win-win situation

226 227 228

5.

229

Final remarks

Summary

231

Chapter I. General Introduction Chapter II. Main Characteristics of French and Spanish Law on Franchising Chapter III. Description and Comparision Chapter IV. General Conclusions

232 232 233 238

Table of Contents

XV

Samenvating

243

Hoofdstuk I. Allgemene Inleiding Hoofdstuk II. De Belangrijkste Karakteristieken van het Frans an Spaans Recht inzake Franchising Hoofdstuk III. Beschrijvingen en Vergelijking Hoofdstuk IV. Algemene Conclusies

244

Legislation

257

Table of Cases

265

Bibliography

273

Abbreviations

291

244 245 251

Table of Contents (extended) Table of Contents (extended) Acknowledgements

VII

Author’s Preface

IX

Table of Contents

XI

Chapter I. General Introduction Section 1. The Europeanisation of private law 1.1 1.2 1.2.1

1.2.2

1.2.3

1.2.4

European private law at present: sectoral harmonisation by the EU The future of European private law The academic debate 1.2.1.1 Academic projects 1.2.1.2 The Lando Commission and the SGECC The political debate 1.2.2.1 Communication on European Contract Law 1.2.2.2 The Action Plan 1.2.2.3 The Way Forward The CFR 1.2.3.1 Definition, aims, contents, elaboration 1.2.3.2 An academic CFR 1.2.3.3 Political developments: a CFR on consumer contract law The CFR as the basis for an optional Instrument on contract law? 1.2.4.1 The political debate 1.2.4.2 The academic debate

1 2 3 5 7 9 10 11 12 14

15 16

XVIII

Table of Contents (extended)

Section 2. The Europeanisation of the law on franchising 2.1 The law on franchising in Europe at present 2.2 A proposal for a future European regulation on franchising 2.2.1 The academic exercise: the PEL CAFDC 2.2.1.1 General 2.2.1.2 Aims and scope 2.2.1.3 Working method 2.2.1.4 Structure 2.2.1.5 The principles on franchising in the PEL CAFDC 2.2.2 The political exercise

19 21 21 22 23 24 25 26

Section 3. Aim, scope, method and structure of the research 3.1 3.2 3.3 3.4

Aim of the research Scope of the research Method Structure of the study

27 27 29 31

Chapter II. Main Characteristics of the French and Spanish Law on Franchising Section 1. The legal framework for franchising in France 1.1 1.2 1.3 1.4 1.5 1.6

French statutory law on franchising French case-law on franchising French literature on franchising Non-binding regulations on franchising Legal nature of franchising Main obligations of the parties: theory of the causa in French law

33 34 35 35 36 37

Section 2. The legal framework for franchising in Spain 2.1 2.2 2.3

Spanish statutory law on franchising Spanish case-law on franchising Spanish literature on franchising

39 41 42

Table of Contents (extended)

2.4 2.5 2.6

Non-binding regulations Legal nature of franchising Main obligations in franchising: theory of the causa in Spanish law

XIX 42 43 44

Chapter III. Description and Comparison of the main Obligations of the Parties in Franchising Contracts in the PEL CAFDC, French and Spanish Law Section 1. Scope of franchising 1.1 1.2 1.2.1 1.2.2 1.2.3 1.2.4 1.3 1.3.1 1.3.2 1.3.3 1.3.4 1.4 1.4.1 1.4.2

PEL CAFDC: Article 3:101 France Introduction Case-law Literature ECEF and AFNOR rules Spain Introduction Private law statutory definitions Case-law Literature Comparison Obligations under the provisions on scope Conclusion

47 48 48 49 51 52 52 54 55 56 57

Section 2. Franchisor’s obligation to give pre-contractual information 2.1 PEL CAFDC: Article 3:102 2.1.1 Introduction 2.1.2 Contents and aim 2.1.2.1 Contents 2.1.2.2 Aim 2.1.3 Remedies 2.1.3.1 Remedies for mistake: annulability or adaptation 2.1.3.2 Strict liability in damages 2.2 France 2.2.1 Introduction

58 59 60 60 61 61

XX

Table of Contents (extended)

2.2.2 Contents and aim of Article L. 330-3 of the Commercial Code 2.2.2.1 Contents 2.2.2.2 Aim 2.2.3 Application of Article L. 330-3 of the Commercial Code 2.2.3.1 Interpretation in conformity with general contract rules on defective consent 2.2.3.2 Particularities of Article L. 330-3 of the Commercial Code 2.2.3.3 Obligation of means 2.2.4 Sales forecasts 2.2.5 Remedies 2.2.5.1 Nullity for non-compliance with a mandatory rule 2.2.5.2 Annulability for defective consent 2.2.5.3 Defences for the franchisor 2.3 Spain 2.3.1 Introduction 2.3.2 Contents and aim of rules on pre-contractual disclosure 2.3.2.1 Contents 2.3.2.2 Aim 2.3.3 Application of the rules on disclosure 2.3.3.1 Case-law 2.3.3.2 Literature 2.3.3.3 Interpretation of the position of courts and scholars 2.3.4 Sales forecasts 2.3.5 Remedies 2.3.5.1 Nullity for non-compliance with a mandatory rule 2.3.5.2 Annulability for defective consent 2.3.5.3 Defences for the franchisor 2.4 Comparison 2.4.1 Introduction 2.4.2 Contents and aim of the obligations 2.4.2.1 Contents 2.4.2.2 Aim 2.4.3 Application of the rules 2.4.4 Remedies 2.4.5 Conclusion

64 65

67 71 75 76 79 80 81 83 85 86 86 88 88 90 91 92 93 93 94 94 96 97 98 99

Table of Contents (extended)

XXI

Section 3. Franchisor’s obligation to license Intellectual Property Rights 3.1 3.1.1 3.1.2 3.1.3 3.1.4 3.2 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.2.6

3.3 3.3.1 3.3.2

3.3.3

3.4 3.4.1 3.4.2

3.4.3 3.4.4

PEL CAFDC: Article 3:201 Introduction Necessary intellectual property rights Undisturbed and continuous use of the rights Remedies France Introduction Title to license the intellectual property rights Intellectual property rights as signs to attract clientele Well-known intellectual property rights Protection against third-party infringements or claims Remedies 3.2.6.1 Nullity 3.2.6.2 Remedies for non-performance Spain Introduction Contents of the obligation regarding intellectual property rights 3.3.2.1 Distinctive signs 3.3.2.2 Title to license the intellectual property rights 3.3.2.3 Adequate for the agreed use 3.3.2.4 Undisturbed use of the intellectual property rights Remedies 3.3.3.1 Nullity 3.3.3.2 Remedies for non-performance 3.3.3.3 Specific remedies Comparison Introduction Contents and form of the obligation to license intellectual property rights 3.4.2.1 Requirements as to contents 3.4.2.2 Form requirements 3.4.2.3 Pragmatic approach Remedies Conclusion

101 102 102 103 104 106 107 107 108 109 110 111 113 114 115 116 117 118 119 120 120 121 122 123 123 124 125

XXII

Table of Contents (extended)

Section 4. Franchisor’s obligation to communicate Know-How 4.1 4.1.1 4.1.2 4.1.3 4.1.4 4.2 4.2.1 4.2.2

4.2.3

4.3 4.3.1 4.3.2

4.3.4

4.4 4.4.1 4.4.2

4.4.3 4.4.4

PEL CAFDC: Article 3:202 Introduction Necessary know-how Relation to Assistance Remedies France Introduction Pertinence of the know-how 4.2.2.1 Requirements as to contents 4.2.2.2 Form requirements 4.2.2.3 L’avantage concurrentiel Remedies 4.2.3.1 Nullity 4.2.3.2 Remedies for non-performance 4.2.3.3 Defences for the franchisor Spain Introduction Contents of the obligation regarding know-how 4.3.2.1 Requirements as to the contents 4.3.2.2 Requirements as to form 4.3.2.3 Differentiation from competitors Remedies 4.3.4.1 Nullity 4.3.4.2 Remedies for non-performance 4.3.4.3 Defences for the franchisor Comparison Introduction Contents and form of the obligation to communicate know-how 4.4.2.1 Requirements as to contents 4.4.2.2 Form requirements 4.4.2.3 Pragmatic approach Remedies Conclusion

126 127 128 128 128 131 135 136 136 137 138 140 142 144 145 145 146 147 147 148 149 149 149 150 151

Section 5. Franchisor’s obligation to give Assistance 5.1 PEL CAFDC: Article 3:203 5.1.1 Introduction

152

Table of Contents (extended)

5.1.2 Necessary assistance 5.1.2.1 Requirements as to contents 5.1.2.2 No form requirements 5.1.2.3 Costs included 5.1.3 Additional assistance at reasonable cost 5.1.4 Remedies 5.2 France 5.2.1 Introduction 5.2.2 Assistance as agreed in the contract 5.2.3 Judicial interpretation as to the contents of the obligation to assist 5.2.3.1 Restrictive interpretation 5.2.3.2 Extensive interpretation: implied obligations 5.2.4 Scholars’ interpretation of the contents of the obligation to assist 5.2.5 Remedies 5.2.5.1 Nullity 5.2.5.2 Remedies for non-performance 5.2.5.3 Defences for the franchisor 5.3 Spain 5.3.1 Introduction 5.3.2 Assistance as agreed 5.3.3 The courts´ interpretation of the contents of the obligation to assist 5.3.4 Scholars’ interpretation of the contents of the obligation to assist 5.3.5 Remedies 5.3.5.1 Nullity 5.3.5.2 Remedies for non-performance 5.3.5.3 Specific remedies 5.3.5.4 Defences for the franchisor 5.4 Comparison 5.4.1 Introduction 5.4.2 Contents of the obligation to assist 5.4.2.1 Requirements as to contents 5.4.2.2 No form requirements 5.4.2.3 Franchisee’s independence as a limitation 5.4.3 Additional costs for assistance 5.4.4 Remedies 5.4.5 Conclusion

XXIII

153 153 153 154 154 154 156

159 161 162 163 163 164 165 167 168 169 170 170 171 172 172 173 174 174 174 175 176

XXIV

Table of Contents (extended)

Section 6. Franchisee’s obligation to pay 6.1 6.1.1 6.1.2 6.1.3 6.1.4 6.1.5 6.2 6.2.1 6.2.2 6.2.3

6.2.4 6.2.4 6.3 6.3.1 6.3.2 6.3.3 6.3.4 6.4 6.4.1 6.4.2 6.4.3 6.4.4 6.4.5

PEL CAFDC: Article 3:301 Introduction Payment as agreed in the contract Unilateral determination of the price Additional costs Remedies France Introduction Form and contents of the obligation to pay Determined price 6.2.3.1 Indirect remuneration 6.2.3.2 Direct remuneration Control of abusive pricing Remedies Spain Introduction Form and contents of the obligation to pay Determined price Remedies Comparison Introduction Contents Unilateral determination of the price by the franchisor Remedies Conclusion

177 177 178 179 180 180 181 182 187 188 189 190 190 192 192 193 194 194 195 196

Section 7. Franchisee’s obligation to follow Business Method and Instructions 7.1 7.1.1 7.1.2 7.1.3 7.1.4 7.2 7.2.1 7.2.2

PEL CAFDC: Article 3:303 Introduction Following the business method and instructions Reasonable care not to harm the franchise network Remedies France Introduction Obligation to follow the business method as agreed in the contract 7.2.3 Obligation not to damage the reputation of the network 7.2.4 Limits to the obligation to follow the business method 7.2.5 Remedies

197 198 199 199 199 200 201 202 204

Table of Contents (extended)

7.3 7.3.1 7.3.2 7.3.3 7.3.4 7.3.5 7.4 7.4.1 7.4.2 7.4.3 7.4.4 7.4.5

Spain Introduction Contents of the obligation to follow the business method Obligations not to damage the reputation of the network Limits to the obligation to follow the business method Remedies Comparison Introduction Contents of the obligation to follow the business method Limits to the obligation Remedies Conclusion

XXV

205 205 206 207 207 208 208 209 210 210

Chapter IV. General Conclusions 1.

Introduction

2.

Differences and similarities between the compared systems

2.1 2.2

A general difference: the sources of the law Differences and similarities as to the main obligations of the parties 2.2.1 Scope rule 2.2.2 Obligations of the franchisor 2.2.3 Obligations of the franchisee 3.

213

214

215 216 219

Underpinning policies: autonomy-friendliness? Legal certainty?

3.1 Franchisors’ autonomy-friendliness 3.1.1 Characteristic obligations in franchising 3.1.2 Requirements as to the form and contents of the obligations 3.1.3 Remedies 3.1.4 Legal outcome in case-law after balancing the interests of the parties 3.2 Legal certainty

221 221 222 223 224 225

XXVI

Table of Contents (extended)

4.

The likely reactions of the parties if the Principles were to apply

4.1 4.2 4.3

Franchisors Franchisees Win-win situation

226 227 228

5.

Final remarks

229

Summary Chapter I. General Introduction

232

Chapter II. Main Characteristics of French and Spanish Law on Franchising

232

Chapter III. Description and Comparision Scope rule Obligation of the franchisor to provide pre-contractual information Obligation of the franchisor to license intellectual property rights Obligation of the franchisor to communicate his know-how Obligation of the franchisor to assist Obligation of the franchisee to pay Obligation of the franchisee to follow the business method of the franchisor

233 233 235 235 236 237 238

Chapter IV. General Conclusions Differences and similarities as to scope of application, contents and form of the obligations, remedies for non-performance and outcome of judicial decisions Underpinning policies: autonomy-friendliness? Legal certainty? The likely reactions of franchisors and franchisees if the Principles were to apply

238 240 241

Table of Contents (extended)

XXVII

Samenvating

243

Hoofdstuk I. Allgemene Inleiding

244

Hoofdstuk II. De Belangrijkste Karakteristieken van het Frans an Spaans Recht inzake Franchising

244

Hoofdstuk III. Beschrijvingen en Vergelijking

245

Reikwijdte Precontractuele informatieplicht van de franchisegever Verplichting van de franchisegever om een licentie op intellectuele eigendomsrechten te verlenen Verplichting van de franchisegever om zijn know-how door te geven Verplichting van de franchisegever om begeleiding te geven Betalingsverplichting van de franchisenemer Verplichting van de franchisenemer om de bedrijfsformule van de franchisegever te volgen

245 246

Hoofdstuk IV. Algemene Conclusies

251

Verschillen en overeenkomsten met betrekking tot toepassingsbereik, inhoud en vorm van de verplichtingen van partijen, rechtsmiddelen tegen niet-nakoming en de uitkomst van rechterlijke uitspraken Onderliggende beleidsdoeleinden: nadruk op autonomie? Rechtszekerheid? De te verwachten reacties van franchisegevers en franchisenemers in geval de Principles van toepassing zouden zijn

247 248 249 250 251

251 253 255

Legislation a)

Principles of European Law on Commercial Agency, Franchise and Distribution Contracts (PEL CAFDC)

257

b)

French Law

260

c)

Spanish law

262

XXVIII

Table of Contents (extended)

Table of Cases European Court of Justice

265

French case-law Cour de Cassation Cours d’appel Tribunal de Grand Instance Tribunal de Commerce

265 267 268 269

Spanish case-law Tribunal Supremo Audiencias Provinciales

269 270

Bibliography

273

Abbreviations

291

Chapter I. General Introduction Section 1. The Europeanisation of private law 1.1

European private law at present: sectoral harmonisation by the EU

The process of harmonising the national private laws of Europe is not a new phenomenon. For several decades now, European Community law has been leading to the harmonisation of the national laws of the EU Member States. The competence to enact legal instruments to harmonise private law, mainly Regulations and Directives, is granted to the Community by Articles 94 and 95 of the EC Treaty1 (EC), provided that the aim of such legislative measures is to overcome obstacles to the functioning of the internal market. On these grounds, the Community has harmonised specific sectors of private law. However, the European Parliament (EP) has indicated that this sectoral approach does not provide sufficient means to guarantee the proper functioning of the internal market and that hence there is a political need to take the process of the harmonisation of the national private laws of Europe further. In Resolutions passed in 1989, 1994 and 2000, the EP called for the unification of larger areas of private law as a means to develop the internal market.2 The EP went even further and required the commencement of preparatory work on the drafting of a European Code of Private Law.3 The European Council at its Tampere meeting in 1999 also suggested carrying

1

2

3

Treaty establishing the European Community (consolidated text), OJ C 325 of 24 December 2002. Resolution of 1989, OJ C 158/400 (Resolution A2-157/89); Resolution of 1994, OJ C 205/518 (Resolution A3-0329/94) and Resolution of 2000, OJ C 377/323 (Resolution B5-0228, 0229-230/2000). Article 1 of the EP Resolution of 1989 reads: “Requests that a start be made on the necessary preparatory work on drawing up a common European code of private law, the Member States being invited, having deliberated the matter, to state whether they wish to be involved in the planned unification”.

2

Chapter I. General Introduction

out “an overall study … on the need to approximate Member States’ legislation in civil matters in order to eliminate obstacles to the good functioning of civil proceedings”.4 Criticism of the sectoral approach has also been voiced by scholars, who have called attention to the negative impact that the implementation of piecemeal directives is having on the internal coherence of national legal systems.5 The incoherences have been claimed to affect the substance of national laws6 or their structure, namely in countries where legislators have to adapt the piecemeal legislation to systems based on a comprehensive civil code. These are structural differences that may lead to incoherence as to the contents of the national laws.7 As a result, piecemeal harmonisation is said to lead to unintended divergences.8

1.2

The future of European private law

These criticisms of the sectoral harmonisation approach initiated a debate on the future of European contract law. The political appeal from the EP and the Council in the first place drew the attention of academics. For a long time the European Commission remained indifferent to the requests made by the EP and the Council, and to the criticism to the sectoral approach. Twelve years had to go by after the first EP resolution on European private law before the European Commission decided to take action. The first step which the Commission took was to issue a discussion paper on the future of contract law in Europe. Below, I will expound how the debate has evolved so far.

4

5

6

7 8

The full text of the Council of Tampere of 15-16 October 1999 can be found on the website of the European Parliament, www.europarl.eu.int/summits/tam_en. van Gerven, 2001, pp. 490 ff; Betlem & Hondius, 2001, p. 9; Snijders, 2003, p. 4; Hesselink, 2005, p. 22; Smits, 2005, p. 164. E.g: the importation of the civil law concept of good faith into British law by means of the Directive on unfair terms is said to disrupt the national system, now that good faith is a concept known to civil law systems, but is utterly alien to common law. See Teubner, 1998, p. 11 ff. See also on this issue Loos, 2007, p. 520-521. Hesselink, 2005, p. 22; Smits, 2005, p. 164. For further elaboration on the negative aspects of the “invasion” of piecemeal Community law into national laws, see van Gerven, 2001, p. 491 ff; Smits, 2005, p. 164 and Loos, 2007, p. 521.

Section 1. The Europeanisation of private law

1.2.1

3

The academic debate

1.2.1.1 Academic projects From 1989, the year in which the first EP Resolution on private law was adopted, until 2001, when the European Commission issued its first Communication on European contract law, the legal debate on the development of private law was mainly carried out by legal scholars. More accurately, this academic debate had already started a few years before the passing of the EP Resolution. In 1982, the Commission on European Contract Law led by professor Ole Lando had begun its research aimed at finding common legal structures for a general law of contracts in Europe. Further on, I will discuss the work of the Commission on European Contract Law in depth. Scholarly writing regarding the Europeanisation of contract law in this period reveals an open-minded approach towards harmonisation.9 Scholars did not look for confrontation, but rather sought to analyse the pros and cons of the harmonisation process.10 Initially, the approach of scholars was rather sceptical. They placed more emphasis on the cons than on the pros.11 This tendency seems to have turned into a more optimistic or “Europeanised” approach where the focus is on identifying the similarities between the national systems rather than on highlighting the differences.12

19

10

11

12

This open approach is evidenced by academic publications regarding European Private law, such as Towards a European Civil Code, the European Review of Private Law, the European Law Review, the Common Market Law Review, etc. Pierre Legrand is the exception to the rule. In all his contributions, this author gives voice to his radical opposition to any further interference from the European legislator in the development of European private law. See for example Legrand, 1996, pp. 52-81 or 1997, pp. 44-62. This sceptical approach may be noted in the contributions to the two first editions of A.S. Hartkamp et al. (eds.), Towards a European civil code, The Hague, 1994 and 1998. See also the papers of the Hague Conference on European private law of 1997 organised by the Dutch Ministry of Justice, published in 1998 in the ERPL, vol. 5, issue 4. In the introduction to the last edition of A.S. Hartkamp et al. (eds.), Towards a European civil code, The Hague, 2004, Hondius indicates that the contributions to the book reveal that national laws are ready for harmonisation. See Hondius, 2004, p. 4. See also R. Goode, 2003, p. 13; Ugo Mattei refers to a “new generation of European private law scholars”, see Mattei, 2004, p. 299. Some of these European private law scholars are in fact convinced that harmonisation of private law within Europe must and is destined to take place. See for example Salomons, 2000, p. 6.

4

Chapter I. General Introduction

The most remarkable characteristic of the academic contribution to the debate on the Europeanisation of private law has been the emergence of research projects involving academics from all over Europe. The political demand for the further harmonisation of private law stimulated the creation of quite a few academic projects for conducting comparative law research into the private laws of the EU in order to assess the need for and feasibility of harmonising private law in Europe. In particular, most of the groups involved in this research aim to determine the common core of legal solutions in Europe as regards private contract law.13 The most renowned of these academic initiatives is the abovementioned Commission on European Contract Law, also known as Lando Commission.14 The Lando Commission looked for common legal structures in the field of general contract law. Its work led to the formulation of the Principles of European Contract Law (PECL).15 In 2001, the “Pavia Group” published its “European Contract Code-Preliminary Draft” based on the work of the Academy of European Private Lawyers.16 The Study Group on a European Civil Code (SGECC) is the successor of the Lando Commision17 and since 1999 has been working on the formulation of European principles in specific fields of patrimonial law (contract, tort and property law).18 Another important ongoing project is the Trento Common Core Project of European Private Law (Trento group). The Trento group also aims to identify the common core of legal solutions as regards specific areas within patrimonial law, but unlike the Lando Commission and the SGECC, its comparative method starts from hypothetical cases.19 Further, a Research Group on the Existing European Community Private Law (Acquis Group) was founded in 2002 with the goal of identifying the common principles of private law which already exist within Community law. This group’s approach 13

14

15

16

17 18

19

See on the work of these groups van Gerven, 2001; Basedow, 2001, p. 39; Hesselink, 2004, III, p. 37; Smits, 2002, p. 5 and 2005, p. 157, among many others. The Commission is named after its chairman, Professor Ole Lando. For further information see: www.cbs.dk/law/commission_on_european_contract_law. PECL Parts I and II in Lando & Beale, 2000 and PECL Part III in Lando & Clive & Prüm & Zimmermann, 2003. This group is led by Professor Giuseppe Gandolfi. This group models its version of a European code on the Italian Codice Civile. See Gandolfi, 2001. See von Bar & Lando & Swann, 2002, p. 192. Information on the characteristics of the SGECC can be found in von Bar & Lando & Swann, 2002, p. 189 ff. For further and up-dated information regarding the SGECC see the group’s website, www.sgecc.net See Mattei & Bussani, 2002, p. 5. In the Trento group the national reporters are required to provide information on how a given case would be solved under their respective systems. See website www.jus.unitn.it/dsg/common-core/home.html.

Section 1. The Europeanisation of private law

5

differs from that taken by the others as it focuses on Community law instead of comparing national legal orders.20 The projects mentioned above are just a few of the many relevant academic projects that exist.21 In the context of this analysis, only the Lando Commission and the SGECC need to be further elaborated upon.

1.2.1.2 The Lando Commission and the SGECC The Lando Commission launched the pioneering project on European private law. It started its work in 1982 with the aim of formulating principles of contract law in Europe. As has already been indicated, its work led to the formulation of the PECL, Parts I, II and III.22 The work was carried out in three stages. The Commission first prepared rules on the performance and non-performance of contracts and remedies for non-performance. In 1992, the Second Commission on European Contract Law began working on the issues of formation, validity, interpretation and contents of contracts, as well as on the aspect of the authority of an agent to bind his principal.23 In 2003, a third Commission published a third set of rules on specific issues, among which assignment of claims and debts, set-off, and prescription. According to the Lando Commission, the PECL are meant to provide “a Union-wide infrastructure of contract law” in which the piecemeal Community law can be embedded.24 The Lando Commission has argued that European sectoral legislation needs as its foundation a comprehensive harmonised body of rules on general contract law in order to guarantee the proper functioning of the internal market.25 Accordingly, the Lando Commission, like the EP and the Council, has claimed that the sectoral approach does not suffice to overcome obstacles to the internal market.

20

21

22 23 24 25

See Schulte-Nölke, 2003, p. 142 and 145. See also the Acquis group’s website, www.acquis-group.org. Other projects include the Project Group on a Restatement of European Insurance Contract Law, or "Insurance Group", the Association Henri Capitant together with the Société de Législation Comparée and the Conseil Supérieur du Notariat, the Research Group on the Economic Assessment of Contract Law Rules or “Economic Impact Group”, the “Database Group”, the Academy of European Law (ERA) and the Social Justice Group. See n. 15, above. The second publication contains Parts I and II of the PECL. PECL, pp. xxi and xxii. See Introduction to the PECL, p. xxi.

6

Chapter I. General Introduction

The SGECC follows the Lando Commission’s reasoning, but extends its search for common principles to the entire area of patrimonial law. The SGECC started its work in 1999, under the leadership of professor von Bar.26 Two main factors contributed to the creation of this group. On the one hand, its establishment was a result of the EP’s call for scholarly research on the need for and feasibility of adopting a code on European private law as contained in the EP resolutions of 1989 and 1994.27 On the other hand, it intended to continue the work of the Lando Commission for specific fields of contract, tort and property law.28 The work of the SGECC is based on the work of the Lando Commission:29 the PECL provide the general contract law regime within which the principles on specific areas of patrimonial law as drafted by the SGECC are framed.30 These specific areas concern particular contracts (sales, services, credit agreements and credit securities, insurance, commercial agency, franchise and distribution contracts), non-contractual obligations (tort law, the law of unjustified enrichment and the law on negotiorum gestio) and certain parts of the law of property in movables which are especially relevant for the functioning of the common market (credit securities in movables, transfer of ownership in movables, and the law of trusts).31 The presentation of the draft texts of the SGECC also resembles that of the PECL. Each rule is accompanied by comments and notes. The comments explain the main features of each rule (reason, purpose, operation) and the notes indicate the principal national sources used and very briefly describe the manner in which each system deals with the issue at stake. The work of the Amsterdam working group within the SGECC has led to the formulation of European principles regarding commercial agency, franchise and distribution contracts (hereinafter: PEL CAFDC or Princi26 27

28 29 30 31

Christian von Bar is Professor at the University of Osnabrück, Germany. von Bar, 1999, p. 138: “The initiators of the Study Group began their deliberations by examining the results of an international conference entitled Towards a European Civil Code which was organised by the Dutch Ministry of Justice and took place in The Hague in 1997. The conference itself had been convened in the wake of the two European Parliament resolutions of 1989 and 1994. Despite some sceptical comments, the basic response of the overwhelming majority of the participants to the idea of creating a European Civil Code was so positive and constructive that the establishment of a European study group seemed to offer sufficient prospect of success.” von Bar, 1999, p.140. von Bar, foreword PEL CAFD, 2006, p. 4; See Hondius, 2004, p. 11. von Bar & Lando & Swann, 2002, p. 192. von Bar & Lando &. Swann, 2002, p. 191. Also von Bar, foreword PEL CAFDC, 2006, p. 4.

Section 1. The Europeanisation of private law

7

ples).32 These I will describe in depth later on when I discuss the harmonisation of the law on franchising.

1.2.2

The political debate

As already indicated, the European Commission took a long time to decide to respond to the appeals of the EP and the Council regarding the need to take further political steps in the harmonisation of private law in Europe. This period can be described as the calm before the storm. After many years of indifference, the European Commission with its 2001 Communication on European Contract Law suddenly embarked on a period of non-stop activity. In this process, academics have been called upon to play a central role.

1.2.2.1 Communication on European Contract Law With the 2001 Communication on European Contract Law (Communication)33 the European Commission extended the debate on the Europeanisation of contract law, which had until then mainly been held among scholars, to other interest groups, mainly consisting of public administrations and institutions, legal practitioners, businesses and consumer associations.34 In this way, the Commission instigated a public debate with the aim of collecting information on the need for further-reaching Community action in the area of contract law. The purpose of the consultations was threefold: first, to find out whether the sectoral harmonisation approach caused problems in the uniform application of Community law or the smooth functioning of the internal market; second, to hear views on the problems facing the internal market as a result of differences in private national laws and finally, to invite opinions on four possible options for future European Community initiatives in contract law.35 The proposed options were (i) to take no action and thus let market forces deal with the existing problems; (ii) to encourage the formulation of common principles of European contract law by means of academic research; (iii) to improve EU law in the area of contract law and (iv) to adopt an optional instrument on contract law at Community level.36 32 33

34 35 36

PEL CAFDC, 2006. Communication from the Commission to the Council and the European Parliament on European Contract Law, COM (2001) 398 final. Communication, p. 6. Ibid. p. 8, 10 and 11 ff. Ibid. pp. 2 and 12.

8

Chapter I. General Introduction

The response to this Communication revealed that the majority agreed on the need to take action in order to improve existing Community law so as to guarantee its coherent and consistent application in all Member States and to guarantee the smooth functioning of the internal market.37 Some respondents also indicated that divergences between national contract laws posed an obstacle to the adequate functioning of the internal market.38 In line with this response, contributors reacted very positively to the option to improve EU law in the area of contract law, whereas the options not to take any action and to encourage the formulation of principles of contract law were considered insufficient to solve the problems identified. Despite the fact that it was claimed that the sectoral approach and the divergences in private national laws impeded the smooth functioning of the internal market, the majority of respondents were against the adoption of an optional instrument on contract law. Academics were divided.39 On this last point, the Community institutions dissented from the majority view. In its reaction to the Commission’s Communication, the EP reiterated that the harmonisation of civil and commercial law was necessary in order to facilitate cross-border transactions in the internal market, and added that harmonisation might in the long run (2010) lead to a “body of rules on contract law”.40 The Council in its reaction also advocated a more horizontal approach to harmonisation, aiming at the creation of a European common core of private law if a need for harmonisation was revealed.41 Both the EP and the Council favoured a code.42

37

38

39

40

41

42

A summary of the response has been included in a document entitled Rections to the Communication on European Contract Law, which can be found on the website of the Commission: http://ec.europa.eu/consumers/cons_int/safe_shop/fair_ bus_pract/cont_law/comments/summaries/sum_en.pdf. For the response concerning the implications for the internal market, also see this document, p. 4 ff. Ibid. for a summary of the response concerning the uniform application of Community Law, p. 9 ff. Ibid. for a summary of the response concerning the position of contributors on the options proposed by the Commission, p. 11 ff. Resolution of 15 November 2001 on the approximation of the civil and commercial laws of the Member States (COM (2001) 398 – C50471/2001 – 2001/2187 (COS)). Council report of 16 November 2001 (No 13017/01) on the need to approximate Member States' legislation in civil matters. Staudenmayer, 2003, pp. 116 and 117.

Section 1. The Europeanisation of private law

9

1.2.2.2 The Action Plan In the light of the replies received, the European Commission in 2003 launched a second round of discussion by means of the Action Plan for a more coherent European Contract Law (Action Plan).43 The Commission followed the proposal of the EP to establish a concrete schedule for measures that had to be taken.44 The Action Plan consisted of two main parts. In the first part the Commission described the problems mentioned by the respondents to the 2001 Communication.45 In the second part, three lines of action were proposed to tackle the problems identified, namely to increase the coherence of contract law (measure I), to create a website where EU-wide general contract terms could be consulted (measure II) and to examine whether problems in the field of European contract law could require the adoption of an optional instrument (measure III).46 For the securing of measure I, the European Commission made a concrete proposal which consisted of elaborating a common frame of reference (CFR), “establishing common principles and terminology in the area of European contract law.” The CFR had to assist the Community institutions in achieving a higher level of coherence in the existing and future acquis in the area of European contract law. 47 The choice of measures was allegedly based on the response by the contributors, and this was indeed the case in respect of measures I and II. However, with respect to measure III concerning the need to adopt a Community horizontal instrument on contract law, the Commission chose to follow the views of the EP and the Council rather than the views of the majority of the respondents and decided that the debate had to continue.48

43

44

45 46 47 48

Communication from the Commission to the European Parliament and the Council, A More Coherent European Contract Law, An Action Plan, COM (2003) 68 final. In its response to the Communication, the EP proposed a very ambitious approach by requesting the European Commission to take concrete measures in the short, medium and long run. Action Plan, pp. 6-14. Ibid. pp. 14-24. Ibid. p. 16. Ibid.

10

Chapter I. General Introduction

1.2.2.3 The Way Forward The reactions to the Action Plan were summarised in the next Communication elaborated by the European Commission in October 2004 entitled “European Contract Law and the revision of the acquis: the way forward” (The Way Forward).49 Similar to the Action Plan, this paper can also be divided into two main parts. In the first part, the Commission announced the following steps that were to be taken regarding the three lines of action proposed in the Action Plan in view of the respondents’ reactions.50 Accordingly, measure I received the most attention, as the contributors mainly insisted on the need to improve existing Community law and considered that the CFR was an adequate means to achieve this result.51 The Commission indicated that a review of eight consumer Directives was to be carried out in order to evaluate whether they had achieved the Commission’s consumer protection and internal market objectives.52 Regarding measure II, the Commission significantly explained that by hosting a website to promote the development and use of the EU-wide standard contract terms it did not aim to draw up standard contracts itself, but only to facilitate the exchange of information.53 Regarding measure III on the debate on an optional instrument, the Commission indicated that according to the contributors there was no need to abandon the sectoral approach.54 However, even though there was no indication that the contributors were in favour of a CFR as the basis for a future optional instrument, the Commission still considered that the debate had to continue, in parallel with the work on the CFR,55 and devoted Annex II of The Way Forward to the parameters which had to be taken into account in that debate. Aspects to be decided were whether an optional instrument should be generally applicable unless the parties expressly exclude this (opt-out approach) or whether it should only apply if the parties expressly agree this (opt-in approach).56 Furthermore, a decision had to be taken on whether the optional instrument should apply only to cross-border 49

50 51 52 53

54 55 56

Communication from the Commission to the European Parliament and the Council, European Contract Law and the revision of the acquis: the way forward, COM (2004) 651 final. The Way Forward, pp. 2-9. Ibid. p. 2. Also Staudenmayer, 2005, p. 96. The Way Forward, p. 3. Ibid. p. 6. No further reference to this measure is needed now that it has been deleted from the political agenda. See in this Chapter 1.2.3.3, below. The Way Forward, p. 8. Ibid. Action Plan, p. 23.

Section 1. The Europeanisation of private law

11

relationships or whether it could also be opted for in purely internal relationships, whether it should be binding (Regulation) or non-binding (Recommendation), whether there should be one or several optional instruments, etc. It was made clear that a possible optional instrument had to be based on the principle of contractual autonomy,57 subject to exceptions when there were areas where mandatory rules were needed.58 The second part of The Way Forward was entirely devoted to the process of preparation and elaboration of the CFR.59

1.2.3

The CFR

1.2.3.1 Definition, aims, contents, elaboration In its Action Plan, the European Commission defined the CFR as “a manual of best solutions in European contract law which will contain principles, definitions and model rules.”60 These best solutions were to be identified on the basis of national contract laws, Community law and relevant international instruments.61 The primary aim of the CFR as announced in the Action Plan was confirmed in The Way Forward: to improve the quality and consistency of the acquis in the area of contract law.62 In these two Communications the Commission also referred to a possible second aim of the CFR: to serve as the basis for one single or several optional instruments on contract law.63 The Action Plan left open the question as to the possible contents of the CFR. However, annexed to the Way Forward was a possible structure for a CFR.64 The Commission proposed a CFR that would resemble a code of contract law divided into three parts, where Chapter I would deal with fundamental principles of contract law, Chapter II with definitions of the most

57 58 59 60

61

62 63 64

Action Plan, p. 23 and The Way Forward, p. 18. Ibid. The Way Forward, pp. 9 to 13. Action Plan, p. 16. For detailed commentaries on the idea of a CFR see Staudenmayer, 2005, p. 96 ff; von Bar, 2005, pp. 17 ff; Schulte-Nölke, 2003, pp. 142 ff; Hesselink, 2004, II, p. 687 ff. The Way Forward, p. 11. As Rutgers has rightly indicated, the Commission gives no indication as to how the best solutions are to be found in the national laws. See Rutgers, 2004, p. 5122. The Way Forward, p. 2. Action Plan, p. 23 and The Way Forward, p. 8. The Way Forward, p. 11.

12

Chapter I. General Introduction

relevant abstract terms and Chapter III with model rules of contract law.65 This final chapter would describe the typical stages in any contractual relationship and might include sections devoted to rules for specific contracts.66 The Commission distinguished two main stages in the CFR process. During the first stage, a draft CFR was to be prepared by academics in cooperation with a network of experts selected by the Commission (CFR-net). The CFR-net had to identify practical issues and to provide technical feedback on the academic drafts.67 This cooperation was meant to guarantee that the academic proposals also took into account the practical needs put forward by the CFR-net.68 The draft CFR had to be submitted to the Commission by the end of 2007. The second stage will not involve academics. During this stage the final academic report is to be subjected to a “practicability test” (as the Commission calls it), which will consist of checking the suitability of the draft CFR for use.69 After this test the researchers’ draft will become the European Commission’s draft.70 This draft will then be submitted for final political consultation to the EP, the Council and the Member States.71 The draft CFR resulting from the political discussion will become a White Paper. The final step scheduled is the adoption of the CFR envisaged for 2009.72

1.2.3.2 An academic CFR Scholars have been called upon to play a central role in the process of the elaboration of the CFR. The European Commission believed that the CFR process could benefit from the legal researchers’ work in the field of European contract law which had been going on for many years already. Therefore, it entrusted those researchers with the task of working out proposals to

65 66

67 68 69 70 71

72

The Way Forward, Annex 1, p. 15. The model CFR proposed by the Commission in the Annex to The Way Forward mentions sections regarding contracts of sale and insurance contracts. Action Plan, p. 2 and The Way Forward, p. 10. The Way Forward, p. 10. E.g. by using the draft CFR in a proposal to modify an existing directive. The Way Forward, p. 12. The EP, in Resolutions on European contract law passed on 23 March and 7 September 2006, calls for the active political involvement of the EU political institutions at the first stage already. Resolution of 23 March 2006 on European contract law and the revision of the acquis: the way forward (P6_TA(2006)0109) and Resolution of 7 September 2006 on European contract law, (P6_TA(2006) 0352). The Way Forward, pp. 12 and 13.

Section 1. The Europeanisation of private law

13

be submitted as the first draft CFR.73 These academics, who are called the Network of Excellence, were requested to establish Common Principles of European Contract Law (CoPECL) as a proposal for a CFR.74 In accordance with the structure of the CFR proposed by the Commission in The Way Forward, the CoPECL had to contain definitions, general concepts and legal rules.75 The work on the CFR has since begun. In the years 2005 and 2006, some academic drafts were presented to the CFR-net in the course of the working sessions organised by the European Commission in Brussels. The members of the CFR-net then provided technical input on these drafts and the academics gave their response to the experts’ comments.76 As there was still research to be done in areas which were not previously covered, new working groups have been formed to continue the comparative research in these areas (e.g. working groups on contracts for loans or contract of mandate). The Network of Excellence has submitted their first academic Draft-CFR (DCFR) to the European Commission in December 2007.77 The DCFR is therefore an academic CFR.78 The academic DCFR has entered the political arena and will probably be modified so as to adapt it to the political needs of the moment. The European Commission has made itself crystal clear in this respect: “the Commission is not bound by the researchers’ final report and will amend it where necessary to achieve the Action Plan’s objectives”.79 However, it is ques-

73

74

75

76

77

78

79

The groups involved in drafting the academic CFR are the Study Group on a European civil code, The Acquis Group and the Insurance Group, see 1.2.1.1 in this Chapter, above. See www.copecl.org. The Network of Excellence was funded by the Commission in May 2005 under the Sixth Framework Programme for Research. The leaders of the academic groups have commented upon the preparation of the CFR, see von Bar, 2005, p. 17; Schulte Nölke, 2003, http://www.iue.it/Law/ ResearchTeaching/EuropeanPrivateLaw/Conferences/SchulteNolke_ Acquis_Group.pdf. According to von Bar, the cooperation between the Network of Excellence and the CFR-net has not been very succesfull. See von Bar, 2005, p. 21. See also Beale, 2006, pp. 304 ff. The print version of the DCFR has been published in February 2008: C. von Bar, E. Clive, H. Schulte-Nölke (edts), Principles, Definitions and Model Rules of European Private Law, Draft Common Frame of reference (DCFR), Interim Outline Edition, European law publishers, Munich, 2008. The Commission has also called the first CFR draft a “researchers” draft. See The Way Forward, p. 12. The Way Forward, p. 12.

14

Chapter I. General Introduction

tionable whether at the final stage the Commission would be willing to redo all the work already done by the academics.

1.2.3.3 Political developments: a CFR on consumer contract law In 2005, the European Commission launched its “First Annual Report on European Contract Law and the Acquis Review” (First Progress Report).80 In this Progress Report the Commission announced that the CFR process had to focus on the review of consumer contract law issues. It shed no light on the state of affairs in respect of the debate on an optional instrument, apart from in a very brief paragraph hinting at the adoption of an optional instrument in the area of financial services.81 The report further gave no indication of the progress of the cooperation between the Network of Excellence and the CFR-net concerning non-consumer subjects which had been discussed in the workshops organised by the European Commission.82 By contrast, the Commission was very explicit in indicating that the idea to create a website with European standard contract terms had been deleted from the political agenda.83 This approach has been confirmed in the “Second Progress Report on the Common Frame of Reference” (Second Progress Report), published by the European Commission in July 2007.84 It follows from these two Progress Reports that a shift has occurred in the European Commission’s approach, which has gone from being broad and comprising the whole of European contract law to becoming more narrow and dealing only with European consumer law.85 The CFR will be used as a toolbox to improve the consumer acquis. The question thus arises whether the second possible use of the CFR, i.e. to serve as the basis for a possible optional instrument on contract law, will also still be pursued.

80

81 82

83 84

85

European Commission’s First Annual Report on European Contract Law and the Acquis Review, COM (2005) 456 final. First Progress Report, p. 11. For example the draft on commercial agency, franchise and distribution contracts, which was discussed in a workshop on 16 March 2005. First Progress Report, pp. 10-11. European Commission’s Second Progress Report on the Common Frame of Reference, COM (2007) 447 final. Beale, 2006, p. 309; Hesselink, 2006a, p. 291.

Section 1. The Europeanisation of private law

1.2.4

15

The CFR as the basis for an optional Instrument on contract law?

1.2.4.1 The political debate The political will of the European Commission to continue the debate on the opportuneness of an optional instrument, as shown in the Action Plan and in The Way Forward, seems to have dwindled, as may be concluded in view of the contents of the Progress Report and the Green Paper. However, it is unclear whether the Commission has permanently abandoned the idea of elaborating an optional code on the basis of the CFR. Commissioner Kuneva86 has indicated that the work on “non-consumer” aspects of the acquis will continue to be taken forward in the coming years.87 However, all attention seems to be focused on specific horizontal issues, e.g. on the validity and interpretation of contracts in case of mistake, fraud or misrepresentation, rather than on general contract law. The Second Progress Report is silent concerning the debate on the opportuneness or inopportuneness of an optional instrument. The European Commision indicates that it considers the CFR a better regulation instrument and that the CFR’s scope “is not a large scale harmonisation of private law or a European civil code.” However, the Commission also indicates that in view of the preferences expressed by the EP for a wide CFR project on general contract law issues going beyond the consumer protection field, it would be also opportune to know the position of the Council on this issue, and in this manner decide whether the work on the CFR could be enlarge to other EU contract law acquis. Clarity is lacking therefore on the official position of the European Commission concerning the adoption of an optional code. On the one hand, the Commission was adamant that the discussion should continue, but on the other hand, it has also indicated that it does not intend to enact a European civil code. The wording used by the Commission in The Way Forward illustrates this confusion: “it is important to explain that it is neither the Commission’s intention to propose a European civil code which will harmonise contract laws of Member States, nor should the reflections be

86

87

Commissioner responsible for Consumer Policy within the Directorate-General Health and Consumer Protection. Paper presented at the SECOLA conference “The Common Frame of Reference and the Future of European Contract Law”, held in Amsterdam on 1 and 2 June 2007.

16

Chapter I. General Introduction

seen as in any way calling into question the current approaches to promoting free circulation on the basis of flexible and efficient solutions.”88 The EP is meanwhile awaiting further developments. In its Resolution on European contract law of March 2006 the EP acknowledged that it remained unclear whether the CFR process would lead to the enactment of an optional instrument, but that the political will to adopt a code might exist in the future.89 However, in its September Resolution the EP took a clearer position: it reiterated that the internal market could not be fully functional without further steps towards the harmonisation of civil law and it firmly supported an approach for a wider CFR on general contract law, thus going beyond the field of consumer protection.90 The EP confirmed this approach in its Resolution on European contract law of December 2007. After welcoming the DCFR, the EP underlined its conviction that a better-regulation approach to the CFR required a CFR which was not limited to consumerlaw issues. The EP also reiterated that all the various options regarding the purpose and legal form of a future CFR instrument, including an optional instrument, should be kept open.91 The final decision on whether an optional code is needed is therefore left for later. According to Staudenmayer, Head of Unit of the Directorate General of Health and Consumer Protection, a political decision on this subject will likely have to be given after examining the final version of the CFR.92

1.2.4.2 The academic debate The work of the Network of Excellence in drafting the academic CFR has continued and been carried out unhindered by political changes. The objective of the Network of Excellence has been to elaborate its proposal for submission as the first draft CFR at the end of 2007. The Commission requested academics to propose a comprehensive set of common principles on European Contract Law, i.e. not limited to contracts concluded with consumers, and that is indeed what academics has been working on. The aca88

89 90 91

92

See also the comment of the European Commission in the Green Paper on the conversion of the Rome Convention into a Regulation (COM (2002) 654), p. 12: “… in the Commission’s opinion, the European contract law project does neither aim at the uniformisation of contract law nor at the adoption of a European civil code.” EP Resolution of 23 March 2006, n. 71 above, p. 1. EP Resolution of 4 September 2006, n. 71 above, p. 2. EP Resolution of 12 December 2007 on European contract law (P6_TAPROV(2007)0615). See Staudenmayer, 2005, p. 100.

Section 1. The Europeanisation of private law

17

demic CFR is therefore broad in scope: it relates to matters of general contract law and to specific contracts, including contracts with consumers. Of course there is also an intense academic debate going on as to the political questions regarding the harmonisation of private law in Europe, such us the question of whether the differences between the national systems of the Community would allow harmonisation, whether the European Commission is competent to uniformise rules of private law or whether an optional instrument would be an adequate method for harmonisation.93 Differences in legal culture have been invoked as the main argument against the enactment of a European civil code.94 This is amply illustrated by Legrand who has asked: “What is a European civil code if not a project seeking to reduce the diversity of legal discourses within Europe?” However, scholars who are less radically opposed to the harmonisation process focus on arguments regarding the legitimacy of a process where EU institutions enact a European code. The European Commission justifies the adoption of an optional code by calling it a measure to guarantee the smooth functioning of the internal market.95 In this view, Article 95 EC which has so far been used as the legal basis for adopting directives which harmonise specific fields of private law, could also be invoked as the legal basis for an optional code.96 However, in its Tobacco judgment of 2000 the ECJ determined that Article 95 does not confer a general power to regulate the internal market, and that intervention is only justified when the divergences in the national laws pose an actual threat to the functioning of the internal market.97 Some authors derive from this restrictive interpretation by the ECJ that the enactment of an optional instrument cannot be justified on the basis of Article 95 EC.98 The academics who belong to the Study Group on Social Justice in European Contract Law (the Social Justice Group) on their part have em93

94 95 96 97

98

The list of scholars contributing to this debate is very long. See among many others Lando, 1999; Grundmann, 2001; Basedow, 2001, pp. 35-49; Jamin & Mazeaud, 2001; Huet, 2002; van Gerven, 2002a and 2004; Wilhelmsson, 2002; Beale, 2002; Díez-Picazo & Roca Trías & Morales, 2002; Cámara Lapuente et al., 2003; Hondius, 2004; Zimmermann, 2004; Collins, 2004, pp. 787-803; Hesselink, 2004a, 2004b, 2006a, 2006b, 2006c; Rutgers, 2006a and 2006b; Loos, 2007. Legrand, 1997, p. 53 and 2004. The Way Forward, p. 20. Rutgers, 2005, p. 158 and 2006, p. 205. Case C-376/98 Germany v. European Parliament and Council [2000] ECR I-84190. See van Gerven, 2005, p. 11; Collins, 2004, p. 788; Rutgers, 2005, p. 147; Loos, 2007, p. 523. Differently, see Basedow, 2001, p. 45 and Weatherill, 2004, p. 640 ff.

18

Chapter I. General Introduction

phasised that the harmonisation process should not focus exclusively on legal-economic aspects regarding the internal market, but that the parameters of social justice should also be considered.99 So far, the only certainty is that some parts of the DCFR will be used to draft the Commission’s CFR, which in turn will likely be used, provided it receives the necessary political support, to review the acquis in respect of consumers. Most other questions remain unanswered. It is difficult to ascertain at this moment what the final outcome of the debate on European contract law will be, given the conglomerate of legal issues involved. In the end, as Hesselink tellingly remarks, “the future of European Contract Law depends on political choices.”100 199 100

Social Justice in European Contract Law, 2004, pp. 653-674. Hesselink, 2002, p. 172. See also Roca i Trías, 2003, p. 204.

Section 2. The Europeanisation of the law on franchising 2.1

The law on franchising in Europe at present

There is at present no European private law regulating the contents of franchising contracts. Unlike the law on commercial agency, which has been harmonised by means of a directive,101 the law on franchising has so far not been made the subject of sectoral harmonisation. There is however European Community law on franchising, namely the Block Exemption Regulation (BER) 2790/1999 on vertical restraints,102 but this is exclusively concerned with competition law aspects of franchising agreements. Further, there is the European Code of Ethics for Franchising (ECEF), which has been established by the European Franchise Federation (EFF).103 This Code contains provisions on the contractual aspects of franchising and is intended to apply Europe-wide. The ECEF is not legally binding, but is a deontological code which contains guidelines to assist parties in establishing a fair franchise relationship.104 The fact that there are deontological rules to help franchisors to conclude fair agreements with their franchisees is quite enlightening: the EFF appears to take the interests of franchisees to heart. However, the practical effect of these provisions upon guaranteeing balanced agreements is minimal, as they only bind franchisors who are members of the EFF and parties who expressly agree to be bound by this code of ethics. Currently, EU Member States all have their own national regimes regulating franchising agreements. However, nearly none of them have statutory

101

102

103 104

Council Directive of 18 December 1986 on the Coordination of the Laws of the Member States relating to Self-employed Commercial Agents (86/653/EEC). Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices, OJ L 336/21-25. This Regulation substitutes BER 4087/88 of 30 November 1988 on the application of Article 85(3) of the Treaty to categories of franchise agreements, OJ L 359. See for further information on the competition law aspects of franchising, Barendrecht & van Peursem, 1997, pp. 44 ff. The full text of the ECEF is available on the EFF website: www.eff-franchise.com. See the preamble of the ECEF.

20

Chapter I. General Introduction

rules regulating the contents of franchising agreements. The only exceptions are Italy and Lithuania. In 2004, the Italian Parliament enacted the Franchising Act,105 while Lithuania has included rules on franchising in the Civil Code of 2000.106 Under the Belgian, French and Spanish legal systems there are statutory disclosure rules that impose on the franchisor a precontractual obligation to inform his franchisees, but there is no legislation in these systems that regulates the internal relationship between the parties.107 In the absence of specific franchising legislation, the legal framework in which franchising relationships are embedded in the EU legal regimes consists of general rules of contract law, of specific rules regulating specific contracts which could be included in a franchise framework relationship108 and of case-law and doctrine that have arisen from commercial practice concerning franchising relationships.109 As mentioned above, however, franchising parties in Italy and Lithuania are also bound by the respective national franchising-specific legislation. The Italian Act is principally a form of disclosure legislation.110 The franchisor is subject to both pre-contractual and contractual information obligations.111 The franchisor is also obliged to agree on the duration of a fixedterm contract that allows the franchisee to amortise his investments.112 The Italian Act imposes contractual obligations upon franchisees as well, but these are limited to the prohibition to transfer the outlet without the prior consent of the franchisor and a duty of confidentiality.113 According to 105 106

107

108

109 110 111 112 113

Act 129/2004 of 6 May 2004 on franchise contracts. Chapter XXXVII of the Lithuanian Civil Code, in force as of 1 July 2001, is devoted to franchising agreements. In Belgium, this is the Law of 19 December 1995 as amended on 25 December 2005 on precontractual information in the framework of agreements of commercial partnership, Doc. 51/1687 (published in Moniteur Belge of 18 January 2006). In France, this is Article L. 330-3 of the French Commercial Code (formerly enacted as Loi Doubin, LOI n.89-1008 du 31 décembre 1989 relative au développement des entreprises commerciales et artisanales et à l'amélioration de leur environnement économique, juridique et social, JCP 1990, III, 63449). In Spain, it is Article 62 of Act no. 7/1996 on Retail Trade of 15 January 1996 (Ley de Ordenación del Comercio Minorista), RCL 1996/148 and 554. See UNIDROIT, Legislation and Regulations Relevant to Franchising, Annex 3 to the UNIDROIT guide to International Franchise Arrangements, in www. unidroit.org. Ortuño Baeza, 1997, p. 1536. See Roppo, 2005, p. 278. Italian Franchising Act, Articles 3 (4) and 4. Ibid. Article 3 (3). Ibid. Article 5.

Section 2. The Europeanisation of the law on franchising

21

Roppo, the Italian Act is clearly intended to protect franchisees as the weaker party in franchising from abuses by franchisors following from their superior bargaining power.114 The relevant Chapter in the Lithuanian Civil Code also includes obligations for both franchisors and franchisees, and similar to the Italian Act, also mostly aims to determine the form and contents of the agreements in order to limit the unilateral discretion of the franchisor to impose terms of contract.115

2.2

A proposal for a future European regulation on franchising

2.2.1

The academic exercise: the PEL CAFDC

2.2.1.1 General The Study Group on a European Civil Code (SGECC) has proposed a European regulation concerning the contents of commercial agency, franchising and distribution contracts: the PEL CAFDC. The PEL CAFD contain a chapter specifically dealing with franchising agreements. The current legal framework for franchising in Europe as described above may change if the principles on franchising in the PEL CAFDC develop into a system of optional rules which parties Europe-wide may apply to regulate the contents of their relationship. This could indeed become the case if the principles on franchising in the PEL CAFDC are made a section of the CFR and the CFR in turn is made the basis of a future optional code. It could also become the case if the European Commission in the proposal for the conversion into a Regulation of the Rome Convention on the law applicable to contractual obligations decides that the PEL CAFDC can be considered a system of private law which can be optionally applied by parties to govern their agreements by means of a choice of law (Article 3(1) of the Rome Convention), as is the case for the PECL.116

114 115

116

See Roppo, 2005, p. 280. A schematic reference in English to the contents of the chapter on franchising in the Lithuanian Civil Code may be found on the website of UNIDROIT, see http://www.unidroit.org/english/guides/1998franchising/country/lithuania.htm. Article 3 (2) of the Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I) presented by the Commission, COM (2005) 650 final.

22

Chapter I. General Introduction

2.2.1.2 Aims and scope The PECL provide the general contract law regime in which the specific principles of the PEL CAFDC are embedded. In addition to the abstract and general rules provided by the PECL, which apply to all contracts, the SGECC considered that particular rules had to be drafted for agency, franchise and distribution contracts, and for contracts where one party engaged in business independently uses its skills and efforts to bring another party’s products on to the market,117 “in order to give legal practice some guidance and to provide them with a reasonable degree of legal certainty.”118 The PEL CAFDC deal exclusively with the internal relationship between the principal and the commercial agent, between the franchisor and the franchisee and between the supplier and the distributor. They do not deal with relations with third parties.119 The SGECC made it clear that the Principles have not been drafted with a specific protection aim,120 but to save transaction costs for the parties by providing for “possible problems solutions which parties would presumably agree to”.121 However, the SGECC was also led by the objective of achieving a proper balance between the interests of the parties involved in commercial agency, franchise and distribution agreements.122 Therefore, in shaping the contents of the obligations, the researchers did not only strive to reflect the common core of solutions in the EU Member States with respect to the main legal issues regarding franchising, or the majority view in the EU in cases where such a common core is lacking, but also took into account other sources. In the case of franchising, for example, these additional sources were the European anti-trust rules on franchising, the model rule on disclosure proposed by the group on franchising within UNIDROIT,123 the ECEF and the model

117 118

119 120 121 122 123

Article 1:101 (scope) of the PEL CAFDC. See Introduction to the PEL CAFDC, 2006, p. 92; Also Hesselink, 2002, p. 102: “… it is clear that having only the general law of contract leaves many specific questions unanswered. This is why within the framework of the European Civil Code project principles of specific contracts are being prepared.” See Introduction to the PEL CAFDC, 2006, p. 96. Ibid. p. 93. Ibid. Ibid. p. 95. See the Report on the Fourth Meeting of the Study Group on Franchising held on 9-10 December 1999, Study LXVIII- Doc 20, p. 2. See also Peters, 2004, p. 34.

Section 2. The Europeanisation of the law on franchising

23

for International Franchising Contracts of the International Chamber of Commerce.124

2.2.1.3 Working method The PEL CAFDC were formulated on the basis of the information provided by the national reporters of the Dutch group within the SGECC, who were asked to answer several questionnaires regarding the main legal questions concerning commercial agency, franchise and distribution agreements.125 On the basis of this information, the Amsterdam working group within the SGECC identified and discussed the main policy issues regarding these contracts and subsequently formulated black letter rules that contain the basic contractual obligations for the parties involved in these types of agreements. The rules are accompanied by Comments, which explain in detail what each rule means and how it operates, and Notes, which briefly explain the particularities of the national legislation with regard to the issue dealt with in each of the provisions. The Notes aim to clarify to what extent the proposed rule resembles the current state of affairs in the national systems with respect to the question at stake. The SGECC thus follows the tripartite structure of Rules, Comments and Notes as was followed by the Lando Commission in drafting the PECL. The Amsterdam team subsequently discussed with an Advisory Council the relevant policy issues in each of the resulting drafts, before these were submitted for approval to the Coordinating Committee. The Advisory Council consisted of a group of professors from different European universities who are all experts in the field of commercial agency, franchise and distribution contracts.126 124

125

126

See ICC Model International Franchising Contract, 2000. ICC International Contract Series, ICC Publishing, Paris, 2000. The Dutch group of reporters consisted of researchers of different European jurisdictions who provided information on their own legal systems: Georgios Arnokouros (Greek Law), Odavia Bueno Diaz (Spanish Law), Rui Miguel Patrício Cascão (Portuguese Law), John Dickie (Common Law), Christoph Jeloschek (Austrian Law), Roland Lohnert (German Law), Andrea Pinna (French Law), Manola Scotton† (Italian Law), Hanna Sivesand (Swedish Law), Muriel Veldman (Dutch Law), Aneta Wiewiorowska (Polish Law). The members of the Advisory Council on Commercial Agency, Franchise and Distribution Contracts are Professor Johny Herre (Stockholm), Professor Jérôme Huet (Paris), Professor Ewan McKendrick (Oxford), Professor Peter Schlechtriem † (Freiburg i.Br.), Professor Hugh Beale (London/Warwick) and Professor Christina Ramberg (Stockholm).

24

Chapter I. General Introduction

The Coordinating Committee, also known as the CoCo, is the highest body in the SGECC hierarchy. It consists of a panel of nearly fifty professors from all EU Member States. The CoCo meets twice a year to review the drafts presented by the working groups and to make the main policy choices after having discussed the drafts with the respective Advisory Councils and the implementation of any changes. All proposals of all working groups are submitted to the CoCo for scrutiny. The CoCo is responsible for guarding the internal coherence of the whole of the work of the SGECC and for deciding on the final version of the text.127

2.2.1.4 Structure The PEL CAFDC consists of four chapters. The first chapter contains general provisions that apply to all three contracts concerned (Chapter 1), while the other three chapters contain specific separate rules for agency contracts (Chapter 2), franchise contracts (Chapter 3) and distribution contracts (Chapter 4). The inclusion of a general chapter which contains rules applicable to all three types of agreements was motivated by certain shared characteristics of these contracts, namely their economic function of bringing goods and services on to the market and their relational character, i.e. the fact that they are normally meant to last for a long time and that they depend very much on intense cooperation.128 However, because important differences between these contracts also exist, it was also considered necessary to formulate specific rules for each type of contract separately. The resulting structure determines that the legal regime applicable to commercial agency, franchising and distribution contracts is formed by the specific provisions in Chapters 2, 3 and 4 respectively, but also by the general provisions in Chapter 1. In addition, a contract governed by specific rules under the PEL CAFDC is also subject to the general contract law regime as laid down in the PECL. All rules contained in the PECL also apply to franchising unless a provision in the general chapter or in the specific chapter on franchising within the PEL CAFDC deviates therefrom.129

127

128 129

The names of the members of the Coordinating Committee can be found in the website of the SGECC: http://www.sgecc.net/pages/en/organisation/105.the_coor dinating_group_team_leaders_and_advisors_to_the_working_teams.htm. See Introduction PEL CAFDC, 2006, p. 94. Ibid. p. 95.

Section 2. The Europeanisation of the law on franchising

25

2.2.1.5 The principles on franchising in the PEL CAFDC Chapter 3 of the PEL CAFDC contains the principles which exclusively apply to franchising contracts. In addition to rules that impose contractual obligations upon the parties in franchising, this Chapter includes a rule that imposes on franchisors a pre-contractual obligation to disclose and a rule on the scope of application, which contains a definition of franchising. The rules are organised into three sections: Section 1 regulates the scope of application (Article 3:101) and pre-contractual disclosure (Article 3:102), Section 2 provides the contractual obligations for franchisors (Articles 3:201 to 3:207) and Section 3 provides the contractual obligations for franchisees (Articles 3:301 to 3:304). The PEL CAFDC impose obligations on the franchisor to inform precontractually, to grant intellectual property rights, to communicate knowhow, to provide assistance, to supply, to inform during performance, to warn of decreased supply capacity and to maintain the reputation of the network. The obligations incumbent upon the franchisee are the obligation to pay, to inform during performance, to follow the business method and instructions of the franchisor and to allow inspection. Although the aim of the PEL CAFDC is not to offer protection, they nevertheless impose more obligations on the franchisor than on the franchisee. The dependent situation of franchisees towards franchisors due to the information asymmetry and unequal bargaining power between the parties made it necessary to devote special attention to the contractual interests of franchisees.130 Franchisors are deemed to be able to take care of themselves, as they typically have the bargaining power and hence the power to impose the terms in franchise agreements.131 Where certain interests, both of franchisors and franchisees, were considered to be in need of far-reaching protection, they are protected in mandatory provisions. This is for example the case for the franchisor’s obligations in respect of pre-contractual disclosure, intellectual property rights, knowhow, supply and warning of decreased supply capacity and the franchisee’s obligations to pay and to follow the business method and instructions. The default obligations are also intended to protect specific contractual interests, but the parties are free to deviate from them.

130 131

Ibid. p. 94. Ibid.

26

2.2.2

Chapter I. General Introduction

The political exercise

The SGECC has become part of the Network of Excellence which has been entrusted with the elaboration of the first draft of the CFR. Academics and experts have already discussed some of the academic proposals for common European principles in working sessions organised by the European Commission. This has been the case with the draft of the PEL CAFDC. The PEL CAFDC were presented to the CFR-net, which consists of experts in the field of agency, franchise and distribution agreements, in the workshop organised by the European Commission on 16 March 2005. However, in its Progress Reports of 2005 and 2007 the Commission has provided no further indication of the latest developments in the discussion on the PEL CAFDC. At the present stage, the academic proposal for a CFR includes the PEL CAFDC. The SGECC’s proposal for European principles on franchising are to be found in Book IV, Part E, Chapter 4 of the academic CFR. As already explained, it will depend on political considerations whether the principles on franchising in PEL CAFDC are also included in the Commission’s draft due by 2009, and whether they will subsequently lead to an optional instrument on franchising. If this were indeed to be the case, the parties to franchising contracts in Europe could opt to apply the principles on franchising instead of their respective national laws to govern the contents of their relationship. As already indicated, this could also be the case if the PEL CAFDC would be defined in the Rome I Regulation as a system of private law which the parties could elect to govern the contents of their agreement.

Section 3. Aim, scope, method and structure of the research 3.1

Aim of the research

In this thesis, the principles on franchising are considered as a system of rules that could apply to franchising relationships in Europe if the parties so decided. The objective of the research is to examine to what extent the specific principles on franchising included in the PEL CAFDC resemble the legal framework of obligations regarding franchising under the legal systems of France and Spain. In order to achieve this objective, the more immediate aim is to compare the specific regime for franchising under the PEL CAFDC with the regimes for franchising under French and Spanish law. A selected core of principles on franchising form the basis for this comparison. A secondary aim of this research is comparing the three systems in the light of more abstract considerations as to the policies that underpin the respective laws on franchising. The relevant findings arising from the comparative research will be tested with regard to the respect for the principles of freedom of contract, i.e. in franchising: the freedom of the franchisor to impose the terms of the contract, and legal certainty. In addition, I will attempt to establish, also in view of the comparative analysis, whether opting in favour of the Principles, instead of French and Spanish law, would be a rational choice for the parties involved in franchising.

3.2

Scope of the research

The comparative research takes as its starting point a selected core of obligations applicable in franchising under the PEL CAFDC. The scope of this research extends to the framework of contractual rights and obligations which arise between franchisors and their franchisees (internal relationship), in particular, in franchising agreements that are concluded for the distribution of goods or services, i.e. distribution franchise contracts. Therefore, this research is neither concerned with other aspects of distribution

28

Chapter I. General Introduction

franchise contracts, e.g. economic or competition aspects, nor with other types of franchise relationships. 132 I have first selected a number of provisions from among the entire set of principles on franchising to serve as the basis for the comparative law research. The rules selected are those on scope of application, those on the obligations for the franchisor to provide pre-contractual disclosure, to grant intellectual property rights, to communicate know-how and to assist the franchisee and those on the obligations for the franchisee to pay a fee, royalties and other periodical payments and to follow the business method and the instructions of the franchisor. The reasons for selecting these particular rules are as follows. The provision concerning scope of application also provides a definition of franchising. The comparison of the definition of franchising in the Principles to the definitions on franchising in France and Spain will help determine whether the three systems actually refer to the same type of contract. As to the rules providing the contractual obligations, these are all, apart from the obligation to assist, defined as core obligations in franchising agreements and are accordingly also included in the rule on scope. Although assistance is not so included, I still felt it was important to include it in the comparison, as it is often considered a core obligation under the two national systems. Finally, the obligation of pre-contractual disclosure is discussed, given that it is included in codified rules under all three systems and because compliance with this obligation is a precondition for the conclusion of a valid franchise agreement in France and Spain. This means that I will not deal with the franchisor’s obligations under the PEL CAFDC concerning supply, information during performance, warning of decreased supply capacity and reputation of the network and the franchisee’s obligations regarding information during performance and inspection. Information on whether and how local legal actors in France and Spain have regulated the contents of franchising agreements and whether the 132

The literature on franchising seems to generally accept the categorisation of franchise contracts provided by the European Court of Justice in Pronuptia (Case 161/84 Pronuptia de Paris v. Pronuptia de Paris Irmgard Schillgalis, [1986] ECR 353) and in Commission Regulation (EEC) No 4087/88 of 30 November 1988 on the application of Article 81(3) (former Article 85(3)) of the Treaty to categories of franchise agreements (OJ L 359, 28 December 1988, p. 46). Three groups of franchising relationships are identified: franchise of production, franchise of services and franchise of distribution. Both the franchise of services and the franchise of distribution are contracts for the distribution of services and goods respectively and therefore they are both regarded in the present analysis as franchise distribution contracts.

Section 3. Aim, scope, method and structure of the research

29

obligations provided under the PEL CAFDC correspond to those established by these French and Spanish local authors can be derived from analyses of the legislation, case-law, commercial practice and scholarly writing concerning each of the systems. However, the examples of contracts subject to the French and Spanish jurisdictions that I obtained did not provide sufficient empirical evidence. Parties involved in franchising are reluctant to disclose the contents of their agreements, especially because these agreements typically contain confidential information as to the franchisor’s business method.

3.3

Method

In this research, I have compared a selected core of obligations incumbent upon the parties in franchising under the PEL CAFDC to the franchising regimes under French and Spanish law in order to locate the similarities and differences between the three systems. In this I have adopted a functional method of comparison. The functional method of comparison as it is understood by its two most outstanding representatives, professors Zweigert and Kötz,133 in short has as its primary aim to locate the legal solutions provided by each of the systems compared which are intended to solve the same legal problem. The present research has as its starting point a selected number of obligations applicable in franchising as contained in the PEL CAFDC. This is a broader perspective on the functional method from the point of view of the topics involved in the comparison.134 The analysis starts with a description of each obligation, first under the PEL CAFDC and then under French and Spanish law, followed by a comparison on the basis of the descriptions. First describing the rules one by one under each of the different systems and then comparing them immediately after was thought to provide the reader with a more comprehensive view of each specific rule than would have been the case if the entire set of rules under the PEL CAFDC was first described, followed by descriptions of the entire set of rules under French and then under Spanish law. The individual descriptions of each specific rule are further divided into sub-topics that correspond to the main features of form and content of the obligations and the remedies for non-performance. The comparisons of the specific rules also follow this structure, with the objective of identifying similarities and differences in the manner in which the systems deal with the obligations compared. It has been decided not only 133 134

Zweigert & Kötz, 1998. Kennedy, 2003, p. 140.

30

Chapter I. General Introduction

to focus on similarities, let alone presume them (praesumptio similitudinis),135 as Zweigert and Kötz advocate, now that the aim of this research is not to find a core of solutions that is shared between the systems compared, but to find out whether the main obligations applicable in franchising under the French and the Spanish legal systems correspond to or deviate from the main obligations according to the PEL CAFDC, and if so, to what extent. In the general conclusions, this information will be considered from another level of abstraction. The differences and similarities in the manner in which the three systems define the franchising agreement reveal more general considerations as to the underpinning policies followed by the drafters of the rules in each system, in particular with regard to the principle of contract autonomy and legal certainty. I will determine whether the system under the PEL CAFDC allows for less or more autonomy of the franchisor to determine the contents of the franchise contract than the systems established by French and Spanish local actors respectively, and whether the PEL CAFDC provide less or more legal certainty. In addition, I will attempt to determine whether opting for the Principles, instead of for French or Spanish law, could be considered a rational choice for the parties, in the sense that they could better serve the parties’ interests than French and Spanish law would. I have selected France and Spain as the legal systems to be compared, regardless of the fact that these systems belong to what is called the same legal family and that this choice could therefore at first glance be criticised from a comparative law perspective due to the proximity of the rules and principles of law in both countries.136 It is even the case that the Spanish Civil Code of 1889 was based on the French Civil Code of 1804. In the absence of franchise-specific laws, both countries therefore apply a similar framework of general contract law rules to regulate franchising relationships. However, it will be interesting from a comparative law perspective to examine how two systems that have a similar general contract law regime may still have different regimes as regards the law on franchising contracts. Several arguments can be put forward to demonstrate that the specific regimes for franchising in France and Spain may have evolved differently. First, as Zweigert and Kötz themselves indicate,137 legal regimes are not formed exclusively by codes or statutory rules, but also by other important sources of law, such as case-law, legal doctrine or customary law. Accordingly, similar general contract law rules in France and Spain may have been interpreted differently when applied by courts and scholars so as to adapt them to the particular needs of franchising in each country. Secondly, legal systems are 135 136 137

Zweigert & Kötz, 1998, p. 40. Zweigert & Kötz, 1998, p. 41; also Sacco, 1991, p. 22 Zweigert & Kötz, 1998, p. 35 and 36.

Section 3. Aim, scope, method and structure of the research

31

the result of the interaction of law with other fields, such as economics and social, political and cultural fields, which might differ significantly in France and Spain.138 Although in this study I do not apply an interdisciplinary approach, it may well be that the solutions arrived at by courts and scholars differ due to the different impact of such factors.139 Thirdly, different legal solutions may not only be arrived at by legal sources from different legal systems, but also by legal sources within the same system. According to Sacco, “within a given legal system with multiple legal formants (law sources) there is no guarantee that they will be in harmony rather than in conflict”.140 Finally, although the two contract law systems are “genetically” linked, this historical connection may be of lesser relevance where the legal regime of franchising is concerned, which is a new legal phenomenon that has been imported from other legal systems (in this case the US) – what is known as a “legal transplant”.141 According to Watson, “borrowing” is a major contributing factor to legal change.142 The research has further been restricted on the basis of efficiency arguments to do with time constraints, language skills and access to materials, which I considered necessary in order to avoid a superficial result.143

3.4

Structure of the study

After the present General Introduction (Chapter I), Chapter II aims to present the main characteristics of the respective legal frameworks in which franchising is embedded in France and in Spain. Chapter III will provide the descriptions and subsequent comparisons of the main obligations of the parties under the three compared regimes. I will first individually describe the obligations under the PEL CAFDC and then under French law and Spanish law. Subsequently, I will compare the solutions found under the three systems. In Chapter IV, I will draw some final conclusions. 138 139

140 141

142

143

Zweigert & Kötz, 1998, p. 39 and Sacco, 1991, p. 32. Zweigert & Kötz, 1998, p. 5: “… microcomparison may not work at all unless one takes into account the general institutional context in which the rules under comparison have evolved and are actually applied.” See also Sacco, 1991, p. 24. See Sacco, 1991, p. 23. According to Watson a legal transplant is “the moving of a rule or a system of law from one country to another.” See Watson, 1974, p. 20. See Watson, 2000, p. 12: “… Legal borrowing I will equate with the notion of legal transplants.” In the same sense Mattei, 2000, p. 124 ff. See Zweigert & Kötz, 1998, p. 41: “… experience shows that as soon as one tries to cover a wide range of legal systems the law of diminishing returns operates.”

Chapter II. Main Characteristics of the French and Spanish Law on Franchising Section 1. The legal framework for franchising in France France has a long history of franchising. The first franchise network became operational in the 1930s. The French franchise sector has since developed into the leading franchise sector in Europe in terms of the number of franchise networks in existence.144

1.1

French statutory law on franchising

There is no French legislation providing rules on the internal relationship under franchising contracts. The only aspect of franchising that has been regulated in France concerns the pre-contractual stage. Pursuant to Article L. 330-3 of the French Commercial Code, formerly enacted as the Loi Doubin, franchisors are obliged to provide their franchisees with precontractual information. This rule was not enacted for franchising relationships specifically, but for all contracts under which one party provides another party with intellectual property rights and requires that party to commit on an exclusive or quasi-exclusive basis. This is typically the case in franchising relationships. Moreover, as Leloup has emphasised, the enactment of the Loi Doubin was a direct consequence of the circumstances which surrounded commercial franchising practice in France in the 1980s.145 During that decade, the failure of many franchise networks and the fact that many franchisees went into liquidation due to the false promises of their franchisors opened up a debate on whether franchise agreements needed to be regulated. A group of experts appointed by the then Minister of Commerce, François Doubin, in 1984 concluded that it would not be advisable to 144

145

Leloup, 2004, p. 9: “Ainsi, on peut, en France, vivre en franchise ”; See the website of the FFF: www.franchise-fff.com and www.europeanfranchising.com/franchi singineu/Figures_on_franchising.aspx. Leloup, 2004, p. 171.

34

Chapter II. Main Characteristics

regulate the internal relationship in franchising agreements by statute, as this could adversely affect the dynamic character of franchising, but that there was nevertheless a need to regulate the provision of pre-contractual information.146 In 1989, the French Parliament consequently enacted an Act on pre-contractual disclosure. 147

1.2

French case-law on franchising

In the absence of specific franchise legislation, the French judiciary has dealt with cases on franchising on the basis of the agreement between the parties, general contract law and the legislation which deals with specific areas of the law which are relevant to franchising relationships (e.g. legislation on intellectual property rights and on sales contracts).148 In this manner the French judiciary has elaborated a specific legal regime on franchising.149 One author has even referred to the French “judicial statute” on franchising.150 French case-law on franchising is abundant and includes many judgments from the Cour de Cassation. The first decision on franchising delivered by the Cour de Cassation dates back to 1970.151 Despite the large number of decisions, complete information on the policies followed by French courts is difficult to obtain. Decisions are very brief and practically only contain the conclusion reached by the court without any explanation as to the reasoning underlying the decision.152

146

147

148

149

150

151 152

See for further information on the political basis of the Loi Doubin the interview given by François Doubin in www.observatoiredelafranchise.fr. Also Leloup, 2004, p. 170. Loi n. 89-1008 du 31 décembre 1989 relative au développement des entreprises commerciales et artisanales et à l'amélioration de leur environnement économique, juridique et social, JCP 1990, III, 63449. Article 1107 of the Civil Code states that atypical contracts are subject to general contract law rules, namely Articles 1101 to 1369 of the Civil Code. In the literature see Ghestin, 2001, p. 137 and Leloup, 2004, p. 11. Clément, 1996, p. 123; Delforge, 2000, p. 37; Demolin, 2001, p. 11; Ferrier, 2001, p. 103. Clément, 1996, p. 123: “c’est ainsi que s’est dégagé peu à peu ce que nous avons appelé d’une façon un peu audacieuse, le statut jurisprudentiel de la franchise.” Cass. com. 21 October 1970, JCP 1971, 10131. Dickson, 1994, p. 12; Hesselink, 2002, p. 13

Section 1. The legal framework for franchising in France

1.3

35

French literature on franchising

French legal authors have been very productive on the topic of franchising. Franchising is discussed in textbooks and manuals by leading scholars.153 Several monographs on franchising also exist.154 French legal journals include many articles on franchising and annotations by well-known academics on franchising cases reported.155 The brevity of French decisions in compensated for by the thorough and systematic analysis of reported court decisions by academics. Annotations of case-law play a large role in understanding the position of the courts and the literature on the system of obligations in franchising.

1.4

Non-binding regulations on franchising

The French Franchise Association (Fédération Française de la Franchise, FFF) and the Association Française de Normalisation (AFNOR) have formulated non-binding regulations regarding the contents of franchising relationships based on what it is generally agreed in practice. The Code de déontologie de la FFF contains deontological rules which only apply to franchisors who are members of the FFF. It has since been replaced by the European Code of Ethics for Franchising (ECEF).156 The AFNOR157 regulation intends to provide minimum rules regarding negotiations on and the contents of franchise agreements. They do not however provide a model contract.158 As has been indicated in the General Introduction, these documents constitute a point of reference for courts, professionals and academics, but nevertheless have limited effect, as they lack binding power. They only govern the relationship where the parties have expressly agreed to this.159 153

154

155

156 157 158 159

See among others Ghestin, 1993; Guyon, 1996; Huet, 2002; Collart Dutilleul & Delebecque, 2002; Malaurie & Aynès & Gautier, 2005. For example the monographs by Le Tourneau, 1994 and 2003; Ferrier, 2002 and Leloup, 2004. See for example Jamin, comments to CA Paris 10 March 1989, Gaz. Pal., 1989, 2, p. 544 ff. or Réseaux intégrés de distribution: de l´abus dans la determination du prix au contrôle des pratiques abusives, JCP 1996, I, 3959, pp. 343-348; Virassamy, La moraer lisation des contrats de distribution par la loi Doubin du 31 décembre 1989 (art. 1 ), JCP 1990, II, 15809, pp. 413-421. Le Tourneau, 2003, p. 16. Norme AFNOR, NF Z20-000, August 1987. Le Tourneau, 2003, p. 17. See 2.1 in Chapter I, above.

36

1.5

Chapter II. Main Characteristics

Legal nature of franchising

It follows from the above that it has so far been the task of the French courts and French legal scholars to deal with the legal issues pertaining to commercial franchise relationships. In the words of Ferrier: “the law on franchising has been progressively constructed by case-law and the analysis of legal doctrine.”160 It is mainly in scholarly writing that the main legal characteristics of franchising agreements are discussed. Franchising contracts are described as atypical agreements (innomé),161 which are commercial162 and based on cooperation.163 Like other contracts for the distribution of goods and services (réseau de distribution),164 they are of long-term duration165 and provide reciprocal obligations (contrat synallagmatique et commutatif)166 with successive performance.167 Franchising contracts are described as being typically formulated as adhesion contracts168 and as being structured as framework agreements (contrat cadre) under which particular contracts are subsumed (contrats d’application).169 160

Ferrier, 2001, p. 103. This translation is mine. Clément, 1994, p. 13; Michel Jéol, conclusions to the decisions of the Assemblée Plénière de la Cour de Cassation of 1 December 1995, D. jur., 1996, p. 13 ff; Leloup, 2004, p. 11. 162 Cass. com. 4 January 1994, 92-11654: the franchisee is an independent entrepreneur and has to be registered as such in the relevant register. In the literature see Huet, 2002, p. 527: “ces contrats de distribution sont, par la force des choses, de nature commerciale.” 163 Definition of franchising in CA Paris 28 April 1978, Cah. dr. entre. n. 42, October 1980, p. 5; Virassamy, comments to Cass. com. 9 November 1993, JCP 1994, II, 22304; Guyon, 1996, p. 892; Le Tourneau, 2003, p. 2; Leloup, 2004, p. 10. 164 Huet, 2002, p. 558 ff. 165 Michel Jéol, conclusions to the decisions of the Assemblée Plénière de la Cour de Cassation 1 december 1995, D. 1996, jur. p. 13; Lasbordes, 2000, p. 271. 166 CA Colmar 9 June 1982, D. 1982, p. 553, annotated by J.-J. Burst: “cadre d’obligations réciproques et interdépendantes”; Virassamy, 1986, p. 84; Malaurie & Aynès, 1999, p. 188; Malaurie & Aynès & Gautier, 2005, p. 473; Gunther, 2000, p. 270; Le Tourneau, 2003, p. 2; Leloup, 1989, p. 205 and 2004, p. 12. 167 CA Paris 10 March 1989, Gaz. Pal. 1989, 2, p. 548; Le Tourneau, 2003, p. 2. 168 Le Tourneau, 2003, p. 2. 169 Huet, 2002, p. 527: “le schéma retenu est alors celui de la vente et revente, à l´intérieur d´un accord global, organisant les relations des parties à long terme”; Lasbordes, 2000, p. 271: “Un contrat-cadre organise les relations de parties pour une longue période, pendant laquelle seront conclus des contrats d´application”; Le Tourneau, 1994, p. 46: “Le contrat de franchisage est un contrat-cadre. Par lui, l’objet et les règles générales qui 161

Section 1. The legal framework for franchising in France

1.6

37

Main obligations of the parties: theory of the causa in French law

Because of the innominate character of franchising agreements, it has fallen to the French courts and literature to establish what constitutes the core obligations of a franchise relationship. In the case-law and in legal writing the main obligations of one of the parties to a franchise contract have been described as the causa of the obligations undertaken by the other party. This is always the case in contracts with reciprocal performance, according to French legal theory on the causa of obligations.170 The efforts of courts and the literature in explaining this theory has led to a lively debate in which many conflicting opinions are presented. In essence, it means that in reciprocal contracts, the performance of one of the parties is the reason (causa) for the other party to undertake his obligations. This reason is to be understood objectively, that is, the reason that would apply to all parties to a contract of a particular type. For instance, in a sales contract the causa for the buyer is to obtain the property and the causa for the seller is to receive the price. The causa is therefore to be differentiated from the subjective reasons which may have led the parties to enter into the contract. The rationale behind the doctrine of the causa is finding reciprocity between performance and counter-performance.171 The existence of the causa is considered a conditio sine qua non for the validity of a contract.172 A contract in which the obligations which are described as the causa of the obligations of the parties are not agreed upon or in which the said obligations are not of the quality required so as to constitute a proper counter-performance to the performance of the other party is a contract which is null and void.173 The existence and adequacy of the causa

170 171

172

173

vont gouverner, pendant un long temps, les rapports contractuels entre les parties sont établies;” Michel Jéol, conclusions to the decisions of the Assamblée Pléniere de la Cour de Cassation 1 december 1995, D. 1996, jur. p. 13: “… on est conduit à distinguer dans ces ensembles contractuels: d´un coté, la convention générale qui fixe durablement le « cadre » des relations d´affaires entre les parties; de l´autre, les contrats « d´exécution » que interviennent ponctuellement pour la mise en œuvre du pacte initial.” Cass. civ. 1 March 1989, JCP 1989, IV, pp. 161 and 176. Ghestin, 1993, p. 818. Carbonnier, 2004, p. 2017: “La cause de l’obligation de chaque contractant est l’obligation de l’autre – ou, peut-on dire de façon plus réaliste, l’exécution de l’obligation de l’autre … Il existe ainsi entre les obligations réciproques une interdépendance qui assure l’équilibre du contrat.” Article 1108 of the Civil Code: “Cuatro conditions sont essentielles pour la validité d’une convention: … (4) Une cause licite dans l’obligation.” Carbonnier, 2004, p. 2019.

38

Chapter II. Main Characteristics

is to be determined at the time when the contract is concluded. Accordingly, there is a ground to declare the nullity of a franchise contract if the obligations which are described in case-law and legal doctrine as the causa of the obligations of the parties in franchising are not agreed upon by the parties or are deemed by the courts not to be of the quality required at the time when the parties concluded the contract.174 Parties may also invoke that the contract of which the nullity is pursued be reclassified as another type of contract.175 The PEL CAFDC do not refer to the main obligations in franchising as the causa of the obligations of the parties. In the system of the PECL, in which the PEL CAFDC are based, a contract is validly concluded if the parties intended to be legally bound and they reached a sufficient agreement “without any further requirement”.176 Under the PEL CAFDC, the main obligations of the parties in franchising are those included in the scope rule.177 The consequences if the parties do not agree on one of these obligations is that the contract cannot be classified as a franchising agreement. In this sense, the regimes in France (causa) and in the PEL CAFDC (scope rule) lead to the same result. The difference between the two regimes regards the consequences of the inadequacy of performance. These are subject in the PEL CAFDC to the rules on nonperformance and not to the rules on formation, as is the case if the theory of the causa applies. Therefore, under the Principles, compliance with the requirements as to the contents of the obligations can only be tested during performance and the validity of the contract is not at risk. The contract remains a franchise contract.178 174

175

176 177 178

Article 1131 of the Civil Code: “L’obligation sans cause … ne peut avoir aucun effet”. In the literature see Ghestin, 1993, p. 841 and Carbonnier, 2004, p. 2017: “Qu’une obligation vienne à manquer, l’équilibre est rompu, et le contrat tombe.” Examples of cases in which the franchise contract is reclassified as another type of agreement (e.g. distribution contract) can be found in Sections 3.2.6.1 and 4.2.3.1 in Chapter III. Article 2:101 PECL. Article 3:101 PEL CAFDC. On how the PEL CAFDC apply to regulate the cases where performance is not of the quality required see 3.1.4 and 4.1.4 in Chapter III.

Section 2. The legal framework for franchising in Spain In Spain, commercial franchising only started long after it had started in France. It was not until the 1980s that franchising contracts were concluded.179 However, from that moment on, the number of franchise chains has continued to increase: in 1988, the number of franchisors operating in Spain was 155 and the number of franchisees 16,000, whilst in 2006 there were 953 franchisors and 60,258 franchisees.180

2.1

Spanish statutory law on franchising

The continuous growth of the franchising industry has not gone unnoticed by the Spanish legislator. Provisions relating to franchising were introduced as Article 62 of Law no. 7/1996 on Retail Sales (Ley de Ordenación del Comercio Minorista, hereinafter: LOCM).181 Although the LOCM is of an administrative law character, its final provision indicates that the rules on franchising are also (among others) of a private law character.182 Article 62 of the LOCM provides a definition of franchising and imposes two precontractual obligations on the franchisor, namely registration in a public register of franchisors and to provide pre-contractual information to the franchisee. Article 62 of the LOCM was implemented by the Real Decreto (RD) 2485/1998 of 26 November 1998.183 The RD 2485/1998 consists of 10 Arti-

179 180 181

182

183

Martín Trilla & Echarri Ardanaz, 2000, p. 6. Information obtained from www.mundofranquicia.com. Ley 7/1996 de 15 de enero, de Ordenación del Comercio Minorista, BOE n.15 of 17 January 1996 (RCL 1996/148 and 554). For an English translation, see CCH, Business Franchise Guide, at p. 7255. Article 62 is therefore private law legislation that is of general application on Spanish territory on the basis of the exclusive competence of the Spanish State to regulate the contents of contracts on the basis of Article 149.1 of the Spanish Constitution. Real Decreto 2485/1998 de 13 de noviembre, por el que se desarrolla el artículo 62 de la Ley 7/1996, de 15 de enero, de Ordenación del Comercio Minorista, relativo a la regulación del régimen de franquicia, y se crea el Registro de Franquiciadores, BOE n.

40

Chapter II. Main Characteristics

cles. Article 1 states that the object of the RD is to establish the basic conditions for the operation of franchised activities and to create a public register of franchisors, as previously announced in the LOCM. Articles 2 and 3 further specify the contents of Article 62 LOCM. Article 2 provides a more concrete definition of franchising and Article 3 spells out the type of precontractual information that the franchisor has to disclose. Article 4 imposes a duty of confidentiality on the franchisee. The remaining six articles are concerned with the creation of the register of franchisors and the way in which it should function. None of these provisions is concerned with the contents of franchising agreements. A new RD on franchising was enacted in 2006. It is the RD 419/2006 of 7 April 2006, which modifies the RD 2485/1998 of 26 November 1998.184 It contains only one Article, which amends Articles 2 and 5 to 10 of the previous RD. The definition in the new RD is practically identical to that in the RD of 1998 apart from some minor details to make it more specific. The new version of Article 2 emphasises the differences between franchising and other similar types of contracts (e.g. exclusive distribution agreements). The amendments made to Articles 5 to 10 are minimal. The new RD establishes two new provisions, one regarding certain information which the franchisor may voluntarily enter in the register (Article 11) and another regarding the creation within the register of a specific section for the businesses of franchisors who are consolidated in the market (Article 12). Articles 3 on precontractual information and Article 4 on the franchisee’s duty of confidentiality have remained unchanged compared to the previous RD. The preamble to the new RD indicates that the reason for amending the previous RD was the need to improve transparency in the franchise market, more specifically to allow franchisees access to information concerning franchisors. In this manner, franchisees can decide on a reasonably informed basis whether to invest in a franchised project. Another novelty in the new RD is that it refers for the first time to franchising as a business method which has proven successful. The previous definition of franchising in the 1998 RD does not mention this. Accordingly, the new RD now requires franchisors to inform the franchisors’ register concerning the number of years that the franchisor has been operating his business (Article 7(1)(b)). Furthermore, Article 12 announces the creation of a new section in the register intended to identify franchisors who are consolidated in the market.

184

283 of 26 November 1998 (RCL 1998\2769). For an English translation, see CCH Business Franchise Guide, at p. 7256. Real Decreto 419/2006 de 7 de abril, por el que se modifica el Real Decreto 2485/1998, de 13 de noviembre, relativo a la regulación del régimen de franquicia y el registro de franquiciadores. BOE n. 100 of 27 April 2006.

Section 2. The legal framework for franchising in Spain

2.2

41

Spanish case-law on franchising

In contrast to the large number of franchising cases decided by appeal courts (Audiencias Provinciales), there have been only a few rulings on franchising by the Tribunal Supremo. However, the number of Tribunal Supremo decisions increased during the 1990s. To begin with, franchising contracts were equated to other types of contracts with which the Tribunal Supremo was more familiar (contracts of license of trademark185 and contracts of exclusive distribution186). The tendency in the lower courts, however, evolved towards more specificity.187 In the absence of established case-law on franchising from the Tribunal Supremo, the approach taken by Spanish courts has to be derived from the judgments of the 52 Audiencias Provinciales.188 Consequently, any description of Spanish case-law will offer a “patchwork” of solutions. Research will show to what extent the appeal courts maintain similar or divergent approaches as to questions on franchising. There are four landmark decisions of the Tribunal Supremo regarding franchising. These are the decisions of 27 September 1996, 4 March 1997, 30 April 1998 and 21 October 2005.189 In these judgments, the Tribunal Supremo defines franchising and determines its legal nature and characteristic elements. These landmark decisions recur in the large majority of decisions taken by the Audiencias Provinciales.190 The main role of the Tribunal Supremo has so far been to define the legal basis in which franchising must be grounded. In its decisions of 27 September 1996 and 30 April 1998, the Tribunal Supremo holds that the atypical character of franchise contracts implies that “it is for the parties to formulate the contents of their relationship, worded in specific clauses and requirements which, expressed in a context of good faith and mutual trust, are to

185 186 187 188 189

190

STS 15 May 1985, RJ 1985\2393. STS 23 October 1989, RJ 1989\6951. Martín Trilla & Echarri Ardanaz, 2000, p. 68. In Spain, each Province has an appeal court. STS 27 September 1996, RJ 1996\6646; 4 March 1997, RJ 1997\1642, 30 April 1998, RJ 1998\3456 and 21 October 2005, Id Cendoj 28079110012005100801. See for example SAP Huesca 20 November 1998, AC 1998\2476; SAP Teruel 24 October 2001, AC 2001\1931; SAP Barcelona 9 September 2002, AC 2002\1728; SAP Barcelona 1 March 2006, Id Cendoj 08019370192006100054; SAP Cádiz 16 March 2006, Id Cendoj 11012370022006100062; SAP Madrid 5 June 2006, Id Cendoj 28079370102006100346; SAP Segovia 25 September 2006, Id Cendoj 40194370012006100274 or SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558.

42

Chapter II. Main Characteristics

have all possible effects.”191 The Tribunal Supremo also indicates that the specific norms that regulate the specific contracts which are framed in franchising relationships may apply by way of analogy.192 In the decisions mentioned, the Tribunal Supremo describes franchising contracts in the same manner as the ECJ does in Pronuptia, where it held that franchising is characterised by the following elements: 1) the franchisor must transmit his know-how, or assistance or working method, and apply his commercial method; 2) the franchisor is obliged to design, direct and pay for the advertising campaigns which are carried out in order to widespread the signs and trademark of the franchisor.193

2.3

Spanish literature on franchising

Legal authors in Spain have been less prolific than their French colleagues as far as their analysis of franchising is concerned. As in France, there are textbooks and manuals by leading Spanish scholars which contain references to franchising,194 and also several monographs regarding the legal regime applicable to franchising contracts.195 There are, however, no commentaries of judicial decisions. A critical insight from legal doctrine regarding case-law on franchising is therefore missing. Legal authors provide a systematic analysis of the system of obligations in Spain, but this analysis is not based on judge-made law, but on commercial practice and competition legislation.

2.4

Non-binding regulations

The Spanish Franchise Federation (Asociación Española de Franquiciadores) has adopted the ECEF. As was already indicated above for French law, the 191

192

193

194

195

STS 27 September 1996, RJ 1996\6646: “Como todo contrato atípico, en este caso mercantil, se regirá, en primer lugar, por la voluntad de las partes plasmada en cláusulas y requisitos concretos que formulados, sin duda, en relaciones de buena fe y mutua confianza, debiendo, las mismas, producir todos sus efectos.” STS 27 September 1996, RJ 1996\6646: “… para el caso de que hubiera lagunas para interpretar su contenido, será preciso recurrir a figuras de contratos típicos afines a dicha relación consensual atípica.” Case 161/84 Pronuptia de Paris GmbH v. Pronuptia de Paris Imgard Schillgalis, [1986] ECR 353 (ECJ). For example Díez-Picazo & Gullón, 2001; De la Cuesta Rute & Valpuesta Gastaminza 2001; Cano Rico, 2002; Broseta Pont, 2003 or Albaladejo, 2004. Gallego Sánchez, 1991; Echebarría, 1995; Díez de Castro & Galán González, 1998; Hernando Giménez, 2000.

Section 2. The legal framework for franchising in Spain

43

ECEF is no more than a deontological code for franchisors with non-binding effect.196

2.5

Legal nature of franchising

The characteristic legal features of franchising are defined both in case-law and in scholarly writing. Despite the fact that franchising is defined under the LOCM and under RD 2485/1998, Spanish courts and the large majority of legal scholars continue to refer to franchising agreements as innominate contracts.197 They are described as onerous agreements198 containing reciprocal obligations (contrato synalagmático)199 that are normally concluded for a long-term duration200 and have an intuitu personae character.201 As to the 196 197

198

199

200

201

See 1.4 in this Chapter, above. STS 27 September 1996, RJ 1996\6646 and 30 April 1998, RJ 1998\3456; SAP La Rioja 13 July 1992, AC 1992\1072; SAP Barcelona 16 December 1996, AC 1997\1650; SAP Orense 7 January 1999, AC 1999\79; SAP Barcelona 28 November 2006, Id Cendoj 08019370172006100570 and SAP Madrid 30 June 2006, Id Cendoj 28079370122006100413. Most authors refer to the franchising contract as an atypical contract, among others Broseta Pont, 2003, p. 131; Villagómez Rodil, 1997, p. 125; Cano Rico, 2002, p. 764; Fernández, p. 354; Lupicinio Rodríguez, p. 879; Gallego Sánchez, 1991, p. 60; Martín Trilla & Echarri Ardanaz, 2000, p. 57; Alonso Espinosa et al., 1999, p. 707. Some authors however defend that the franchising contract is a typical contract because it has been statutorily defined: Ortuño Baeza, 1997, p. 1528 and Hernando Giménez, 2000, p. SAP Barcelona 12 February 2003, JUR 2003\196372. In the literature Ortuño Baeza, 1997, p. 1528. STS 30 April 1998, RJ 1998\3456: the franchisor claimed termination due to the franchisee’s non-performance of the obligation to pay. The Tribunal Supremo concluded that there was no right to terminate because the franchisor had not performed his reciprocal obligations. SAP La Rioja 13 July 1992, AC 1992\1072; SAP Barcelona 16 December 1996, AC 1997\1650; SAP Granada 5 June 2000, JUR 2000\225079; SAP Madrid 10 July 2000, JUR 2000\262050; SAP Barcelona 12 February 2003, JUR 2003\196372. In the literature: Uría, 1994, p. 693; Alonso Soto, 2001, p. 193; De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 361 ; Martín Trilla & Echarri Ardanaz, 2000, p. 57. SAP La Rioja 13 July 1992, AC 1992\1072, SAP Barcelona 9 September 2002, AC 2002\1728. Domínguez García, 1985, p. 430; De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 362; Alonso Soto, 2001, p. 193. SAP La Rioja 13 July 1992, AC 1992\1072; SAP Huesca 20 November 1998, AC 1998\2476; SAP Málaga 15 May 2006, Id Cendoj 29067370052006100309; SAP Lugo 23 November 2006, Id Cendoj 27028370022006100513. In the literature, see

44

Chapter II. Main Characteristics

conclusion of the contract, franchising agreements are described as taking the form of adhesion contracts where the contractual terms are imposed by the franchisor,202and which are structured as framework agreements under which particular contracts are framed (Contrato-marco and prestaciones diversas).203

2.6

Main obligations in franchising: theory of the causa in Spanish law

The main obligations in franchising are enumerated in the definition provided by the Spanish legislator in RD 2485/1998. These obligations are also described in the case-law and in legal writing as requirements for the validity of franchise contracts, namely as the causa of franchising contracts. The Spanish theory of the causa has been adopted from the theory of the causa in France, and, like in France,204 efforts to explain this doctrine have led to controversy in the debate in Spanish case-law and literature. According to Article 1261 of the Civil Code, a contract can only be valid if there is consent of the parties, object of the contract and causa of the contract. Article 1274 of the Civil Code explains that in reciprocal agreements -which franchising agreements are- the causa of the obligations of one party is the main counter-performance of the other party. If there is no causa, the existence and adequacy of which is to be verified for the moment

202

203

204

Domínguez García, 1985, p. 430; De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 362, Ortuño Baeza, 1997, p. 1528. SAP Barcelona 16 December 1996, AC 1997\1650; SAP Sevilla 28 January 2002, JUR 2002\47775; SAP Bilbao 17 October 2006, Id Cendoj 48020370042006100294. In the literature: Domínguez García, 1985, p. 430; De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 362; Tintoré & Peña & Naranjo, 2001, p. 49 justify this by the necessity to maintain uniformity in the network; Martín Trilla & Echarri Ardanaz, 2000, p. 58 differentiate between the negotiation phase regarding franchising businesses where the trademark is well-known and others where the trademark is not well-known. In the latter case, the franchisor would have more opportunity to negotiate the terms of the contract. There is no case-law referring to the franchising contract as a framework agreement, although there have been some decisions in which the complexity of franchising contracts is emphasised: STS 29 July 1996, RJ 1996\6646 and 30 April 1998, RJ 1998\3456 refer to it as a mixed contract. SAP Barcelona 24 March 2004, JUR 2004\122633. In the literature Uría, 1994, p. 693; Domínguez García, 1985, p. 430; De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 362; Alonso Soto, 2001, p. 193; Ortuño Baeza, 1997, p. 1528. See 1.6 in this Chapter, above.

Section 2. The legal framework for franchising in Spain

45

when the contract was concluded, the contract in question is void due to the absence of one of the requirements for validity.205 This question is regulated in a different manner in the PEL CAFDC. As explained above regarding French law, the PEL CAFDC do not provide for a causa requirement.206 A contract which is null due to lack of causa can be reclassified by the court as another type of contract (conversión del contrato nulo). For this, two conditions must be fulfilled. In the first place, the elements as to the form and contents of the obligations which were not adequate to preserve the validity of the original contract must for the new contract be the necessary elements to correctly classify that contract. This is an objective requirement. In the second place, the court has to interpret whether the parties would have wanted the agreement to be reclassified in order to fulfil their contractual expectations had they discovered that the contract in its original form would have ended up null.207 This is a subjective criterion. There is no general rule which regulates this issue under Spanish law but it is accepted on the basis of the principle of preservation of the validity of contracts.208 205 206 207 208

Lacruz Berdejo, 2003, pp. 414 ff; Albaladejo, 2004, p. 675. See 1.6 in this Chapter, above. Lacruz, 2003, pp. 56 ff; Albaladejo, 2004, p. 866. Albaladejo, 2004, p. 867.

Chapter III. Description and Comparison of the main Obligations of the Parties in Franchising Contracts in the PEL CAFDC, French and Spanish Law Section 1. Scope of franchising 1.1

PEL CAFDC: Article 3:101

Article 3:101 of the PEL CAFDC regulates the scope of franchising contracts. This provision sets out the core obligations in a franchise agreement, i.e. the obligations that must be agreed upon in order to be able to classify the agreement as a franchising agreement.209 According to Article 3:101, a franchise agreement is a contract whereby one party (the franchisor) grants the other party (the franchisee), in exchange for remuneration, the right to conduct a business (franchise business) within the franchisor’s network for the purposes of selling certain goods or services on the franchisee’s behalf and in the franchisee’s name, and whereby the franchisee has the right and the obligation to use the franchisor’s tradename or trademark and other intellectual property rights, the knowhow and the business method. According to this definition, franchising contracts must at least include the obligation of the franchisor to grant the right to use the franchisor’s business method, namely use of the tradename or trademark and other intellectual property rights and know-how, and the obligation of the franchisee to pay and to use the franchisor’s business method. The Comments to the provision on scope point out that, unlike under the European competition rules regarding franchising, the definition under the PEL CAFDC does not include the franchisor’s obligation to assist as a main obligation under the contract. The purpose of leaving this obligation out was to widen the scope of the rules on franchising agreements.210 This means that an agreement can be classified under the PEL CAFDC as a franchising agreement even if the obligation to assist has not been agreed.

209 210

See PEL CAFDC, Article 3:101, Comment B. See PEL CAFDC, Article 3:101, Comment A.

48

Chapter III. Description and Comparison

1.2

France

1.2.1

Introduction

In France, there is no statutory definition of franchising. In French private law, franchising has been defined by the French courts and French legal doctrine. Private definitions can be found in the ECEF and in the AFNOR regulations.

1.2.2

Case-law

There are not many definitions of franchising in French case-law, and none of them have been provided by the Cour de Cassation. They are all contained in decisions of lower courts. In a decision of 1973, the Tribunal de Grand Instance of Bressuire defined franchising as a contract where one undertaking licenses to other independent undertakings in exchange for remuneration, the right to use the franchisor´s registered name and trademark to sell products and services. This agreement generally implies the provision of technical assistance.211 This definition describes as core obligations the duty of the franchisor to provide his intellectual property rights and the duty of the franchisee to pay. The obligation to assist is only mentioned as an obligation that is generally included, from which it follows that the obligation to assist may also be left out. In a later decision of 1982, the Cour d´appel of Colmar212 only considered the obligations of the franchisor (providing intellectual property rights and know-how) and stressed the importance of the quality of know-how (tested, original, specific, up-dated, controlled). The obligation to assist was not mentioned: in a franchise contract the franchisor must put at the disposal of the franchisee a commercial name, signs and symbols, a trademark, know-know and a collection of products and services which are offered in an original and specific

211

212

TGI Bressuire 19 June 1973, D. 1974, p. 195, note F. Bories: “… un contrat par lequel une entreprise concède à des entreprises indépendantes en contrepartie d’une redevance, le droit de se présenter sous sa raison sociale et sa marque pour vendre des produits ou services. Ce contrat s’accompagne généralement d’une assistance technique.” CA Colmar 9 June 1982, D. 1982, p. 553, note J.-J. Burst: “Un contrat de franchise doit comporter la mise à la disposition du franchisé par le franchiseur d´un nom commercial, de sigles et symboles, d´une marque ainsi que d´un savoir-faire, et d´une collection de produits ou de services offerts d´une manière originale et spécifique et exploités suivant des techniques commerciales uniformes préalablement expérimentées et constamment mises au point et contrôlées.”

Section 1. Scope of franchising

49

manner and operated in conformity with uniform commercial techniques which have been previously tested and are constantly up-dated and controlled. The Paris Cour d´appel in 1989 gave a very different definition which did not include reference to intellectual property rights and know-how, but referred to the parties’ obligation to cooperate and especially to the franchisor’s obligation to provide assistance in the form of technical advice, staff training and the promotion of the trademark.213 The emphasis was all on the obligation to assist. The obligation to pay was not mentioned. These definitions of French courts vary considerably, with the only point in common being that they all refer to the obligations of the franchisor. However, there they vary again: one decision mentions as obligations of the franchisor that he must provide intellectual property rights and assistance, while the second also mentions intellectual property rights, but adds knowhow and a collection of products and services and the third stresses the obligations to cooperate and to assist. The obligation to assist is thus mentioned in two out of the three decisions. The definitions described hardly pay any attention to the obligations of the franchisee. The franchisee’s obligation to pay is only included in the decision of 1973.

1.2.3

Literature

In 1970, Level defined franchising as a contract where an undertaking (franchisor) puts at the disposal of other undertakings (franchisees) a set of commercial means with the help of which the franchisees can sell the products or provide the services.214 It is a generic definition which refers to the transfer of the commercial means of the franchisor without specifying those means. The obligations of the franchisee are not mentioned. Subsequent definitions provided in legal writing are much more specific. In 1989, Leloup referred to franchising as a contract with reciprocal obligations by which one undertaking, called the franchisor, grants to one or more under213

214

CA Paris 10 March 1989, Gaz. Pal. 1989, 2 sem, p. 544 ff: “Le contrat de franchisage implique la constitution d’un réseau de points de vente, exploité par des personnes indépendantes et l’instauration d’une concertation et d’une coopération réelles entre les franchisés eux-mêmes, appelés à confronter leurs expériences, ainsi qu’entre les franchisés et le franchiseur, que à l’obligation de fournir aux franchisés son assistance sous la forme spécialement de conseils techniques, d’actions de formation du personnel et de promotion de la marque et de produits.” Level, annotation of the decision of the Cour de Cassation of 21 October 1970, JCP 1971, 10131: “Le contrat de franchising est la convention par laquelle une entreprise met à la disposition d´autres commerçants un ensemble de moyens commerciaux à l´aide desquels ceux-ci vendront des marchandises ou fourniront des services.”

50

Chapter III. Description and Comparison

takings, called franchisees, the right to repeat, by using the franchisor’s name, with the help of his means of attracting clientele, and with his continuous assistance, the management system previously used by the franchisor and which should, thanks to the competitive advantage which it procures, reasonably allow a diligent franchisee to carry on a profitable business.215 Leloup has repeated this definition in later publications.216 Leloup’s definition lists the obligations of the franchisor (intellectual property rights, know-how and ongoing assistance). Leloup’s definition, like Level’s, ignores the obligations of the franchisee. Leloup also concerns himself with the required contents of the obligations of the franchisor, in particular regarding the quality of the business method: this must have been sucessfully tested and has to reasonably enable a diligent franchisee to be succesfull. Huet describes franchising as a distribution contract whereby an entrepreneur, the franchisor, puts at the disposal of the distributors, the franchisees, his trade-name or his trademark, and his know-how, and imposes on the franchisees the obligation to use the distinctive signs and to respect a uniform presentation of the products which are sold to final consumers. Together with the know-how, the franchisor provides commercial or technical assistance during the time the contract is effective. In exchange for the know-how and the well-known character of the trademark, the franchisee is generally required to pay a fee to enter the network, and to pay royalties for the duration of the relationship.217 Different from Leloup and Level, Huet emphasises the reciprocal character of franchising by referring to the obligations of the franchisee to pay and to follow the method of the franchisor. The obligations of the franchisor mentioned by Huet are the same as those mentioned by Leloup (providing intellectual property rights, know-how and assistance). Huet does not refer to the quality of performance by the franchisor. Malaurie and Aynès provide a definition that is similar to Huet’s, where both the obligations of the franchisor and of the franchisee are included. To the obligations included in Huet’s definition (for the franchisor, the obligations to provide intellectual property rights, know-how and assistance and for the franchisee the obligations to pay and to follow the business method) 215

216 217

Leloup, 1989, p. 205 and 2004, p. 12: “Le contrat synallagmatique à exécution successive par lequel une entreprise, dénommée franchiseur, confère à une ou plusieurs autres entreprises, dénommées franchisées, le droit de réitérer, sous l´enseigne du franchiseur, à l´aide de ses signes de ralliement de la clientèle et de son assistance continue, le système de gestion préalablement expérimenté par le franchiseur et devant, grâce à l´avantage concurrentiel qu´il procure, raisonnablement permettre à un franchisé diligent de faire des affaires profitables.” Leloup, 2004, p. 12. Huet, 2002, p. 559.

Section 1. Scope of franchising

51

they add the obligation of the franchisee to communicate improvements to the franchisor and to keep confidentiality. There is no reference to the quality of the means to be provided by the franchisor. The full definition reads as follows: franchising grants to an undertaking the right to use the franchisor´s trademark, know-how and ongoing assistance in selling products. Reciprocally, the franchisee undertakes the obligation to pay, to respect the commercial techniques and to inform the franchisor of the improvements he makes to the system. The franchisee is also obliged to keep confidentiality.218

1.2.4

ECEF and AFNOR rules

Article 1 of the ECEF defines franchising as a system of marketing goods and/or services and/or technology, which is based upon a close and ongoing collaboration between legally and financially separate and independent undertakings, the franchisor and its individual franchisees, whereby the franchisor grants its individual franchisees the right, and imposes the obligation, to conduct a business in accordance with the franchisor’s concept. The right entitles and compels the individual franchisee, in exchange for a direct or indirect financial consideration, to use the franchisor’s trade name, and/or trade mark and/or service mark, knowhow, business and technical methods, procedural system, and other industrial and/or intellectual property rights, supported by continuing provision of commercial and technical assistance, within the framework and for the term of a written franchise agreement, concluded between parties for this purpose. This is a very detailed definition. Both the obligations of the franchisor and of the franchisee are mentioned. The definition further stresses the reciprocal character of franchising contracts. The AFNOR definition is also quite detailed, but only refers to the obligations of the franchisor. Unlike the ECEF definition, it does not mention the obligation to assist. The focus is on requirements as to form and contents of the intellectual property rights and know-how. According to the AFNOR definition, franchising is a cooperation method between a franchisor on the one hand, and one or several franchisees on the other hand. The franchise implies that the franchisor owns or has a legal right concerning one or more of the signs which attract the clientele (such as social denomination, commercial name, signs, production, commercial or service marks … ) as well as 218

Malaurie & Aynès & Gautier, 2005, p. 473: “… il (le franchisage) confère à un commerçant le droit d’utiliser la marque, le savoir-faire, et bénéficier de l’assistance continue du franchiseur pour vendre les produits. Réciproquement, le franchisé s’oblige à payer des redevances (un droit d’entrée plus des redevances périodiques), à respecter des techniques commerciales conformes et à informer le franchiseur des àmeliorations qu’il découvre; il est également tenu à une obligation de discrétion (la « confidentialité »).”

52

Chapter III. Description and Comparison

the possession of know-how which may be able to be transferred to the franchisees and which is characterised by a collection of products or services of an original and specific character and operated according to previously tested techniques.219

1.3

Spain

1.3.1

Introduction

In Spain, definitions of franchising have been included in the legislation. The first definition was provided by Article 62 (1) of the LOCM, followed by the definition in the implementing RD 2485/1998. Definitions of franchising are also to be found in case-law. There are however not many definitions in legal writing.

1.3.2

Private law statutory definitions

According to Article 62 (1) of the LOCM, franchising is a contract where a company, the franchisor, grants to another company, the franchisee, the right to operate the system which is owned by the franchisor to trade his products and services.220 Article 2 of RD 2485/1998 provides a more specific definition, which mirrors the definition contained in the BER 4087/88.221 Franchising is described as an agreement by which one undertaking, the franchisor, grants to another undertaking, the franchisee, in exchange for direct or indirect financial con-

219

220

221

AFNOR rule: “… une méthode de collaboration entre une entreprise franchisante d’une part, et une ou plusieurs entreprises franchisées, d’autre part. Le franchisage implique préalablement, pour l’entreprise franchisante la propriété ou la jouissance d’un ou de plusieurs signes de ralliement de la clientèle (tels que dénomination sociale, nom commercial, enseigne, marque de fabrique, de commerce ou de service….) ainsi que la détention d’un savoir-faire transmissible aux entreprises franchisées se caractérisant par une collection de produits, et ou un ensemble de services: – présentant un caractère original et spécifique; – exploité selon les techniques préalablement expérimentées.” Article 62 (1) LOCM:“La actividad comercial en régimen de franquicia es la que se lleva a efecto en virtud de un acuerdo o contrato por el que una empresa, denominada franquiciadora, cede a otra, denominada franquiciada, el derecho a la explotación de un sistema propio de comercialización de productos o servicios.” The definition of the BER 4087/88 was previously adopted by the Spanish legislator by means of RD 157/1992 of 21 February which further elaborated Act 16/1989 of 17 July regarding competition law, BOE n. 52 of 29 February 1992.

Section 1. Scope of franchising

53

sideration, the right to exploit a franchise for the purposes of marketing specified types of goods and/or services and shall include at least: – the use of a common name or shop sign and the uniform presentation of premises and/or means of transport that are the object of the contract, – the communication by the franchisor to the franchisee of know-how, – and the continuing provision by the franchisor to the franchisee of commercial or technical assistance throughout the duration of the agreement.222

A new version of this definition was included in the RD 419/2006 which amends RD 2485/1998. The new definition is virtually identical to the old one, apart from the addition of a few elements, the most relevant of which regard the quality of the business method: this must have been successfully tested by the franchisor and the know-how has to be characteristic of the business, substantial and singular. The new definition clarifies that the financial consideration can be either direct or indirect or both and that assistance can be either commercial or technical or both. Finally, the definition is extended to cover all types of intellectual property rights (where before it only covered a common name or shop sign). Pursuant to Article 2 RD 2485/1998, a franchise contract has to include the franchisor’s obligation to provide the signs which allow the franchisee to exploit the image of the franchisor’s network, to communicate know-how and to provide assistance and also includes the franchisee’s obligation to pay. If these obligations are not agreed upon, a contract cannot be classified as a franchising agreement. There are striking differences between the definition in the LOCM and the definition in the RD. Article 62 of the LOCM provides a generic definition of franchising, while RD 2485/1998 gives a very specific description. According to some authors, the legislator by the abstract definition in the LOCM strove to formulate a broad rule concerning scope so as to prevent

222

Article 2 of RD 2485/1998: “A los efectos del presente Reglamento se entenderá por actividad comercial en régimen de franquicia, regulada en el artículo 62 de la Ley 7/1996, de Ordenación del Comercio Minorista, aquella que se realiza en virtud del contrato por el cual una empresa, el franquiciador, cede a otra, el franquiciado, a cambio de una contraprestación financiera directa o indirecta, el derecho a la explotación de una franquicia para comercializar determinados tipos de productos o servicios y que comprende por lo menos: el uso de una denominación o rótulo común y una presentación uniforme de los locales o de los medios de transporte objeto del contrato, la comunicación por el franquiciador al franquiciado de un "saber hacer", y la presentación continua por el franquiciador al franquiciado de asistencia comercial y técnica durante la vigencia del acuerdo.”

54

Chapter III. Description and Comparison

that franchisors would circumvent the protective rule of Article 62 by not including all the elements which are typical of a franchise contract.223 Curiously enough, however, the preamble of RD 419/2006 mentions the need for specificity as a better means to protect franchisees. Specificity is said to ensure that franchisees can clearly identify whether they are entering into a franchise relationship or another type of relationship which closely resembles franchising.

1.3.3

Case-law

The Tribunal Supremo has twice defined franchising in identical terms in its decisions of 27 September 1996 and 30 April 1998: from a doctrinal point of view franchising has been defined as the contract concluded between two parties that are legally and economically independent, based on which one of them, the franchisor, transfers to the other, the franchisee, the right to use, under several conditions of control, for a limited period and in a determined area, a certain technique for the operation of industrial and commercial activities or for the operation of service activities by the franchisee, in exchange for financial remuneration.224 The Tribunal Supremo decision of 4 March 1997 contained a different definition: in a franchise contract, one of the parties, who holds the title to a particular trademark, shop sign, patent, symbol, formula, method or technique of production or industrial and commercial activity, grants to the other party the right to use, for a definite period and within a certain area, under certain conditions of control, the matters to which he holds the title, in exchange for remuneration, normally in the form of a fee or percentage.225 223

224

225

Alonso Espinosa et al., 1999, p. 705; Ortuño Baeza, 1997, p. 1528; Ruiz de Villa Jubany, 1996, p. 445. Definition in STS 27 September 1996, RJ 1996\6646 and 30 April 1998, RJ 1998\3456: “… desde un punto de vista doctrinal ha sido definido como aquel que se celebra entre dos partes juridica y economicamente independientes, en virtud del cual una de ellas (franquiciador) otorga a la otra (franquiciado) el derecho a utilizar bajo determinadas condiciones de control, y por un tiempo y zona delimitados, una técnica en la actividad industrial y comercial o de prestación de servicios del franquiciado, contra entrega por éste de una contraprestación económica.” Definition in STS 4 March 1997, RJ 1997\1642: “… La característica fundamental de esta modalidad contractual estriba en que una de las partes, que es titular de una determinada marca, rótulo, patente, emblema, fórmula, método o técnica de fabricación o actividad industrial o comercial, otorga a la otra, el derecho a utilizar, por un tiempo determinado y en una zona geográfica delimitada, bajo ciertas condiciones de control, aquello sobre lo que ostentaba la titularidad, contra la entrega de una prestación

Section 1. Scope of franchising

55

The first definition is more generic. It refers to the franchisor’s obligation to transfer the right to use a certain technique to market goods or services. The second definition is more specific, as it indicates that the transfer of rights concerns intellectual property rights and a business method or formula. Both definitions indicate that the obligation to pay is the franchisee’s counterperformance. Unlike the statutory definition in the RD, the definitions of the Tribunal Supremo do not mention assistance as a main obligation. Numerous definitions are contained in the judgments of the Audiencias Provinciales. The Audiencias provide specific definitions that mention both the franchisor’s obligations and the obligation to pay of the franchisee. Most of these definitions differ from those of the Tribunal Supremo in that they also refer to the obligation to assist as a core obligation,226 although a few do not mention it.227

1.3.4

Literature

Spanish legal writers have not been very inventive in the formulation of definitions of the concept of franchising. Authors generally refer to the definitions included in European competition law or in Article 2 of RD 2485/1998.228 Alfaro’s definition is the exception. This author describes franchising as a contract whereby an entrepreneur (franchisor) assigns to another (franchisee) the use of all the immaterial elements of an undertaking which have allowed the success of the said undertaking, in exchange for remuneration, normally in the form of a fee.229 This definition refers to the generic obligation of

226

227

228

229

económica, que suele articularse normalmente mediante la fijación de un canon o porcentaje.” SAP La Rioja 13 July 1992, AC 1992\1072; SAP Barcelona 16 December 1996, AC 1997\1650; SAP Zaragoza 10 April 2000, AC 2000\1287; SAP Barcelona 31 March 2001, JUR 2001\215218. SAP Barcelona 23 January 2001, JUR 2004\54712; SAP Sevilla 28 January 2002, JUR 2002\47775; SAP Barcelona 28 November 2003, JUR 2004\5933. Ortuño Baeza, 1997, p. 1525; Guardiola Sacarrera, 1998, p. 238; Hernando Giménez, 2000, p. 65. Alfaro, 1995, p. 3154 : “… aquel contrato por el que un empresario (franquiciador) cede a otro (franquiciado) la utilización de todos los elementos inmateriales de una empresa que han producido el éxito de la misma a cambio de una retribución en forma normalmente de canon. Estos elementos son: marca, know-how, condiciones de venta, publicidad, marketing, etcétera.” The English translation is mine.

56

Chapter III. Description and Comparison

the franchisor to transmit the immaterial elements which have allowed the success of the business, but does not specify exactly what these obligations are.

1.4

Comparison

1.4.1

Obligations under the provisions on scope

The obligations that according to the three systems are characteristic of a franchise relationship are the franchisor’s obligations regarding the license of intellectual property rights and the communication of know-how. Unlike under Article 3:101 of the Principles, the obligation to assist for the franchisor is typically included as part of the definition of a franchise contract both in France (in the case-law and in the literature) and in Spain (in the RD 2485/1998, in the case-law of the Audiencias Provinciales and in the literature). The obligation of the franchisee to pay is included in the rule on scope in the PEL CAFDC and in the statutory definition of franchising in the Spanish RD 2485/1998. The Spanish courts and the literature also typically refer to the obligation to pay. In France, the obligation to pay is not mentioned in the case-law (apart from in the definition of 1973), but only in the definitions of certain authors. Finally, the obligation to follow the business method, which is characteristic of franchising according to the Principles, is only mentioned by a few authors in France. It is not mentioned in French case-law. In Spain it is not included in any of the definitions of franchising. Very likely, unlike in the PEL CAFDC, most of the descriptions on franchising provided by French and Spanish courts and French and Spanish literature are not intented to be scope rules, i.e. complete enumerations of the reciprocal obligations of the parties which are necessary to classify an agreement as a franchise contract, but are rather intended to enumerate the obligations of the franchisor and to stress their importance. The emphasis is typically on the franchisors’ obligations and on the quality of his performance because the franchisor is expected to take good care of his own interests and to certainly include the obligations of the franchisee when imposing the terms of the contract. As a consequence of this, the determination of the obligations which are necessary to classify a contract as a franchise agreement both in France and Spain can only be established after analysing which obligations are described in the case-law and the literature as core obligations in the franchise agreement.

Section 1. Scope of franchising

1.4.2

57

Conclusion

The three systems coincide in classifying the obligations to provide intellectual property rights and know-how on the part of the franchisor and the obligation to pay on the part of the franchisee as the obligations which characterise a franchise relationship. The definition of franchising in the Principles presents two main differences compared to the definitions in France and in Spain: first, in these two national systems, contracts which do contain the obligation for the franchisor to provide assistance are not regarded as franchise contracts, and second, the obligation for the franchisee to follow the business method is not mentioned in the definitions under these two national regimes. Because most of the definitions provided by courts and literature are not intended to be scope rules, a definitive conclusion as to whether the PEL CAFDC and French and Spanish law provide for the same scope obligations in franchising contracts can only be reached after studying each of the obligations individually and finding out whether they are described by courts and literature as core obligations in franchising.

Section 2. Franchisor’s obligation to give pre-contractual information 2.1

PEL CAFDC: Article 3:102

2.1.1

Introduction

The PEL CAFDC in Article 3:102 provide an obligation for the franchisor to inform the franchisee on certain issues before the contract is concluded. This provision specifies for the franchisor the general pre-contractual obligation to inform that the PEL CAFDC impose on both parties in franchising under Article 1:201 (general chapter).230 Pursuant to Article 1:201(1), franchisors are obliged to provide their franchisees with adequate information within a reasonable time before the contract is concluded. This rule is essentially one on mistake. Accordingly, if the non-performance of this obligation leads to fundamental mistake on the part of the franchisee, the remedies for mistake under the PECL apply (Article 1:201 (2)).231 Article 3:102 adds two particularities to the general obligation under Article 1:201. First, it sets out in detail the list of issues that are to be disclosed. Second, in addition to the remedies for mistake, it provides the remedy of damages even when no fundamental mistake has taken place. Article 3:102 reads as follows:

230

231

Article 1:201 of the PEL CAFDC: “(1) Each party must provide the other party with adequate information a reasonable time before the contract is concluded. If it does not, Paragraph (3) applies. (2) Adequate information means information which is sufficient to enable the other party to decide on a reasonably informed basis whether or not to enter into a contract of the type and on the terms under consideration. (3) If a party’s failure to comply with paragraph 1 leads the other party to conclude a contract when the first party knew or could reasonably be expected to have known that the other party, had it been provided with adequate and timely information, would not have entered the contract, or would have entered the contract only on fundamentally different terms, the remedies for mistake under PECL Chapter 4 apply. (4) Parties may not derogate from this provision.” See PEL CAFDC, Article 1:201, Comment G.

Section 2. Franchisor’s obligation to give pre-contractual information

59

(1) The obligation to disclose pre-contractual information (Article 1:201) requires the franchisor in particular to provide the franchisee with adequate and timely information concerning: (a) the franchisor’s company and experience, (b) the relevant intellectual property rights, (c) the characteristics of the relevant know-how, (d) the commercial sector and the market conditions, (e) the particular franchise method and its operation, (f) the structure and extent of the franchise network, (g) the fees, royalties or any other periodical payments, (h) the terms of the contract. (2) If the franchisor’s non-compliance with paragraph 1 does not give rise to a fundamental mistake under Article 4:103 PECL, the franchisee may recover damages in accordance with Article 4:117(2) and (3) PECL, unless the franchisor had reason to believe that the information was adequate or had been given in reasonable time. (3) The parties may not derogate from this provision.

2.1.2

Contents and aim

2.1.2.1 Contents The contents of the obligation of pre-contractual disclosure for franchisors under the Principles are the result of a combination of Articles 1:201 and 3:102. According to Article 1:201, the franchisor has to provide the franchisee within a reasonable time before the contract is concluded with adequate information, that is, information which is correct and complete.232 Article 1:201 therefore imposes a time requirement and a requirement as to the contents with respect to the provision of information. Article 3:102 aims to qualify the requirement as to contents: for the information to be complete, it must necessarily contain all the items specified in the list given in Article 3:102 (1). The franchisor may disclose more information than contained in the list, but not less.233 By listing the issues which are to be disclosed, the Principles clarify which type of information is considered relevant to enable the franchisee to decide on a reasonably informed basis whether or not to enter into a contract of the type and on the terms under consideration.234 According to the Principles, such information regards the following six main aspects: the 232 233 234

See PEL CAFDC, Article 1:201, Comment E. See PEL CAFDC, Article 1:201, Comment D. See PEL CAFDC, Article 1:201 (2).

60

Chapter III. Description and Comparison

franchisor’s company, the business method which is transferred, the characteristics of the market concerning the sector of activity of the franchise, the franchisor’s network, the payment conditions and the terms of the contract. The Comments to the rule explain in detail the type of information which may relate to each of these items.235

2.1.2.2 Aim According to the Comments to Article 3:102, the aim of a specific precontractual duty to disclose for the franchisor is to protect the franchisee’s interests, as it intends to guarantee that the latter obtains all the information necessary -that is to say correct information concerning all items on the list- in order to enter into the franchise contract with full knowledge of the relevant facts.236 The Principles justify this need for protection by invoking the information asymmetry that exists between the parties, meaning that the franchisor is in possession of all the relevant information while the franchisee only has access to such information if the franchisor discloses it. The franchisee, who is therefore dependent on the franchisor, risks all his investments if the franchisor does not inform him adequately on the characteristics of the business which he is going to operate.237

2.1.3

Remedies

2.1.3.1 Remedies for mistake: annulability or adaptation According to Article 1:201, if the non-performance of the franchisor of the obligation to provide adequate and timely information on issues either included or not on the list of Article 3:102 leads the franchisee to enter into the contract under the influence of fundamental mistake, the remedies for mistake under the PECL apply.238 The contract will be avoidable for mistake (Article 4:103 PECL), unless the franchisor asks for the adaptation of the contract by indicating that he is willing to perform or is actually performing the contract as the franchisee understood it (Article 4:105 PECL). Damages may also be granted (Article 4:117 PECL). On avoidance, either party may recover the value of performances they have rendered so far by way of restitution (Article 4:115 PECL). 235 236 237 238

See PEL CAFDC, Article 3:102, Comment E. See PEL CAFDC, Article 3:102, Comment B. See PEL CAFDC, Article 1:201, Comment B. See PEL CAFDC, Article 1:201 (3).

Section 2. Franchisor’s obligation to give pre-contractual information

61

2.1.3.2 Strict liability in damages In addition to the remedies for mistake, Article 3:102 (2) PEL CAFDC entitles the franchisee to claim damages when the franchisor does not comply with his obligation under Article 3:102 (1) – that is to say, with the obligation to provide timely, correct and complete information (on all items on the list) – even if the lack of compliance does not lead to a fundamental mistake. Whereas Article 1:201 PEL CAFDC only provides legal consequences when fundamental mistake has been proven, under Article 3:102, the franchisor may be liable in damages even if the franchisee cannot prove that he entered into the contract under the influence of fundamental mistake. To avoid strict liability, the franchisor may argue (Article 3:102 (2)) that he had reason to believe that the information was adequate (correct and complete, i.e. concerning all the items on the list) or was given within a reasonable time.239 Strict liability can only be invoked when the franchisor does not inform on all items of the list, or if the information on these items is incorrect or was untimely given. When information which is not included in the list of Article 3:102 is incorrectly or untimely given or when such information is not provided although it was relevant to the franchisee in the particular case, the mistake rule under Article 1:201 shall apply.

2.2

France

2.2.1

Introduction

In France, pursuant to Article L. 330-3 of the French Commercial Code formerly enacted as the Loi Doubin, the franchisor has a pre-contractual duty to provide information to the franchisee (obligation précontractuelle de renseignement). Before the enactment of the Loi Doubin, an autonomous obligation to inform in the case of distribution contracts was not recognized under French case-law. In the first judgments of the Cour de Cassation in the 1980s on claims arising from a lack of pre-contractual information in the field of distribution, distributors were held to be entrepreneurs who were presumed

239

See PEL CAFDC, Article 3:102, Comment G.

62

Chapter III. Description and Comparison

capable of obtaining any information which they needed and to verify any information which they received.240 Despite the position taken by the French courts, the French Parliament in 1989 nevertheless enacted the Loi Doubin, according to which the franchisor, as a contractual party who provides his commercial name, trademark or distinctive signs to the other party and who requires from that party to commit exclusively or quasi-exclusively, has to provide pre-contractual information to his franchisees.241 The Loi Doubin which is now Article L. 330-3 of the Commercial Code reads as follows: “A person who grants to another person the licence to use a trade name, a trade mark or a logo, subject to the commitment of exclusivity or quasi exclusivity for the exercise of the latter’s activities shall prior to the execution of any agreement negotiated in the two parties’ mutual interest, furnish to the other party a document giving honest information permitting the other party to make an informed decision. This document, the contents of which shall be provided for by a decree shall contain, among other things, information on the age and the experience of the licensor’s business, the status and the possibilities of growth of the market, the importance of the retail network, the term renewal, termination and conditions of transfer of the agreement and the scope of the exclusivities granted. When payment of any monies shall be demanded prior to the execution of the agreement here above mentioned, especially in order to be granted the rights of exclusivity of a territory, the undertakings made in consideration of such payment shall be described in writing as well as the reciprocal obligations of the parties in case of forfeiture. The document provided for under paragraph 1, as well as the proposed contract shall be delivered at least 20 days before the execution of the agreement or, if

240

241

Arrêts Turco of 25 February 1986 and Couturier of 10 February 1987, JCP 1988, II, 20995. See Virassamy, annotation of the decision of the Cour de Cassation of 4 December 1990, JCP 1991, n. 39, p. 305. As has already been indicated above (Chapter II, section 1), the French Parliament adopted the Act on disclosure on the indications of a group of experts appointed by the Ministry of Commerce which considered it necessary that the provision of pre-contractual information was regulated in franchising so as to prevent the failure of franchise networks, given that franchisees often went into liquidation as a result of franchisors’ actions in the 1980s.

Section 2. Franchisor’s obligation to give pre-contractual information

63

the case arises, before payment of the monies described in the paragraph here above.”242

After the enactment of the Loi Doubin, the Cour de Cassation changed its approach in order to follow the position of the French legislator. In a decision of 4 December 1990, the Cour de Cassation for the first time acknowledged the existence of an obligation for the franchisor to provide precontractual information.243 In this case, the franchisee claimed the invalidity of the contract as he entered into the agreement under the influence of mistake. He argued that the commercial benefits were much lower than the forecasts of the franchisor had led him to expect. The court concluded that the franchisor had not complied with his obligation to provide the franchisee with a study of the market based on serious criteria. This change in the approach of the French judiciary had already been anticipated in the decision of the Colmar Cour d´appel of 9 March 1990.244 Unlike the French courts, French legal doctrine already consistently favoured the acknowledgment of a legal obligation to inform for distribution contracts.245 Scholars therefore welcomed the change in the courts’ approach.246 242

243

244

245

246

Translation by the EFF. See http://www.eff-franchise.com/francenationallevel. html#loidoubin. The original version in French can be found in the Annex. Cass. com. 4 December 1990, JCP 1991, n. 39, p. 305, annotated by G. Virassamy. CA Colmar 9 March 1990, D. 1990, 232, somm., obs. J.-J. Burst. This case arose in connection with a dispute in a franchise relationship for the operation of a dating agency. The franchisee claimed avoidance of the contract on the ground of mistake concerning the characteristics of the trademark and the know-how and concerning the potential of the franchised business to succeed. The court confirmed that a study of the market was lacking, but concluded that the franchisor had complied with his obligation to inform because the information provided (demographic study, information on competitors and provisional budget) was sufficient to allow the franchisee to enter into the contract in full knowledge of all the relevant facts. Burst, comments to the decision of the Colmar Cour d’appel of 9 March 1990, D. 1990, somm., p. 234: “S´agissant du contrat de franchise, la legal doctrine enseigne que le franchiseur est tenu d´une obligation de renseignement à l´égard du franchisé potentiel.” Ghestin, 1993, p. 602; Virassamy, annotation to the decision of the Cour de Cassation of 4 December 1990, JCP 1991, n. 39, 21725, p. 307: “… c´est essentiellement la nouvelle loi, dite loi Doubin du 31 décembre 1989 qui constitue le témoignage le plus notable de cette volonté de moraliser la phase précontractuelle, et qui constitue la justification profonde du changement d´orientation de la jurisprudence … nous ne pou-

64

Chapter III. Description and Comparison

In practice, most claims brought before French courts regarding precontractual information are for the avoidance of the franchise contract, based on significant discrepancies between the sales forecasts provided by the franchisor prior to the conclusion of the agreement and the actual profit made by the franchisee after commencing the operation of the business in question.247

2.2.2

Contents and aim of Article L. 330-3 of the Commercial Code

2.2.2.1 Contents Article L. 330-3 of the Commercial Code imposes on the franchisor requirements as to form and contents of the obligation of pre-contractual disclosure. As to form, the provision obliges the franchisor to provide the information in writing.248 In addition, the information is to be delivered to the franchisee at least 20 days before the parties are due to sign the contract or before the franchisee pays any sum of money to the franchisor.249 As to contents, the provision requires the franchisor to provide information which is accurate and which must concern all relevant aspects regarding the franchised business. In particular, according to paragraph 2, such relevant aspects regard information concerning the establishment and experience of the company, the state of development and prospects for further development of the relevant market, the importance of the network, the duration of

247

248

249

vons qu’approuver cette évolution qui nous semble seule conforme à la morale des affaires, au respect de la fonction du contrat qui est d’être un instrument d’échanges réciproques à la satisfaction commune, et à l’esprit de coopération entre les parties que l’on ne peut limiter à la seule phase d’exécution du contrat et qui doit en fait exister dès le stade de sa préparation.” See decisions of the Cour de Cassation of 4 December 1990, JCP 1991, II, 21725, n. 39, p. 305, annotated by G. Virassamy; 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin; 24 February 1998, D. 1998, somm., p. 337 and 26 February 2002, 99-14283. Of the decisions of lower courts see the CA Versailles 29 October 1992, D. 1995, somm., p. 76, obs. D. Ferrier; CA Douai 6 October 1992, D. 1995, somm., p. 75, obs. D. Ferrier; CA Paris 3 February 1994, D. 1995, somm., p. 76, obs. D. Ferrier; CA Paris 17 May 1995 and CA Versailles 29 June 1995, D. 1997, somm., p. 55, obs. D. Ferrier; CA Paris 14 November 1997 and 16 January 1998, D. 1998, somm., p. 337 ; CA Toulouse 13 January 2000, D. 2000, p. 261. The written information to be submitted to the franchisee is known in practice as the “document d’information précontractuelle” (DIP). See Article L. 330-3 (4) of the Commercial Code.

Section 2. Franchisor’s obligation to give pre-contractual information

65

the agreement, the conditions under which the agreement may be renewed, transferred or terminated and the fields of exclusivity. An implementing decree was issued in 1991 to further specify the contents of the information that must be provided.250 The decree refers to six main categories of information. Each of these categories is made up of a detailed list of the issues that are to be disclosed. The different categories concern: (1) particulars which identify the franchisor’s company; (2) details concerning the registration of the company; (3) banking details; (4) how long the company has been in existence and details on its previous experience together with a presentation of the general and local state of the market for the goods or services which are the object of the franchise; (5) information concerning the network and (6) duration of the contract, conditions of renewal, termination or transfer, exclusivities, and estimation of the initial investments to be made by the franchisee.

2.2.2.2 Aim Article L. 330-3 (1), final sentence, of the Commercial Code expressly provides that the objective of the provision on disclosure is to guarantee that the party which is provided with intellectual property rights and which is obliged to commit on an exclusive or quasi-exclusive basis -i.e. in franchising agreements: the franchisee- only enters into the contract after having acquainted himself with all the relevant facts concerning the agreement which he is about to conclude (en connaissance de cause). In several judicial decisions and by some legal authors it has been pointed out that this provision protects the freedom of consent of the franchisee.251 Legal doctrine 250

251

Décret n° 97-337 du 4 avril 1991 portant application de la loi n° 89-1008 du 31 décembre 1989. The original version in French can be found in the Annex. CA Paris 17 May 1995, D. 1997, somm., p. 55, obs. D. Ferrier: “l’obligation précontractuelle de renseignement prévue par la loi n 89-1008 du 31 déc. et par le décret n. 91-337 du 4 avril 1991 a pour finalité la protection du futur franchisé en lui permettant de se déterminer en toute connaissance de cause.” and CA Versailles 29 June 1995, D. 1997, somm., p. 55, obs. D. Ferrier. In the literature see Ghestin, 1993, pp. 577 and 645; Malaurie & Aynès & Gautier, 2005, p. 473: “Le loi du 31 décembre 1989, dite loi Doubin … afin de protéger le franchisé, oblige le franchiseur à lui communiquer au moins vingt jours avant la conclusion du contrat … « un document donnant des informations sincères … »”; Kenfack, annotation to the decision of the Cour de Cassation of 14 January 2003 and 11 February 2003, D. 2003, jur., p. 2307: “il convient d´avoir à l´esprit que la Loi Doubin a été instituée pour moraliser certaines activités”; Virassamy, annotation to the decision of the Cour de Cassation of 4 December 1990, JCP 1991, n. 39, p. 307: “… c´est essentiellement la nouvelle loi, dite loi Doubin

66

Chapter III. Description and Comparison

tends rather to base the protection of the franchisee on the fact that the franchisee is in a dependent position vis-à-vis the franchisor.252 The information asymmetry253 and the unequal bargaining power254 between the parties are invoked to demonstrate that the franchisee is the weaker party in the relationship and that this justifies the need for legal protection.255

252

253

254

255

du 31 décembre 1989 qui constitue le témoignage le plus notable de cette volonté de moraliser la phase précontractuele.” Leloup, 2004, p. 171: “Nous sommes en présence d’un texte protecteur de la liberté du consentement.” Ghestin, 1993, p. 602; Huet, 2002, p. 559: “La dépendance des franchisés à l’égard de l’animateur du réseau … justifie que l’obligation de renseignement et de conseil soit particulièrement importante.” Marot, 1999, p. 434: “le contrat que le futur franchisé va signer créera une situation de dépendance en raison de deux critères objectifs: (1) le futur franchisé exploitera sous les signes de ralliement du franchiseur (2) une obligation d´exclusivité ou de quasi-exclusivité du futur franchisé dans l´exercice de son activité … Et c´est cette situation de dépendance future qui justifie le souci du législateur de voit le futur franchisé s´engager en connaissance de cause”; Matray, 1992, p. 31: “La loi Doubin a pris en considération le fait que les professionnels de la distribution en réseau étaient souvent issus du salariat et maîtrisaient mal les nouvelles formules de collaboration en sorte qu’ils étaient à la merci d’un fournisseur plus avisé en plus professionnel.” Ferrier, 2000, p. 238: “Cette protection a été inspirée par la situation économique difficile dans laquelle s’étaient trouvés certains distributeurs après avoir conclu un accord d’exclusivité sur la foi de perspective d’activités optimistes … ”; also Ferrier, 2002, p. 374. Ghestin, 1993, p. 615; Ferrier, 2001, p. 104; Malaurie & Aynès & Gautier, 2005, p. 474. TGI Carcassone 2 May 2002, D. 2002, p. 2597, annotated by O. Tiquant: “L´obligation précontractuelle de renseignements … a pour but de lutter contre tout abus d´une position de force caractérisée notamment dans les contrats d´adhésion … par une absence réelle de négociation.” Ghestin has called attention to the fact that French courts increasingly tend to impose obligations to inform on the party who imposes the contractual conditions in an agreement. This is mainly the case in contracts concluded with consumers, but it may also apply to business-to-business relationships. See Ghestin, 1993, p. 641; See in case-law, for example, Cass. com. 17 March 1992, RTD civ. 1993, p. 115, obs. J. Mestre. Marot, 1999, p. 431: “… le législateur a voulu protéger le faible qu’est présumé être le franchisé”; Clément, 1994, p. 10: “… elle [loi doubin] va protéger la partie la plus faible qui, investit des sommes qui peuvent être considérables …” This author refers to the Loi Doubin as a “loi consumériste”; Frignani, 1995, p. 7: “The [French] law was enacted to protect franchisees in the pre-contractual phase because it was felt that they are the weaker party and this is the most crucial phase, as it defines the rights and obligations of each party.”

Section 2. Franchisor’s obligation to give pre-contractual information

2.2.3

67

Application of Article L. 330-3 of the Commercial Code

2.2.3.1 Interpretation in conformity with general contract rules on defective consent French courts of appeal have taken two different tacks as to the manner in which the rule on disclosure is to be applied:256 whilst some courts have considered that the mere non-compliance by the franchisor with the legal requirements of the disclosure rule implies that the contract is null and void,257 other courts have held that such non-compliance can only lead to the annulment of the contract if it gives rise to defective consent on the part of the franchisee.258 The first approach focuses on formal compliance with the letter of the law and is explained on the basis of Article 6 of the Civil Code which provides that the parties cannot deviate from what a mandatory rule establishes.259 Nullity is also considered a better means to ensure observance of the protective spirit of the obligation.260 The second approach is a subjective 256 257

258

259

260

Marot, 1999, p. 431. CA Paris 7 April 1993, D. 1995, somm., p. 75, obs. D. Ferrier; 24 March 1995, JCP 1995, I, 3867, n. 63; 17 May 1995, D. 1997, somm., p. 55, obs. D. Ferrier; 18 June 1997, Lettre distrib., 1997-11; CA Montpellier 4 December 1997, JCP E, 1998, p. 604. CA Colmar 9 March 1990, D. 1990, somm., p. 232 ff., obs. J.-J. Burst; T. com. Paris 22 March 1993, D. 1994, somm., p. 281, obs. T. Hassler; CA Paris 21 June 1996, Lettre distrib., 1996-11; 9 September 1997, Lettre distrib. 1997-12 and 14 November 1997, D. 1998, somm., p. 337, obs. D. Ferrier; CA Lyon 31 March 2005, http://www.legifrance.gouv.fr. Article 6 of the Civil Code: “On ne peut déroger, par des conventions particulières, aux lois qui intéressent l'ordre public et les bonnes moeurs.” See for example CA Paris 17 May 1995, D. 1997, somm., p. 55, obs. D. Ferrier: “l’obligation pré- contractuelle de renseignement prévue par la loi n 89-1008 du 31 déc. et par le décret n 91-337 du 4 avri. 1991 a pour finalité la protection du futur franchisé en lui permettant de se déterminer en toute connaissance de cause … C´est texte est donc d´ordre public … Le nonrespect de cette obligation par le franchiseur entraîne en conséquence la nullité du contrat de franchise.” Marot, 1999, p. 431: “… le décret d´application contient en son art. 2 une sanction pénale, ce qui confère à l´ensemble du dispositif un caractère d´ordre public. Dès lors, il n´est pas possible aux parties d´écarter l´application de la loi Doubin.” Marot, 1999, p. 431: “… le législateur a voulu protéger le faible qu´est présumé être le franchisé; il est donc de l’intérêt de celui-ci que le débiteur de l´information précontractuelle ne puisse être dégagé de son obligation.” See also Tiquant, annotation of the decision of the Carcassone Tribunal de Grande Instance of 2 May 2002 and the Lyon Cour d´appel of 2 November 2001, D. 2002, p. 2601.

68

Chapter III. Description and Comparison

approach according to which the “actual knowledge” of the franchisee is the relevant criterion in determining whether non-compliance with the duty of disclosure should have the envisaged effects. Legal doctrine has embraced the subjective approach.261 Scholars underline that the negative consequences of declaring a contract null and void cannot be justified now that the formal approach does not aim to amend a situation of defective consent, but merely focuses on whether the formalities have been observed. 262 The Cour de Cassation definitively opted for the subjective approach in its decisions of 2 December 1997 and 10 February 1998.263 Some lower

261

262

263

Jamin, comments to the decision of the Paris Cour d’appel Paris of 24 March 1995, JCP 1995, I, 3867, p. 345: “dans ce cas il semble qu’elle [la nullité] ne puisse être prononcée que lorsque l’intérêt qu’elle vise à sauvegarder est assez important pour justifier cette sanction et est mis asses gravement en danger par l’inobservation de la loi” … “cet intérêt n’est pas systématiquement mis en péril lorsque l’information transmise par le franchiseur est incomplète, car sa carence peut n’avoir aucun effet sur le sort de son franchisé”; Malaurie & Aynès & Gautier, 2005, p. 475: “la jurisprudence décide qu’il s’agit comme toujours en matière de formalisme informatif, d’une nullité facultative, qui ne peut être prononcée que si l’absence d’information ou son inexactitude ont eu pour effet de vicier le consentement du contractant”; Ferrier, 2000, p. 239: “l’annulation s’impose lorsque le consentement du distributeur a été vicié en raison d’une information insuffisante ou dolosive.” Kenfack, annotation to the decisions of the Cour de Cassation of 14 January and 11 February 2003, D. 2003, jur., p. 2305: “… l’objectif visé par le texte est d´éclairer le créancier d´informations pour lui permettre de prendre une décision en ayant tous les éléments.” Ferrier, comments to the decisions of the Cour de Cassation of 2 December 1997 and 10 February 1998, D. 1998, somm., p. 334: “Des raisons d´opportunité n´ont peut-être pas été étrangères à la position de la Cour de Cassation. Après avoir mesuré des effets dévastateurs de l´annulation du contrat pour indétermination du prix, elle a peut-être estimé préférable de ne pas ouvrir une nouvelle voie de nullité-pretexte.” Also Ferrier, comments to the decisions of the Cour de Cassation of 19 October 1999 and the Montpellier Cour d´appel of 21 March 2000, D. 2001, somm., p. 296: “On a pourtant relevé que la référence à l´ordre publié était insuffisante à justifier la sanction de la nullité.” Marot, 1999, p. 436: “On a vu ainsi un nombre impressionnant de contrats dans la distribution frappés de nullité plusieurs années après au plus grand mépris des intérêts légitimes de la tête de réseau et des autres membres du réseau.” Cass. com. 2 December 1997, D. 1998, somm., p. 334, obs. D. Ferrier: “ne donne pas de base légale à sa décision au regard de l´art. 1116 c.civ. la cour d´appel qui, pour prononcer l´annulation d´un contrat de franchisage, énonce que le non-respect par le franchiseur de son obligation d´information précontractuelle est constitutif du dol prévu par l´art. 1116 c.civ sans caractériser un comportement du franchiseur ayant conduit le

Section 2. Franchisor’s obligation to give pre-contractual information

69

courts have followed the Cour de Cassation,264 but others continue to declare the contract automatically null and void.265 The Cour de Cassation, however, has stood firm and has on occasion set aside decisions of lower courts where the contract was declared null without any prior verification as to whether the non-performance of the duty of information had caused the franchisee to consent defectively.266 From the above explanation it emerges that Article L. 330-3 of the Commercial Code is to be interpreted in the light of the general French doctrine of defective consent (Article 1109 ff. of the Civil Code).267 Courts should not focus on whether the franchisor has complied with the formalities of the rules on disclosure, but on whether the franchisee has provided valid consent,268 namely on whether the franchisee was mistaken as to the very substance of the object of the agreement (l’erreur)269 or whether his consent has been extorted by fraud (le dol).270 Relief for mistake is granted

264 265

266

267

268

269

270

franchisé à être abusé sur les conditions réelles dans lesquelles il était amené à contracter.” See also Cass. com. 10 February 1998, D. 1998, somm., p. 334. TGI Carcassone 2 May 2002 and CA Lyon 2 November 2001, D. 2002, p. 2597. CA Versailles 27 January 2000, Lettre. distrib. 2000-3; CA Montpellier 21 March 2000, D. 2001, somm., p. 296, obs. D. Ferrier. Cass. com. 19 October 1999, D. 2001, somm., p. 296; Cass. com. 5 December 2000, 98-16524 (inédit), http://www.legifrance.gouv.fr; Cass. com. 22 October 2002, 00-22174 (inédit titré), http://www.legifrance.gouv.fr; Cass. com. 14 January 2003, D. 2003, jur., annotated by H. Kenfack, p. 2304; Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr; Cass. com. 20 March 2007, 0611290 (inédit), http://www.legifrance.gouv.fr. Article 1109 of the Civil Code: “Il n’y a point de consentement valable, si le consentement n’a été donné que par erreur, ou s’il a été extorqué par violence ou surpris par dol.” CA Paris 14 November 1997, Lettre distrib. 1998-2:“Il s’enforce alors de rattacher la nullité à la police des vices du consent”. Leloup, 2004, p. 188: “La Cour de Cassation a consacré à nouveau, à plusieurs reprises, l’absorption de la loi du 31 décembre 1989 dans le droit commun de la formation du contrat. La seule recherche que doivent faire les juges du fond est celle, non pas de l’observation du formalisme de la loi doubin, mais celle de la validité du consentement”; Kenfack, annotation to the decisions of the Cour de Cassation of 14 January and 11 February 2003, D. 2003, jur., p. 2306 : “Le droit spécial de l´art. L.330-3 c.com, s´intègre alors parfaitement dans le droit commun de la théorie des vices du consentement.” Article 1110 of the Civil Code: “L'erreur n'est une cause de nullité de la convention que lorsqu'elle tombe sur la substance même de la chose qui en est l'objet … ” Article 1116 of the Civil Code: “Le dol est une cause de nullité de la convention lorsque les manoeuvres pratiquées par l'une des parties sont telles, qu'il est évident que,

70

Chapter III. Description and Comparison

on the basis of the general doctrine of defective consent if the franchisor knew that the matter about which there was a mistake was determinant for the franchisee, even though the franchisor did not know of the mistake.271 Moreover, mistake must be excusable, meaning that it should not be considered the franchisee’s fault if he has given mistaken consent.272 The choice in favour of the subjective approach in conformity with the French general legal doctrine of defective consent also determines the position of French courts and legal doctrine on the application of the specific requirements of form and contents under Article L. 330-3 of the Commercial Code. On the one hand, if defective consent is not proven, then it does not matter whether the franchisor has not observed the time requirement,273 or has not given all the information on the list.274 On the other hand, the scope of the obligation is broadened by the imposition of further requirements not explicitly contained in the wording of the rule. Indeed, courts and doctrine have interpreted the rule to mean that in order to prevent situations of defective consent, the franchisor has a duty to inform not only prior to the contract’s conclusion, but also prior to its express or tacit renewal.275 Moreover, every piece of information provided by the franchisor, even when it is not included in the list of Article L. 330-3 of the Commercial Code, is nevertheless considered to fall within the scope of this Article and must therefore also be accurate and complete.276

271 272

273

274

275

276

sans ces manoeuvres, l'autre partie n'aurait pas contracté. Il ne se présume pas, et doit être prouvé.” Ghestin, 1993, p. 488. Idem, p. 483. See also Fabre-Magnan & Sefton-Green, 2004, p. 405. In the caselaw see CA Lyon 31 March 2005, http://www.legifrance.gouv.fr. Cass. com. 19 October 1999, D. 2001, somm., p. 296; Cass. com. 22 October 2002, 00-22174 (inédit titré), http://www.legifrance.gouv.fr; Cass. com. 14 January 2003, D. 2003, jur., annotated by H. Kenfack, p. 2304; Cass. com. 11 March 2003, 97-14367 (inédit), http://www.legifrance.gouv.fr. See decisions of the Cour de Cassation of 14 January 2003, 00-11781 (inédit titré), http://www.legifrance.gouv.fr; 22 October 2002, 00-22174 (inédit titré), http:// www.legifrance.gouv.fr and 21 November 2000, JCP E 2001, p. 712. Cass. Com. 13 March 1990, Bull. civ. IV, n. 77; CA Versailles 27 January 2000, Lettre distrib. 2000-3; Cass. com. 14 January 2003, D. 2003, jur., annotated by H. Kenfack, p. 2304. In the literature Ferrier, 2000, p. 240; Kenfack, annotation to the decision of the Cour de Cassation of 14 January 2003, D. 2003, jur., p. 2306 and Leloup, 2004, p. 176. Cass. com. 11 February 2003, D. 2003, jur., annotated by H. Kenfack, p. 2304, regarding a franchise contract for the distribution of chocolate. The franchisee brought an action for annulment of the contract because the information provided by the franchisor concerning the state of competition in the local market

Section 2. Franchisor’s obligation to give pre-contractual information

71

2.2.3.2 Particularities of Article L. 330-3 of the Commercial Code The interpretation of the specific pre-contractual obligation on disclosure for the franchisor in the light of the general rules of contract law on invalid consent raised the question of whether the enactment of specific legislation was necessary.277 French courts have not been always clear in their application of the rule on disclosure and the general rules on defective consent.278 There have even been decisions dated after the enactment of the Loi Doubin where neither the claim, nor the court’s reasoning was based on that Law, but on the general doctrine of fraud.279 Does Article L. 330 of the Commer-

277

278

279

had been inaccurate and incomplete. The franchisor argued that the Loi Doubin did not provide a duty to provide this type of information. The Cour d´appel and subsequently the Cour de Cassation, while agreeing with the franchisor that the law did not include a duty to provide information concerning the local market, held that such information when volunteered by the franchisor must nevertheless be accurate and complete. Kenfack comments on this decision in the following terms: „… il est logique que toutes les informations transmises soient sincères, y compris celles qui ne sont pas exigées par le texte légal. Son esprit [Loi Doubin] justifie que toutes les information transmises obéissent au même régime.” See Kenfack, annotation to the decision of the Cour de Cassation of 11 February 2003, D. 2003, jur., p. 2305. See for a similar decision CA Orléans 26 October 2006, 392, http://www.legi france.gouv.fr. Tiquant, annotation to the decision of the Carcassonne Tribunal de Grande Instance of 2 May 2002 and the Lyon Cour d´appel of 2 November 2001, D. 2002, p. 2599 : “Certains commentateurs des plus autorisés se sont donc interrogés sur son utilité”; Kenfack, annotation to the decision of the Cour de Cassation of 14 January and 11 February 2003, D. 2003, jur., somm., p. 2305 : “la solution se trouve surtout dans le droit commun des contrats, ce qui soulève des ici la question de l´intérêt du texte du droit spécial”; Leloup, 2004, p. 191: “Peut-on dire aujord’hui que l’on est dans le même état que si l’article L. 330-3 du Code de commerce n’existait pas? ” See for example Cass. com. 2 December 1997, D. 1998, somm., p. 334, obs. D. Ferrier. The Cour de Cassation indicated that the Loi Doubin was applicable, but subsequently held that based on Article 1116 of the Civil Code the contract would not to be invalidated. See also CA Paris 9 September 1997, Lettre distrib. 1997-12, in which the annulment of the contract was based on both the Loi Doubin and Article 1116 of the Civil Code. Cour de Cassation of 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr and CA Toulouse 13 January 2000, D. 2000, jur., p. 261, both concerned cases in which the franchisee claimed defective consent due to omitted information by the franchisor. In the first case, the Cour de Cassation declared the contract null and void as it has been demonstrated that the pre-contractual information only provided a very general presentation of the franchise business which was not pre-

72

Chapter III. Description and Comparison

cial Code add certain particularities to the general French regime of defective consent? According to a number of scholars, this is indeed the case. Tiquant, for example, has argued that the term “en connaissance de cause” used in Article L. 330-3 of the Commercial Code does not have the same meaning as the term “vices du consentement” used in Article 1108 ff. of the Civil Code. According to this author, the rule on disclosure imposes a stricter standard with regard to the quality of the consent.280 Ghestin and Leloup have contended that the regime of Article L. 330-3 of the Commercial Code serves to provide specific criteria to evaluate whether the non-disclosure has led to defective consent without having to fall back on the more abstract concept of good faith.281 Above all, the enactment of a specific obligation to disclose has influenced the manner in which the mechanism of proof works concerning (a) the existence of a pre-contractual obligation to inform, (b) the performance of the pre-contractual obligation to inform and (c) proof of defective consent. (a) By providing a specific obligation of pre-contractual disclosure, the French legislator has presumed that the conditions for being able to conclude that such an obligation exists were present in franchising. These conditions concern, on the one hand, that the franchisor is in possession of the relevant information and is aware of how relevant the information is in respect of the franchisee’s consent,282 and on the other hand that the franchisee is not in possession of the information.283 The disclosure rule enacted by the French legislator lists the elements that form the substance of the franchise contract and presumes that the franchisor is in possession of this

280

281 282

283

cise, that the information was silent on the state of the local market and that the provisional earnings forecast had been based on a study carried out in a certain area where the economic welfare of the population did not resemble the economic welfare of the franchisee’s potential clients. These were grounds to conclude the fraudulent reticense of the franchisor to inform, justifying annulment of the contract. In the second decision the Cour d’appel held that the franchisor had not provided misleading information and that therefore there was no ground for annulment on the basis of Article 1116 of the Code Civil. Tiquant, comments to the decision of the Carcassone Tribunal de Grande Instance of 2 May 2002, D. 2002, jur., p. 2597. Ghestin, 1993, p. 613; Leloup, 2004, p. 192. Ghestin indicates that information relevant to consent is any information influencing the consent of the receiver. See Guestin, 1993, p. 614; Fabre-Magnan calls this “la pertinence de l’information”; see Fabre-Magnan, 1992, p. 3. In the same vein Malaurie & Aynès, 1999, p. 373 and Le Tourneau, 1987, p. 103. Guestin, 1993, p. 614; Le Tourneau, 1987, p. 103.

Section 2. Franchisor’s obligation to give pre-contractual information

73

information, while the franchisee is presumed not to be in possession of it. This eventually means that the franchisee is freed from his obligation to prove the existence of an obligation to inform.284 Courts may disprove this presumption in cases where they come to the conclusion that the franchisee should have been aware of the information. 285 (b) The existence of a specific obligation to disclose in franchising also seems to imply a particular mechanism of proof as regards the performance of the obligation. How the system works in France is far from clear. As stressed by some French authors, the question regarding the burden of proof is one of the most complicated aspects as regards information obligations.286 In several lower court decisions it was held that it is up to the franchisee to prove that the franchisor did not comply with his obligation to inform,287 while in other lower court decisions it was concluded that it is up to the franchisor to prove that he did comply with his legal obligation to inform.288 French legal doctrine is also divided. There are authors who defend that it falls to the party to be informed, i.e. the franchisee, to prove that the party that has to inform, i.e. the franchisor, failed to do so,289 while others argue

284 285 286

287

288

289

Fabre-Magnan, 1992, p. 427. Ghestin, 1993, pp. 614 and 625. According to Mestre, 1990, p. 468, proof of (non-)compliance is the most complex problem with respect to obligations to inform. See also Fabre-Magnan, 1992, p. 3. CA Paris 21 June 1996, Lettre distri. 1996-11: “les appelants (franchisées) ne peuvent d’en prévaloir pour étayer leur demande de nullité qu’autant qu’ils apportent de preuve, qui leur incombe, de ce que leur consentement s’en trouve vicié.” TGI Carcassone 2 May 2002; CA Lyon 2 November 2001, D. 2002, p. 2597, annotated by O. Tiquant and CA Lyon 31 March 2005, http://www.legifrance. gouv.fr. Virassamy, 1998, p. 375: “Dans la répartition de la charge de la preuve, il revient à ces distributeur, demandeur á l´ action en nullité du contrat d’établir la violation de l’obligation légale d’information préalable et au juge de rechercher que l’absence d’information, ou les informations incomplètes ou erronées communiquées ont, selon le case, été á l’origine d’un dol ou d’une erreur qui l’ont empêché de s’engager en connaissance de cause.” Marot, 1999, p. 432: “Il nous semble toutefois plus exact d’écrire que, dans le système mis en place par l’arrêt du 10 févr. 1998, c’est au créancier de l’information de rapporter la preuve que l’absence d’information ou les informations incomplètes ou erronées ont pu générer un dol, le juge ayant alors pour tâche d’apprécier la pertinence de cette preuve et d’en tirer la conséquence sur l’éventuelle nullité du contrat.” Similarly Leloup, 2004, p. 188.

74

Chapter III. Description and Comparison

that it is up to the franchisor to prove that he has complied with his duty to inform. 290 The same debate takes place regarding information obligations in general, and the tendency among courts and legal doctrine is to impose the burden of proof of compliance on the party that has to inform.291 Authors who support this approach argue that imposing the burden of proof on the party to which the information is due, i.e. in franchising contracts: the franchisee, implies requiring him to provide a preuve d´un fait négatif.292 (c) Generally, where franchisees claim annulment of the contract on the basis of Article 1110 of the Civil Code, they have to prove mistake and that this mistake was fundamental. This proof is subjective, which makes it difficult for the franchisee to provide evidence that his consent was influenced and that if he had known of the mistake he would not have consented.293 However, according to commentaries by some French scholars on franchising decisions, courts have established a presumption of defective consent that benefits franchisees. The franchisor has to prove that he has fulfilled the requirements of Article L. 330-3 of the Commercial Code, namely timely provision of written information (form) concerning all issues listed (contents). From that moment, the following presumption begins to operate: if the franchisor is unable to prove that he has complied with the obligation, it is presumed that the franchisee’s consent is defective and it is up to the franchisor to disprove the causal link between the lack of compliance and the defective consent. Conversely, if the franchisor is able to prove that he complied with the obligation, it is presumed that the franchisee’s consent is valid and it falls to the franchisee to prove that he entered into the contract under defective consent.294 290

291

292 293 294

Kenfack, annotation to the decision of the Cour de Cassation of 14 January 2003, D. 2003, jur., p. 2304; Tiquant, annotation to the decision of the TGI Carcassone of 2 May 2002 and CA Lyon of 2 November 2001, D. 2002, p. 2600; Ferrier, comments to the decision of the Cour de Cassation of 2 December 1997 and 10 February 1998, D. 1998, somm., p. 334 and comments to the decision of the Cour de Cassation of 19 October 1999, D. 2001, somm., p. 296. Also Ferrier, 2000, p. 242. This tendency is especially noticeable regarding information obligations for doctors, where the burden of proof falls on the provider of the medical service. See Cass. civ. 25 February 1997, D. 1997, somm., p 319, obs. J. Penneau. See for example Fabre-Magnan, 1992, p. 430. Ghestin, 1993, p. 857. Tiquant, annotation to the decisions of the TGI Carcassone of 2 May 2002 and CA Lyon of 2 November 2001, D. 2002, p. 2600: “La Loi Doubin instaurant une règle de forme destinée à assurer la protection du consentement du candidat franchisé, le respect de cette loi fait présumer l’intégrité du consentement du franchisé. Réciproque-

Section 2. Franchisor’s obligation to give pre-contractual information

75

2.2.3.3 Obligation of means Courts and legal authors have pointed out that the obligation of the franchisor to provide pre-contractual information is an obligation of means.295 The franchisor is not required to guarantee a certain result, but merely to perform his obligation with due diligence.296 The franchisor is obliged to provide accurate information on certain issues, but this is understood as an obligation for the franchisor to act in good faith in providing the information.297 According to Fabre-Magnan, French courts and some scholars define the obligation to inform as an obligation of means, because they do not refer to the obligation to provide the information, but to the obligation to guarantee that the receiver of the information -the franchisee in franchising- uses the information adequately. According to this author, the obligation to provide the information and to guarantee that the information reaches the party to be informed are obligations of result, whereas there is no obligation to guarantee that the receiver of the information uses it correctly. Only in this sense does the provider of the information have an obligation of means.298

295

296 297

298

ment, la violation, même formelle, de cette loi laisse présumer que le franchisé ne s’est pas engagé en connaissance de cause”; Kenfack, annotation to the decision of the Cour de Cassation of 14 January 2003, D. 2003, jur., p. 2306: “l’inexécution de l’obligation précontractuelle d’information présumerait un vice du consentement.” Also Guyon, 1996, p. 893. CA Douai 6 October 1992, D. 1995, somm., p. 75, obs. D. Ferrier; CA Paris 29 October 1992, D. 1995, somm., p. 75, obs. D. Ferrier; CA Paris 29 May 1992, D. 1992, somm., p. 392, obs. D. Ferrier; CA Paris 23 March 1993, D. 1995, somm., p. 76, obs. D. Ferrier; CA Paris 17 May 1995 and CA Versailles 25 June 1995, D. 1997, somm., p. 55, obs. D. Ferrier. In the literature see Ghestin, 1993, p. 615; Jamin, 1996a, p. 188; Huet, 2002, p. 539 and 559; Ferrier, comments to the decision of 29 May 1992, D. 1992, somm., p. 392 and Ferrier, 2001, p. 105. See Malaurie & Aynès, 1999, p. 471 ff. CA Versailles 29 June 1995, D. 1997, somm., p. 55. The franchisee claimed the nullity of the contract because of the discrepancy between the sales forecast and the sales actually realised in the operation of the business. The franchisor claimed that he had acted in good faith when he carried out the study of the market. The court held that good faith could not be invoked, because the franchisor had been aware of the lack of potential viable profits. In the literature see Marot, 1999, p. 436: “Notre Cour suprême rejette toute approche formaliste et brutale et fait appel à des notions variables d’un cas à l’autre comme la bonne foi …” Ferrier, 2000, p. 240 and Delforge, 2000, p. 40. Fabre-Magnan, 1992, pp. 401 and 409.

76

Chapter III. Description and Comparison

2.2.4

Sales forecasts

As indicated above, most claims brought before French courts for annulment of a franchise contract on the ground of defective consent concern significant discrepancies between the profits prognosticated by the franchisor and the profits actually obtained by the franchisee in the operation of the business.299 Despite this fact, the French legislator has not included in the rule on disclosure any provision of information on sales forecasts. This paradoxical situation justifies that sales forecasts are dealt with under a separate heading. Although there is no obligation to provide information on sales forecasts,300 it is generally acknowledged that franchisors typically give this type of information as a way to attract franchisees to join the network, often by promising them overly optimistic economic results.301 The expected profit299

300

301

See decisions of the Cour de Cassation of 4 December 1990, JCP 1991, II, 21725, n. 39, p. 305, annotated by G. Virassamy; 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin; 24 February 1998, D. 1998, somm., p. 337 and 26 February 2002, 99-14283 (inédit), http://www.legifrance.gouv.fr. Among the decisions of lower courts see CA Versailles 29 October 1992, D. 1995, somm., p. 76, obs. D. Ferrier; CA Douai 6 October 1992, D. 1995, somm. p. 75, obs. D. Ferrier; CA Paris 3 February 1994, D. 1995, somm., p. 76., obs. D. Ferrier; CA Paris 17 May 1995 and CA Versailles 29 June 1995, D. 1997, somm., p. 55, obs. D. Ferrier; CA Paris 14 November 1997 and 16 January 1998, D. 1998, somm., p. 337, obs. D. Ferrier; CA Toulouse 13 January 2000, D. 2000, p. 261; CA Orléans 26 October 2006, 392, http://www.legifrance.gouv.fr. CA Toulouse 13 January 2000, D. 2000, p. 261: “le franchiseur n’a pas à établir, légalement, de compte prévisionnel du franchisé ni d’ailleurs d’étude de marché.” See also CA Orléans 26 October 2006, 392, http://www.legifrance.gouv.fr. In the literature, Ferrier, comments to the decisions of the Paris Cour d’appel of 14 November 1997 and 16 January 1998 and of the Cour de Cassation of 24 February 1998, D. 1998, somm., p. 337: “la loi n. 89-1008 du 31 déc. 1989 n’impose pas, contrairement à ce que laissent supposer certaines décisions, l’établissement et la communication par le franchiseur d’une étude prévisionnelle sur l’activité du franchisé. ” Virassamy, annotation to the decision of the Cour de Cassation of 4 December 1990, JCP 1991, II, 21725, n. 39, p. 307; Ferrier, 2000, p. 241: “Il conviendrait aussi d’admettre le caractère naturellement et normalement optimiste des informations transmises par le titulaire de la marque; elles constituent un argument ou encouragement commercial tolérable dès lors qu’il n’y a pas intention de tromper …” “… l’optimisme ne peut-il être analysé comme une faute. Ce qui est condamnable, c’est l’optimisme déplacé ou simplement de façade, qui est évidemment destiné à convaincre le candidat.” Ferrier, comments to the decisions of the Paris Cour d’appel of 14 November 1997 and 16 January 1998 and of the Cour de Cassation of 24 February 1998, D. 1998, somm., p.

Section 2. Franchisor’s obligation to give pre-contractual information

77

ability of the operation of the franchise business is a decisive factor in persuading franchisees to enter into the franchise contract.302 In early cases, French courts tended to find in favour of the franchisee and based their decisions on the fact that the expected profits had not been realised.303 However, the approach to this issue has also changed: now incorrect sales forecasts are only considered grounds for annulment if they led to defective consent.304 Although information on potential earnings is not required by Article L. 330-3 of the Commercial Code, if the franchisor nevertheless provides it, it falls within the scope of the Article, meaning that the information has to fulfil the requirements of form and contents which the Article provides: the information has to be provided in writing 20 days before the contract is concluded and it has to be accurate. As regards the latter requirement, courts have specified that the information on sales forecasts has to be based on serious criteria.305 For example, there have been some decisions where

302

303

304

305

337: “… les franchiseurs, soucieux d’affirmer la qualité de leur savoir-faire et la réalité de la réussite commerciale qui en découle, communiquent souvent aux candidats franchisés des prévisions d’activité attractives …” CA Paris 14 November 1997, D. 1998, somm., p. 337, obs. D. Ferrier: “Le caractère réalisable du chiffre d’affaires prévisionnel présenté par le franchiseur est donc un élément substantiel pour le candidat franchisé.” TGI Carcassone 2 May 2002, D. 2002, p. 2597, annotated by O. Tiquant; CA Orléans 26 October 2006, 392, http:// www.legifrance.gouv.fr: “qu’en effet, le franchiseur doit être d’autant plus attentif à la pertinence des informations prospectives que leur délivrance apparaît comme une incitation à contracter et que le caractère réalisable du chiffres d’affaires prévisionnel est un élément substantiel pour le candidat franchisé.” Cass. com. 4 December 1990, JCP 1991, n. 39, obs. G. Virassamy, p. 305. The franchisor presented the business as having very interesting prospects of development without mentioning the existing economic difficulties. These difficulties within a mere six months after the conclusion of the contract led to chronic deficits that were impossible to correct. The contract was annulled. The franchisor had to pay damages to the franchisee due to “wrongful and unrealistic sales forecasts”. Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin. See above 2.2.3.1, in this Chapter, on the application of Article L. 330-3 of the Commercial Code only where the franchisor’s non-compliance leads to the franchisee’s defective consent. In the literature, Delforge, 2000, p. 39. Cass. com. 4 December 1990, JCP 1991, n. 39, p. 305, annotated by G. Virassamy. The franchisee did not realize the earnings promised by the franchisor. The court concluded that the study of the market presented by the franchisor which had been a crucial factor in persuading the franchisee to enter into the contract was not based on serious criteria and had therefore resulted in mistake on the part of the franchisee; CA Douai 6 October 1992, D. 1995, somm., p. 75, obs. D. Fer-

78

Chapter III. Description and Comparison

the courts have specified that a study of the market cannot be considered to be based on serious criteria if it does not take into account the actual circumstances surrounding the business of the franchisee.306 However, the most relevant criterion, which, according to Jamin, works as a presumption of the unsound character of the market study, is any major discrepancy (normally over 30%) between the percentage of sales calculated by the franchisor and the profits eventually obtained.307

306

307

rier: “manque à son obligation de fourniture de renseignements sérieux le franchiseur qui a fourni des renseignement totalement inexacts, l´ampleur de l´erreur traduisant la légèreté des études de marché … ” CA Versailles 29 October 1992, D. 1995, somm. p. 75, obs. D. Ferrier: “un contrat de franchise doit être annulé pour attitude dolosive déterminante du franchisé lorsque l´étude de faisabilité établie par ce dernier contient de nombreuses inexactitudes, des chiffres prévisionnels invérifiables, fantaisistes et mensongers … ” CA Paris 9 September 1997, Lettre distrib. 1997-12; CA Paris 16 January 1998, D. 1998, somm., p. 337, obs. D. Ferrier: “Si l’obligation prévue par la loi n 891008 du 31 déc. 1989 et son décret d’application n 91-337 du 4 avr. 1991 n’est pas une obligation de résultat, elle n’en exige pas moins du franchiseur que, pour l’établissement du budget prévisionnel du franchisé, installé dans un endroit précis d’une ville, il mette en œuvre les moyens statistiques, informatiques et économiques qu’il possède déjà en sa qualité de professionnel de la franchise dans le commerce envisagé, ainsi que les moyens d’investigations suffisants pour la connaissance du marché local, aux fins de proposer une étude prévisionnelle sérieuse.” CA Orléans 26 October 2006, 392, http://www.legifrance.gouv.fr: “… l’article L. 330-3 précité ainsi que l’obligation de contracter de bonne foi propre au droit commun des contrats, imposent au franchiseur une présentation sincère du marché local ainsi que l’établiseement de budgets raisonnables sur la base de chiffres non contestés.” CA Versailles 29 October 1992, D. 1995, somm., p. 76, obs. D. Ferrier: It was proven that the forecast results were included in a standard document which did not take into consideration the peculiarities of the situation of the franchisee in question; CA Versailles 29 June 1995, D. 1997, somm., p. 55, obs. D. Ferrier: the forecast was based on the results of shops in Paris while the franchisee’s outlet was opening in Lyon. Jamin, 1996, p. 188. See the decisions of Cass. com. 24 February 1998, D. 1998, somm., p. 337, obs. D. Ferrier: “Il ne saurait être reproché à une cour d’appel de rejeter la demande d’un franchiseur … dès lors qu’elle retient que le franchiseur … a fourni au futur franchisé une étude contenant non seulement des inexactitudes mais encore des résultats prévisionnels fantaisistes supérieurs de près de 40% à ceux qui pouvaient être effectivement réalisés…”; CA Paris 3 February 1994, D. 1995, somm., p. 76, obs. D. Ferrier: “Commet une faute le franchiseur qui a prévu dans son étude de marché un chiffre d’affaires annuel sur la base duquel ont été faits les investissements et les embauches mais qui s’est révélé en fait inférieur de 30% …”; CA Versailles 29 June 1995, D. 1997, somm., p. 55, obs. D. Ferrier: „… les chiffres énoncés se sont révélés

Section 2. Franchisor’s obligation to give pre-contractual information

79

However, it must be recalled that the franchisor is not obliged to guarantee that the profits will be realized, but only to observe due diligence in preparing the information.308 He therefore operates under an obligation of means.309

2.2.5

Remedies

2.2.5.1 Nullity for non-compliance with a mandatory rule Some French lower courts continue to declare franchise contracts null and void (nullité absolue) if the franchisor has failed to comply with the mandatory rule on disclosure (Article 6 of the Civil Code), even though the Cour de Cassation has established that this should only be done if defective consent is proven. That the contract is null and void means that it never came into existence. Declaring a contract null implies that the contract is declared invalid with retroactive effect (l’anéantissement rétroactif du contrat) and parties are to be placed in the situation they were before they entered the contract.310 Generally, parties in this situation have to provide restitution to each other

308

309

310

trop largement différents de la réalité … l´évaluation des résultats susceptibles d´être obtenus étant anormalement optimiste puisqu´elle dépasse du double les résultats effectivement réalisés.” CA Paris 14 November 1997, D. 1998, somm., p. 337, obs. D. Ferrier: “Le contrat doit donc être annulé pour erreur sur une condition substantielle, dés lors que le chiffre d’affaires réalisé a été inférieur de 53% á celui prévu par le franchiseur qui, au lieu de faire procéder á une véritable étude de marché prenant en compte les particularités locales de l’implantation, s’est contenté d’appliquer ses ratios habituels ce qui a abouti á la présentation d’un chiffre d’affaires prévisionnel grossièrement erroné.” Leveneur, annotation to Cass. com. 19 May 1992, JCP E, 1993, II, 387: “il ne suffit pas que les prévisions contenues dans les études préalables faites par le franchiseur … ne se réalisent pas une fois le contrat conclu, pour que sa responsabilité puisse être engagée. Encore faut-il que l´auteur des études ait manqué de diligence dans leur confection”; Ferrier, comments to CA Paris 23 March 1993, D. 1995, somm., p. 76; Leloup, 2004, p. 188: “la non-réalisation des previsions du franchiseur ne suffit pas à justifier l’annulation du contrat, le franchiseur n’etant nullement tenu d’une obligation de résultat.” This was explicitly acknowledged by the Cour de Cassation in Cass. com. 19 May 1992, JCP E, 1993, II, 387, annotated by L. Leveneur and Cass. com. 28 May 2002, 98-20212 (inédit), http://www.legifrance.gouv.fr. See also CA Orléans 26 October 2006, 392, http://www.legifrance.gouv.fr: “… Atendu que si le franchiseur n´est tenu que d´une obligation de moyens lorsqu´il établit un compte prévisionnel …” Carbonnier, 2004, p. 2099; Leloup, 2004, p. 322.

80

Chapter III. Description and Comparison

of whatever it is that they have provided.311 However, as emphasised by some authors, this is not the case with respect to contracts consisting of successive performance, like franchising contracts. In such cases, the effects as to the performances already rendered are not retroactive.312 The nullity of the contract also implies that the post-contractual obligations of the franchisee, notably non-competition and confidentiality clauses, cease to exist.313

2.2.5.2 Annulability for defective consent Under French law, defective consent is a ground for claiming the avoidance of the contract (nullité relative). Unlike the remedy of nullity –which can be invoked by any interested party- annulability can only be invoked by the aggrieved party, i.e. in franchising, the franchisee. Likewise the remedy of nullity, the remedy of annulability is intended to re-establish the situation that existed prior to the conclusion of the contract. The contract is thus declared invalid retroactively. Parties in franchising contracts are however not obliged to restitute to each other what they have received from the other party because franchising is a contract consisting of successive performance.314 Whether the courts also pursue this line of reasoning does not become clear from the case-law. In a decision of 11 February 2003, the Cour de Cassation confirmed a decision of a lower court annulling a contract due to inaccurate information provided by the franchisor and ordered the franchisor to reimburse “some” sums paid by the franchisee to the franchisor and also awarded damages. The court therefore ordered the franchisor to return part of the payment received, but not all of it.315 The franchisee could also claim damages arising out of the franchisor’s pre-contractual liability (dommages-intérêts).316 For this the franchisee has to prove a causal link between the inaccuracy of the information and the damage suffered.317

311 312

313 314 315 316 317

Leloup, 2004, p. 322. Ghestin, 2001, p. 541; Malaurie & Aynès, 1999, p. 433 and Carbonnier, 2004, p. 2099. Ferrier, 1987, p. 12. See 1.5 in Chapter II, above. Cass. com. 11 February 2003, D. 2003, jur., p. 2304, annotated by H. Kenfack. Article 1382 of the Civil Code. Leloup, 2004, p. 322.

Section 2. Franchisor’s obligation to give pre-contractual information

81

2.2.5.3 Defences for the franchisor Many factors seem to play a role in determining whether the franchisor is liable for non-compliance with the obligation to provide pre-contractual information. The franchisor cannot be blamed if the expected profits do not materialize due to unforeseen circumstances.318 In some decisions, prompt action by the franchisor to correct the information concerning sales forecasts has been considered an exonerating factor.319 Recurring criteria for exoneration are also concerned with the question of whether the mistake was excusable, i.e. whether the franchisee could have prevented it. There have been many rulings by French courts denying remedies to franchisees when mistake is considered to be inexcusable. In this line of reasoning, franchisees are considered professionals who have to actively seek the information which they need (devoir de s´informer)320 and are presumed capable of appreciating the value and feasibility of forecasts provided by the franchisor as to expected profits,321 or any other type of pre-contractual 318

319

320

321

CA Paris 23 March 1993, D. 1995, somm., p. 76; CA Paris 22 September 1992, D. 1995, somm., obs. D. Ferrier, p. 77, where the commercial conditions in the commercial centre where the franchisee’s outlet was located changed and the franchisor could not have known that this was going to be the case. See also Leveneur, annotation to the decision of the Cour de Cassation of 19 May 1992, JCP E, 1993, II, 387. Cass. com. 4 December 1990, JCP 1991, II, 21725, n. 39, p. 305, annotated by G. Virassamy and Cass. com. 30 January 1996, JCP 1996, I, 3929, annotated by Ch. Jamin: the franchisor did not advise the franchisee promptly enough to correct the inadequacy of the method; Cass. com. 5 December 2000, 98-16524 (inédit), http://www.legifrance.gouv.fr: the earnings forecast had been too optimistic, but the franchisor promptly intervened to correct the situation for the franchisee. CA Colmar 9 March 1990, D. 1990, jur., p. 235; Jourdain, 1983, p. 139; Ferrier, 2000, p. 239: “la loi de 1989 … mettant à la charge du premier [franchiseur] une obligation d’information … sans exclure pour le second [le franchisé] le devoir de s‘informer.” Legal doctrine is unanimous concerning the existence of an obligation to obtain information and on the fact that it limits the obligation to inform. See Ghestin, 1993, p. 625 ff. and Fabre-Magnan, 1992, p. 6. In the following decisions, the courts in question rejected to declare the contract invalid as claimed by the franchisees, because the latter ought to have been aware of the fact that the earnings forecast were not viable: Cass. com. 5 December 2000, 98-16524 (inédit), http://www.legifrance.gouv.fr: the court acknoweldges that the earnings forecast was too optimistic, but the franchisee ought to have been aware of this in his capacity of a professional in the sector who should have been aware of the business results achieved by other hairdressers in the same market; Cass. com 14 January 2003, 01-10120 (inédit), http://www.legifrance.

82

Chapter III. Description and Comparison

information.322 The diligence observed by the franchisee is a relevant factor that may counter the lack of diligence exercised by the franchisor in providing the information.323 Finally, the precise content of the pre-contractual

322

323

gouv.fr: no mistake was found, because the franchisee had been familiar with the sector of activity for 15 years; CA Paris 16 April 1991 and 29 May 1992, D. 1992, somm., p. 392, obs. D. Ferrier: “Il appartient au franchisé en sa qualité de professionnel averti du commerce d´apprécier la valeur et la faisabilité des promesses de rentabilité qui lui son faites dans la mesure ou celles-ci ne comportent pas de la part du promettant une obligation de résultat; CA Paris 29 October 1992, D. 1995, somm., p. 76, obs. D. Ferrier: “s´il existe un décalage entre le chiffre d´affaires prévu dans l´étude de marché fournie par le franchiseur et le chiffre d´affaires réalisé par le franchisé, il appartenait à ce dernier, qui avait déjà exploité des points de vente dans la même ville dans le même secteur d´activité, et donc, à ce titre, au fait des contingences commerciales et des aléas inhérents à ce type d´activités d´apprécier la valeur et le réalisme de ces estimations”; CA Paris 23 March 1993, D. 1995, somm., p. 76, obs. D. Ferrier: “le franchisé, commerçant indépendant, doit être considéré comme un professionnel avisé et prudent, que ne saurait se laisser abuser par une publicité, même quelque peu excessive …” In the following cases, the courts in question concluded that there was no mistake because the franchisee, as a professional in the sector involved, ought to have been aware of the relevant aspects concerning which the mistake was claimed. Accordingly, the contracts were not declared invalid: Cass. com. 1 July 2003, 0112699 (inédit), http://www.legifrance.gouv.fr: the franchisee claimed mistaken consent as regards the reputation of the franchisor. The latter presented himself in 1992 as one of the leading companies in the field of technical vehicle testing, but this turned out not to be the case as testing of vehicles only became compulsory after the introduction of a statute to this effect in 1985. The Cour de Cassation considered that the franchisee, as a professional in the automobile sector, could not have been unaware of the fact that business activity in this field was lacking until the statute established the compulsory testing of vehicles. Furthermore, the franchisee had been provided with a list of centres using the trademark of the franchisor and there had been enough time from the moment of receipt of this information to the time when it had to be returned to become acquainted with the necessary information concerning the technical testing of vehicles. Along the same lines, Cass. civ. 8 July 2003, 02-11691 (inédit), http://www. legifrance.gouv.fr. In a decision of the Cour de Cassation of 4 December 1990, JCP 1991, II, 21725, n. 39, p. 305, annotated by G. Virassamy, the franchisee was not considered responsible for failing to realise the profits which the franchisor’s forecasts had promised, because the franchisee had followed the recommendations of the franchisor. Of the French authors commenting on such matters, Leloup puts the most emphasis on the obligation of the franchisee to act with due diligence in perform-

Section 2. Franchisor’s obligation to give pre-contractual information

83

information provided has to be analysed in order to be able to conclude whether the franchisee was actually mistaken.324

2.3

Spain

2.3.1

Introduction

Under Spanish law the franchisor has the obligation to provide precontractual information to his franchisees as explicitly required by Article 62 of the Ley de Ordenación del Comercio Minorista of 1996 (LOCM). Article 62 (3) of the LOCM reads as follows: “The franchisor has to provide the franchisee, no less than 20 days before the parties sign the contract or pre-contract, or before the franchisee makes any payment to the franchisor, with all the necessary information in writing in order to allow the franchisee to decide freely and with full knowledge of the relevant facts whether to enter the franchise network, in particular, with information regarding the main details that identify the franchisor, a description of the commercial sector in which the franchise business is operated, the contents and characteristics of the business and its operation, the structure and extension of the network and the essential elements of the franchise agreement.”325

324

325

ing the contract as a precondition if he wishes to claim mistaken consent. See Leloup, 2004, p. 193. Cass. com. 17 November 1998, Cont. Conc. Consomm. February 1999, p. 8: the franchisee claimed fundamental mistake as to the contents of the contract, in particular the obligation to assist. The court did not declare the contract void, as it considered that the franchisee could not have been mistaken because he had been informed of the characteristics of the assistance obligation; CA Paris 11 February 2000, 1997/23653 (pub.bull), http://www.legifrance.gouv.fr: the franchisee argued on appeal that the franchisor had no network of hairdressers and that he had been mistaken regarding this circumstance. The Cour de Cassation concluded that the franchisor never intended to claim that there was a network, but had only indicated that he had the intention to establish such a network. The franchisee had been correctly informed; CA Toulouse 13 January 2000, D. 2000, p. 261: the franchisee claimed that he had been unable to attract the clientele promised by the franchisor. The court verified that the pre-contractual information indicated that the franchisor undertook to bring along clientele in the sector of activity in question, but that this information could not be interpreted as a promise by the franchisor to guarantee permanent clientele. English translation by CCH, Business Franchise Guide, at p. 7255.

84

Chapter III. Description and Comparison

The application of the legislation on disclosure has been invoked in several proceedings before the Audiencias Provinciales by franchisees who claimed annulment of the franchise contract due to the franchisor’s non-compliance with the pre-contractual obligation to inform.326 These cases will be discussed further on. According to legal doctrine, the fact that the obligation to inform precontractually has been laid down in statutory law merely confirms the existence of this legal obligation for the franchisor. Some authors base the franchisor’s obligation to disclose on the doctrine of culpa in contrahendo according to which the pre-contractual phase of contractual relationships already gives rise to obligations for the parties.327 Other authors infer the precontractual obligation to disclose from the principle of good faith which governs commercial relationships and whose application extends to the precontractual stage, especially in the case of franchising contracts which regulate relationships in which cooperation, trust and loyalty are extremely important.328 Still other authors contend that the dominant position of the franchisor in the relationship is the main ground justifying the precontractual obligation to disclose.329

326

327

328

329

SAP Valencia 17 January 2001, AC 2001\1269; SAP Teruel 24 October 2001, AC 2001\1931; SAP Burgos 11 February 2002, AC 2002\892; SAP Madrid 16 january 2006, Id Cendoj 28079370142006100001; SAP Zaragoza 11 April 2006, Id Cendoj 50297370042006100187; SAP Alicante 4 May 2006, Id Cendoj 03014370082006100185; SAP Madrid 26 July 2006, Id Cendoj 28079370132006100293. There is no specific regulation of pre-contractual liability in Spain. See Echebarría, 1995, p. 211. The doctrine on this issue has been construed by legal doctrine. See for a general discussion of the issue Díez-Picazo & Gullón, 2001, p. 6465. As to franchising, see the comments of Hernando Giménez, 2000, p. 111. Echebarría, 1995, p. 237; Ortuño Baeza, 1997, p. 1534: “con anterioridad a la aprobación en la Ley 7/1996 … las propuestas doctrinales se encaminaban hacia la aplicación al deber de información del principio de la buena fe ”; Alonso Espinosa et al., 1999, p. 724: “junto a la obligación de información que se deriva de la Ley ex Article 62.3, conserva toda su vigencia el deber de informar derivado de la buena fe objetiva … ” Gómez Calle, 1994, p. 86: “Allá donde la ley no establece expresamente deberes precontractuales de información, su determinación y delimitación ha de ser tarea de doctrina y jurisprudencia. Tarea en la que se ha de partir del criterio de la buena fe en sentido objetivo.” See Ortuño Baeza, 1997, p. 1533: “la importancia de esta información previa … es manifiesta en la contratación nacional en la que por regla general las condiciones económico-sociales de los contratantes son desiguales. ” See also Hernando Giménez, 2000, p. 92.

Section 2. Franchisor’s obligation to give pre-contractual information

2.3.2

85

Contents and aim of rules on pre-contractual disclosure

2.3.2.1 Contents Article 62 (3) of the LOCM imposes requirements as to form, contents and time of the obligation on pre-contractual disclosure. As to contents, Article 62 only gives an indication of the information which is to be disclosed. This has been further specified in the Real Decreto (RD) 2485/1998, which serves to implement Article 62 of the LOCM.330 Article 3 of RD 2485/1998 provides that the information has to be given in a truthful and non-misleading way (información veraz y no engañosa331) and lists the specific items that are to be disclosed.332 These are the following: a) particulars which identify the franchisor; b) proof of legal ownership or proof of the right to license the intellectual property rights, duration of the licence and existing claims concerning the intellectual property rights; c) general description of the relevant aspects regarding the economic sector in which the franchise is established; d) description of the experience of the franchisor, which includes the day the business started, the development stages and the prospects for development; e) contents and characteristics of the franchise business and the method of operation, which includes a general explanation of the business system, the characteristics of the know-how and of the commercial and technical assistance that the franchisor will permanently provide to his franchisees, and an estimation of the investments which are to be made to start the business. In case the franchisor provides the franchisee with information on sales forecasts or expected profits, such information is to be based on experience or studies which are to be sufficiently grounded; f) structure and extension of the network; g) essential elements of the franchise agreement, including the rights and obligations of the parties, duration, conditions of renewal, fees, exclusivity rights and restrictions of the right to transfer the business. Neither the LOCM nor the RD 2485/1998 indicate the private-law remedies that apply if the franchisor fails to comply with his obligation to disclose.

330

331 332

See 2.1 in Chapter II, above. The original version of Article 62 of the LOCM can be found in the Annex. Alonso Espinosa et al., 1999, p. 720. According to Ruiz de Villa Jubany, the LOCM provided a non-exhaustive list of information which was turned into an exhaustive list in the implementation decree so as to ensure legal certainty, Ruiz de Villa Jubany, 1997, p. 12; Hernando Giménez agrees that the RD establishes an exhaustive list of items to be disclosed; see Hernando Giménez, 2000, p. 93.

86

Chapter III. Description and Comparison

2.3.2.2 Aim As is literally included in the wording of Article 62 of the LOCM, the objective of the disclosure rule is to guarantee that the franchisee can decide freely and in full awareness of the facts whether to enter the franchise network. Although the obligation of pre-contractual disclosure was already deemed to exist before the enactment of the LOCM, the codification of this obligation is regarded by legal scholars as a concrete measure taken by the legislator to mitigate the information asymmetry between the parties, namely the asymmetry caused by the costs and difficulties involved for the franchisee in obtaining the information concerning the business of the franchisor.333 According to Spanish authors, the codification of the obligation meant to introduce certainty as to the information which is to be disclosed and to add strict requirements of form so as to provide a protective regime for the franchisee.334

2.3.3

Application of the rules on disclosure

2.3.3.1 Case-law The court’s reasoning in most of the few existing Spanish decisions on precontractual disclosure, all of them from Audiencias Provinciales, is not based on the codified obligation of disclosure, but on the general doctrine on defective consent.

333

334

Echebarría, 1995, p. 256: “… resulta apreciable la consideración del franquiciado como contratante débil; no tanto en le hecho de que sus intereses se bean funcionalmente disminuidos en la negociación sino en la inferioridad cultural del mismo por el menor acceso a la información.” Hernando Giménez, 2000, p. 92: “Respecto al franquiciador, tal deber de información habrá de adquirir una especial relevancia dado que habitualmente ostenta una posición más fuerte y consolidada en la relación precontractual siendo lo normal que los futuros franquiciados carezcan muchas veces de la experiencia comercial necesaria.” Ortuño Baeza, 1997, p. 1533: “… una de las causas más importantes del posible fracaso de los sistemas de franquicia, es el carácter incompleto o engañoso de la publicidad de reclutamiento.” In the same vein Alonso Espinosa et al., 1999, p. 717. Ortuño Baeza, 1997, p. 1535: “las normas contenidas en los párrafos segundo y tercero del artículo 62 de la Ley de Ordenación del Comercio Minorista han venido a paliar la situación creada por la ausencia de una normativa específica al efecto imponiendo una serie de cautelas en favor del franquiciado”; Similarly Alfaro, 1991, pp. 174-183; Gallego Sánchez, 1991, p. 92; Echebarría, 1995, p. 119 and Alonso Espinosa et al., 1999, p. 717-719.

Section 2. Franchisor’s obligation to give pre-contractual information

87

In the case decided by the Valencia Audiencia Provincial on 17 January 2001, the franchisee argued that the information provided on estimated profits, which persuaded him to enter into the contract, proved inaccurate after he had begun operating the business. The franchisee claimed that the information was not in accordance with the provisions of RD 2485/1998 which requires that information on earnings must be based on experience or studies which are sufficiently grounded in reality. The court did not make any reference to the RD, but merely stated that the information on estimated profits was based on results obtained by other franchisees in the network, and was thus sufficiently based on practice, and that the risk of not obtaining the promised profits fell to the franchisee.335 In the case decided by the Teruel Audiencia Provincial of 24 October 2001, the franchisee claimed termination of the contract due to the franchisor’s non-performance of his obligation to provide pre-contractual information on among other things know-how. Without referring to the LOCM or the RD, and without clarifying whether termination is an adequate remedy in case of pre-contractual non-performance, the court merely rejected the claim. The court held that the information had been provided now that the contract which the parties had signed included a clause stating that the franchisor had delivered to the franchisee the necessary information to allow him to decide freely and in full knowledge of the relevant facts whether to enter the franchise network. The information was therefore considered provided and the franchisee could not prove otherwise.336 The Burgos Audiencia Provincial in a decision of 11 February 2002 denied that the franchisor had made use of misleading advertising concerning estimated profits, as first the brochure containing the information merely referred to profits which “could” be realised and second the estimate had been made on the basis of one year, whereas the franchisee terminated the contract only two months after it had been concluded.337 Finally, in two cases decided by the Audiencias Provinciales of Zaragoza, 11 April 2006 and Madrid, 26 July 2006, the courts did not grant annulment of the contracts in question because the franchisees did not provide evidence of the fraudulent behaviour of the respective franchisors.338 Even though the courts did not base their conclusions on the specific disclosure obligations contained in the legislation, their reasoning was along the lines of the general contract law rules on disclosure: they verified whether the information was sufficient to allow the franchisee to enter into 335 336 337 338

SAP Valencia 17 January 2001, AC 2001\1269. SAP Teruel 24 October 2001, AC 2001\1931. SAP Burgos 11 February 2002, AC 2002\892. SAP Zaragoza 11 April 2006, Id Cendoj 50297370042006100187 and SAP Madrid 26 July 2006, Id Cendoj 28079370132006100293.

88

Chapter III. Description and Comparison

the contract in full knowledge of the relevant facts and whether the information was based on serious studies. Only in two decisions the courts decided on the basis of the statutory provisions on disclosure. These are the decisions of the Madrid Audiencia Provincial of 16 January 2006 and of the Alicante Audiencia Provincial of 4 May 2006. In the first one the court held that the franchisor fulfilled the obligation of disclosure imposed in the LOCM by providing the franchisee with a standard forecast on earning claims. In the second one the court stated that the RD 2485/1998 did not impose the obligation on the franchisor to provide information on sales forecasts. The court added that even if the sales forecasts had been given, they could not have been regarded as a guarantee of success.339

2.3.3.2 Literature Spanish authors do not refer to the manner in which the codified obligations are to be applied in practice. They merely describe the contents of the obligation of pre-contractual disclosure as contained in Article 62 of the LOCM and RD 2485/1998.340

2.3.3.3 Interpretation of the position of courts and scholars Spanish courts have not specified the private-law remedies which apply if the franchisor does not comply with his statutory obligation to disclose. In the only two decisions in which courts have based their conclusions on the specific disclosure obligation, they have not granted any remedies to the franchisees. In theory, the effects of the disclosure obligation in Spain vary depending on whether it is applied in accordance with Article 6 of the Civil Code concerning the consequences of lack of compliance with mandatory rules,341 or in accordance with the general rules on defective consent contained in Articles 1265 ff of the Civil Code.342

339

340 341

342

SAP Madrid 16 January 2006, Id Cendoj 28079370142006100001 and SAP Alicante 4 May 2006, Id Cendoj 03014370082006100185. Hernando Giménez, 2000, pp. 128 ff. Article 6 (3) of the Civil Code: “Los actos contrarios a las normas imperativas y a las prohibitivas son nulos de pleno derecho, salvo que en ellas se establezca un efecto distinto para el caso de contravención.” Article 1265 of the Civil Code: “Será nulo el consentimiento prestado por error, violencia, intimidación o dolo.” See Alonso Espinosa et al., 1999, p. 729.

Section 2. Franchisor’s obligation to give pre-contractual information

89

In accordance with Article 6 (3) of the Civil Code, non-compliance with a mandatory rule is considered a void act (acto nulo de pleno derecho). Accordingly, if this provision would apply, the non-complaince of the franchisor with Article 62 of the LOCM would lead to the absolute nullity of the franchise contract.343 The effects are different if the rule on disclosure is interpreted in accordance with the general doctrine of defective consent. The remedy of annulment provided under Article 1265 of the Civil Code can only be claimed when mistake is proven.344 The existing decisions on pre-contractual disclosure suggest that Spanish courts prefer the second option. These decisions reveal that courts have taken account of the behaviour of franchisees as regards the information provided by franchisors in order to determine whether there is defective consent. In scholarly writing on franchising it is also argued that the franchisee, as a professional, is obliged to verify the information provided by the franchisor.345 The fact that courts and legal authors take the behaviour of the franchisee into consideration as a factor in determining the liability of the franchisor suggests that they do not favour the application of Article 6 (3) of the Civil Code in cases where the franchisor does not perform his precontractual obligation to inform. Moreover, mistake has to be proven. Furthermore, some authors argue that the sanction of automatic nullity is disproportionate vis-à-vis the franchisor on the one hand and does not satisfy the interests of the franchisee on the other hand.346 In fact, the Tribunal Supremo tends to preserve the validity of contracts in cases where a mandatory rule has not been complied with if the non-performance is not deemed to be fundamental.347 Finally, another argument against the application of Article 6 of the Civil Code is that whenever the Spanish legislator intended the non-performance of a LOCM obligation to lead to the nullity of a con-

343 344 345

346 347

Albaladejo, 2004, p. 182 ff. Albaladejo, 2004, p. 639. Echebarría, 1995, p. 260; Martín Trilla & Echarri Ardanaz, 2000, p. 33: these authors consider that the franchisee has to actively seek any information which would allow him to verify the reliability of the franchisor (e.g. check whether the franchisor belongs to the Spanish Association of franchisors as this would indicate that the franchisor complies with the requirements of the association, check the information concerning the franchisor that is entered in the public register, etc.). Echebarría, 1995, p. 260; Alonso Espinosa et al., 1999, p. 727. STS 19 October 1944, Ar. 1176; 28 January 1958, Ar. 554; 27 February 1964, Ar. 1152; 8 June 1979, Ar. 2347; 28 July 1986, Ar. 462 and 17 October 1987, Ar. 7293.

90

Chapter III. Description and Comparison

tract, it made express provisions to this effect and this was not done in respect of the obligation to provide pre-contractual information.348 This approach in favour of the application of the disclosure rule in accordance with the rules on defective consent may justify the position of some authors who are against a presumption of mistake where the franchisor does not comply with his obligation to disclose,349 even though this presumption has been defended by the courts and by doctrine in the case of other types of contracts where a specific obligation to provide pre-contractual information is imposed on one of the parties.350

2.3.4

Sales forecasts

Parties have no obligation under Spanish law to provide information on sales forecasts. This was already the case before the enactment of the LOCM and RD 2485/1998 and has remained the case after the codification of the duty of pre-contractual disclosure. The RD requires information on the situation in the market sector in which the franchise business is operated, but this concerns objective information on the market involved rather than information on estimated profits.351 Nevertheless, the Spanish legislator has made provision in RD 2485/1998 for the possibility that the franchisor volunteers information on sales forecasts. Where this is the case, the information has to be based on previous experience and studies which must be sufficiently grounded in reality.352 According to the very few existing judicial decisions and to legal doctrine, the liability of the franchisor in respect of information on estimated profits is to be determined having due regard to certain factors. In the first place the obligation to inform concerning sales forecasts is an obligation of means: the franchisor does not guarantee the realisation of the estimated benefits.353 In the second place, it is in principle for the franchisee as an

348 349 350

351 352 353

Article 23 (3) of the LOCM. Rojo Auria, 1994, p. 284; Alonso Espinosa et al., 1999, p. 728. STS 28 February 1990, Ar. 726, concerning the obligation of pre-contractual information imposed by the Ley del Suelo. There is also a presumption of mistake in favour of the patient in contracts for medical treatment. If the medical service provider cannot prove that he has provided the necessary information to the patient, the patient is presumed to have given mistaken consent. Alonso Espinosa et al., 1999, p. 719. Article 3 (e) of RD 2485/1998. SAP Burgos 11 February 2002, AC 2002\892; SAP Madrid 16 January 2006, Id Cendoj 28079370142006100001; SAP Alicante 4 May 2006, Id Cendoj

Section 2. Franchisor’s obligation to give pre-contractual information

91

entrepreneur to assume the risk of making less profit than expected.354 Finally, the provision of information which exaggerates the advantages of the network is not liable to sanctions per se. Spanish doctrine refers to such information as a case of dolus bonus: the franchisor emphasises the positive aspects of his network to attract new members. This practice is considered tolerable due to the fact that any person might expect the franchisor to exaggerate positive information as his aim is to increase business.355

2.3.5

Remedies

As indicated in the introduction, the LOCM establishes that Article 62 is of a private law nature. Non-compliance with the obligation to provide precontractual information therefore has private law effects. However, the LOCM does not establish which civil remedies apply in the case of noncompliance. It only provides an administrative sanction, namely that noncompliance of the franchisor with the obligation of pre-contractual disclosure is considered a minor infraction of an administrative law character, punishable by an administrative remedy.356 It also however specifically provides for the possibility to claim civil remedies (Article 63 (1), final sentence, of the LOCM). In the absence of actual case-law regarding the remedies that apply if the franchisor does not comply with the obligation to inform pre-contractually, the following description of remedies available is necessarily theoretical. The remedies vary according to whether formal compliance with Article 62 of the LOCM is required on the basis of Article 6 of the Civil Code or the rules on defective consent are followed.

354

355 356

03014370082006100185. See also Echebarría, 1995, p. 726; Martínez Sanz, 1995, p. 363 and Alonso Espinosa et al., 1999, p. 720. SAP Valencia 17 January 2001, AC 2001\1269; SAP Madrid 16 January 2006, Id Cendoj 28079370142006100001; SAP Zaragoza 11 April 2006, Id Cendoj 50297370042006100187; SAP Madrid 26 July 2006, Id Cendoj 28079370132006100293. See in the literature Alfaro, 1995, p. 3155 ff; Echebarría, 1995, p. 347; Martínez Sanz, 1995, p. 363; Alonso Espinosa et al., 1999, p. 723. Díez-Picazo & Gullón, 2001, p. 59; Lacruz Berdejo et al. 2003, p. 366. Article 64 (h) of RD 2485/1998.

92

Chapter III. Description and Comparison

2.3.5.1 Nullity for non-compliance with a mandatory rule Pursuant to Article 6 (3) of the Civil Code, the non-compliance of the franchisor with Article 62 of the LOCM as a mandatory rule leads to the absolute nullity of the contract. This nullity can be claimed by any interested party, including the party which is not complying.357 The court may also ex officio declare the contract void on this basis.358 The nullity of the contract has retroactive effect:359 the parties must return what they have received from each other so as to restore the situation in which they found themselves before the contract was concluded.360 However, the Audiencias Provinciales have repeatedly indicated that the invalidity of a franchise contract has no retroactive effect regarding the validity of the obligations that have already been performed. This means that the franchisor does not have to reimburse the franchisee for payments in exchange for the obligations that the franchisor has already performed.361 In accordance with Article 1902 of the Civil Code, any damage suffered by the aggrieved party may also be compensated.362 Damages comprise only the negative interest (interés negativo) (e.g. costs of the conclusion of the

357 358 359 360

361

362

Albaladejo, 2004, p. 858. Lacruz Berdejo et al., 2003, p. 536; Albaladejo, 2004, p. 858. Articles 1303, 1304, 1307 and 1308 of the Civil Code. Article 1303 of the Civil Code: “Declarada la nulidad de una obligación, los contratantes deben restituirse recíprocamente las cosas que hubiesen sido materia del contrato, con sus frutos, y el precio con los intereses …” Albaladejo, 2004, p. 862. SAP Barcelona 9 September 2002, AC 2002\1728: The entrance fee was agreed to reimburse the initial costs of the franchisor and the know-how and continuing assistance provided the two first years of the contract. Since the contract only lasted for six months, the franchisee had paid for services which were not going to be provided and therefore the payment had to be partially reimbursed; Similar decisions can be found in the judgements of the SAP Asturias 22 January 2001, AC 2001\959; SAP Barcelona, 12 February 2003, JUR 2003\196372; SAP Zaragoza 16 September 2003, AC 2003\1507 and SAP Barcelona 16 April 2004, JUR 2004\152123; SAP Oviedo 7 March 2006, Id Cendoj 33044370052006100091 and SAP Málaga 15 May 2006, Id Cendoj 29067370052006100309. These decisions follow the general doctrine stated by the Tribunal Supremo as to the nonretroactive effects of the remedies which result in the invalidity of long-term contracts with successive performances. See decisions of the Tribunal Supremo of 10 July 1998, RJ 1998\6600 and 9 October 2003, RJ 2003\8232. Article 1902 of the Civil Code deals with extra-contractual liability: “El que por acción u omisión causa daño a otro, interviniendo culpa o negligencia, está obligado a reparar el daño causado.” Albaladejo, 2004, p. 879.

Section 2. Franchisor’s obligation to give pre-contractual information

93

contract, costs of performance).363 The franchisee is therefore not entitled to compensation of lost profits, i.e. benefits which he would have received had the contract been validly concluded (interés positivo).364

2.3.5.2 Annulability for defective consent If the non-compliance with the obligation to disclose is approached from the perspective of the general rules of contract law on defective consent, the franchisee may, provided he proves fundamental mistake, claim the annulment of the contract.365 The contract remains valid up to the point when the court declares it null.366 Other than that, the declaration of annulment of the contract has the same effect as described above: the contract is considered no longer to exist and the parties must restitute what they have received from each other party and any costs (interés negativo) are to be compensated, although the obligation to restitute does not include the reimbursement of the money paid by the franchisee in exchange for performances already rendered by the franchisor.367

2.3.5.3 Defences for the franchisor Spanish courts take a strict approach to the remedy of annulment on the ground of defective consent, also taking into account the interests of the party which has relied on the consent given by the other party and generally protecting legal security.368 For this reason, in order for a mistake to serve as a ground for annulment of the contract, the following conditions must be met: 1) the mistake must be fundamental, that is, it must concern a matter which was decisive for the mistaken party to enter into the contract;369 2) there must be a causal link between the mistake and the purpose of the 363 364 365 366 367 368 369

Lacruz Berdejo et al., 2003, p. 563; Albaladejo, 2004, p. 879. Albaladejo, 2004, p. 879. Articles 1265 and 1300 of the Civil Code. Lacruz Berdejo et al., 2003, p. 537; Albaladejo, 2004, p. 879 See n. 361, above. Díez-Picazo & Gullón, 2001, p. 53; Albaladejo, 2004, p. 639. STS 5 March 1960, RA 950; STS 15 October 1973, RA 3797. In the case decided by the Madrid Audiencia Provincial of 26 July 2006, Id Cendoj 28079370132006100293, the court did not grant any remedies to the franchisee because he did not prove that he would not have concluded the contract had hij received correct information from the franchisor. Díez-Picazo & Gullón, 2001, p. 54; Albaladejo, 2004, p. 632.

94

Chapter III. Description and Comparison

contract (dolo causal or dolus grave);370 and 3) the mistake must not be attributable to the party who has made it (excusable). Mistake is understood to be excusable when the contracting party which alleges it could have avoided it by taking reasonable care.371 In the field of franchising, Spanish courts and scholars tend to take account of the behaviour of the franchisee as a factor co-determining the liability of the franchisor.372 Accordingly, several scholars hold that the obligation for the franchisor to inform ends where the obligation for the franchisee to obtain information begins.373

2.4

Comparison

2.4.1

Introduction

Both the Principles on franchising and the French and Spanish legal systems contain an obligation for the franchisor to provide franchisees with precontractual information. The disclosure provisions in question are Article 3:102 of the PEL CAFDC, Article L. 330-3 of the French Commercial Code and Article 62 of the LOCM. The French and the Spanish rules have been further elaborated by implementation decrees.

2.4.2

Contents and aim of the obligations

2.4.2.1 Contents In general terms, the formulation of the obligations of pre-contractual disclosure under the three regimes follows the same pattern: the franchisor is obliged to provide information on specific items (1). Such information must be of a certain quality (2) and is to be provided at a certain time before the contract is concluded (3). Unlike under the Principles, a fourth requirement exists under French and Spanish law: the information is to be provided in writing (4). Despite the similarities between the various formulations of the 370 371

372

373

STS 14 June, 1943, RA 719. STS 8 June 1968, RA 3766; STS 5 March 1962, RA 1532. In the doctrine, see Díez-Picazo & Gullón, 2001, p. 54; Albaladejo, 2004, p. 633. See the decisions of the AP Valencia 17 January 2001, AC 2001\1269, Teruel 24 October 2001, AC 2001\1931 and SAP Burgos 11 February 2002, AC 2002\892. In the literature, see the analysis of Echebarría, 1995, p. 260 and Martín Trilla & Echarri Ardanaz, 2000, p. 33. Gómez Calle, 1994, p. 89; Alonso Espinosa et al., 1999, p. 720.

Section 2. Franchisor’s obligation to give pre-contractual information

95

obligation, there are also divergences between the systems when it comes to the contents of each of these requirements. (1) As to the specific items that are to be disclosed, all the disclosure provisions examined specify the type of information that is to be given by expressly providing a mandatory list of issues which the information has to concern; these issues are considered relevant ex ante for the franchisee to be able to give informed consent. However, while the French and Spanish disclosure rules give a very detailed list of items, the list under the Principles is formulated in generic terms. In the Principles, the required information is divided into six main categories. Further details as to the contents of each category may be found in the Comments to the rule. In the end, however, the information that is to be disclosed is basically the same, as the description of the relevant information under each category as set out in the Comments coincides with the specific items included in the French and Spanish lists. However, the degree of discretion which the franchisor has to decide what information is to be provided differs. Under the French and the Spanish rules, there is no such discretion. The franchisor has to inform on every item of the detailed list. Under the Principles, the franchisor has to necessarily inform on each of the generic categories on the list, but apart from that he is free to decide what is the relevant information in each category. In this, he should preferably take into consideration what the Comments indicate concerning this information, but the Comments are not binding upon him. (2) As to the quality of the information, the different terminology used in the three disclosure rules does not allow for an accurate assessment of the degree of similarity or discrepancy between them. According to the Principles, the information has to be “correct”, the French provision requires that the information is “sincère”, and the Spanish rule requires that the information is “veraz y no engañosa”. However, no further clarification as to the exact meaning of these terms is provided. Do correct, sincère and veraz mean the same thing? Ultimately, the answer to this question has to be theoretical. Most proceedings in France and Spain concern the lack of correspondence between the franchisor’s forecasts of earnings and profits and the earnings and profits actually realised by the franchisee and to resolve these disputes the French courts and the Spanish legislator have established an objective “quality test”: the franchisor must have based the information concerning sales forecasts on previous experience and realistic studies. (3) The third common requirement concerns time-limits. The franchisor is required to deliver the information in sufficient time before the contract is concluded or before the franchisee makes any payment, allowing the franchisee an adequate period of time to decide whether to enter into the contract. The regime under the Principles is more flexible than the regimes

96

Chapter III. Description and Comparison

under French and Spanish law. The Principles require that the information is provided a reasonable time in advance whereas the French and the Spanish rules refer to a strict period of at least 20 days. Pursuant to the Principles, the required period could be longer than 20 days, but also shorter, depending on what is reasonable in view of the circumstances of the case. (4) In addition to these three requisites that are common to all systems, there is a fourth condition, namely that the information is to be given in writing, which is only required under the French and Spanish rules.

2.4.2.2 Aim The aim of the disclosure rules is the same under all three systems, namely to guarantee that franchisees have all the necessary information to allow them to enter into a franchise contract in full knowledge of the relevant facts. This is explicitly recognised in the Comments to Article 3:102 of the Principles and in the wording of the relevant French and Spanish provisions. The aim of the disclosure rules is therefore to avoid situations where franchisees are practically “seduced” by greedy franchisors to pay the fee to enter a business network which turns out to be either non-existent or unsuccessful. The main rationale underlying these provisions is therefore to protect the interests of franchisees. However, the French and the Spanish disclosure rules impose stricter requirements on the franchisor than Article 3:102 of the Principles: they give a very detailed list of items to be disclosed, impose stricter time constraint, and provide a requirement of form. In the Principles, a more abstract formulation was opted for that leaves a broader margin for the franchisor to define the precise contents of his obligation. The formulation of the Principles allows that the contents of the obligation are adapted to the circumstances of the case (e.g. in some cases not all the detailed issues on the list may be relevant, or a period of at least 20 days may not be reasonable, or certain important information could be transmitted to the franchisee orally). The strict formulation used in the French and the Spanish rules allows for less flexibility, in order to restrict the possibilities for the franchisor to give substance to his obligation to inform in such a manner that it may endanger the interests of his franchisees. The strict character of the French and the Spanish rules also favours legal certainty: there is less room for divergent interpretation by the parties when the contents of the obligation are more detailed.

Section 2. Franchisor’s obligation to give pre-contractual information

2.4.3

97

Application of the rules

The PEL CAFDC have so far not been applied by courts and therefore there is no indication of how judicial intervention would influence substantive law. The rule under the Principles leaves many aspects to be determined by national courts. A comparison of how the respective codified rules have been interpreted in France and Spain is therefore relevant as this will provide an indication as to how national courts will apply the rule on disclosure in the Principles. There is much information on the interpretation of French courts and scholars of the application in practice of Article L. 330-3 of the Commercial Code. There is a great deal of French case-law on pre-contractual disclosure, much of it from the Cour de Cassation. Lower courts are divided in that some hold that non-compliance with Article L. 330-3 leads to the nullity of the contract and others hold that non-compliance only leads to annulment when mistake is proven in accordance with the general rules on defective consent. The Cour de Cassation takes the second approach. That defective consent is proven does not necessarily mean that annulment will be granted. French courts attach considerable weight to the question of whether mistake was inexcusable (e.g. whether he acted as a professional familiar with the sector in question and whether he required the franchisor to provide correct information, etc.). The main particularity resulting from the rule on disclosure in France seems to regard the mechanism of proof, especially the reversal of the burden of proof concerning the performance of the obligation and the proof of defective consent. Some French authors argue that it is for the franchisor to prove that he has complied with his obligation to disclose and failing this, that it must be presumed that the franchisee gave mistaken consent. However, the actual existence of a rule on reversal of the burden of proof and presumption of mistake cannot be clearly inferred from the case-law. Differently, in Spain, so far there have been only decisions of the Audiencias Provinciales and in most of them the courts in question have not applied the legislation on disclosure. Spanish literature does nothing but describe what the rule on disclosure states. The theoretical possibilities as to how the rule on disclosure is to be applied in practice are therefore to be inferred from general contract law. The possibilities are the same as under French law: to emphasise the mandatory character of the rule and grant the nullity of the contract if the rule is not complied with or to apply it in accordance with the rules on defective consent and only grant annulment if noncompliance leads to a fundamental mistake. The approach taken by Spanish courts and scholars reveals that there is a tendency in favour of the second approach, as is the case in France. Spanish scholars however, unlike their French counterparts, do not seem to advocate a presumption of mistake in the interests of the franchisee.

98

2.4.4

Chapter III. Description and Comparison

Remedies

Of the three disclosure regimes, only that under the Principles explicitly indicates the civil remedies that apply if the franchisor does not comply with his obligation. In France, this question has been left to the courts. In Spain, courts have so far not upheld any claims by franchisees in the three existing decisions. Spanish case-law does not shed any light on the applicable remedies. The options remain open. In theory, two are possible: absolute nullity of the contract for non-compliance with a mandatory obligation or annulability when fundamental mistake is proven. The franchisee under all three regimes has the right to claim remedies for defective consent if he did not enter into the contract in full knowledge of the relevant facts due to the non-compliance of the franchisor with his duty to inform. Under the Principles, these remedies include annulment of the contract, but also the adaptation of the contract if proposed by the franchisor. As to French law, the case-law indicates that the remedy afforded by the courts is annulment of the contract. Annulment is also the typical remedy for defective consent in accordance with general contract law in Spain. Different from the Principles, neither French nor Spanish law grant to the franchisor the possibility to propose the adaptation of the contract. The three systems all require that mistake is fundamental. Fundamental means the same under all three regimes: the franchisee has to prove that he, had he been informed as required by the rules on pre-contractual information, would not have entered into the contract or would have entered into the contract only on fundamentally different terms. In addition, all the systems take into account whether the franchisee’s lack of diligence is a major cause of the mistake and will not grant relief on the ground of mistake if this is the case. The Principles additionally require the franchisee to prove that the franchisor knew or ought to have known of the mistake. Differently, in France and Spain, a mistaken party may obtain relief even though the other party did not know of the mistake. On this point, the Principles are therefore less favourable to the interests of franchisees than the French and the Spanish regimes are. The Principles acknowledge the right of the franchisee to damages for the non-performance of the franchisor even when there is no proof of fundamental mistake. This form of strict liability was an option for some French lower courts. However, the Cour de Cassation has definitively abandoned this strict view in favour of a moderated solution which takes into account the actual knowledge of the franchisee rather than formal compliance with the requirements of the rule on disclosure. Under Spanish law it would be possible in theory to claim the strict liability of the franchisor for the nonperformance of a mandatory obligation. However, the existing case-law on pre-contractual disclosure reveals that courts opt to apply the general doc-

Section 2. Franchisor’s obligation to give pre-contractual information

99

trine on defective consent, according to which the franchisor’s nonperformance is only to be sanctioned if mistake is proven.

2.4.5

Conclusion

The PEL CAFDC contain a more generic formulation of the rule on precontractual disclosure compared to the French and Spanish rules. The Principles leave more room for interpretation as to the contents of the obligation on pre-contractual disclosure. However, this generic formulation in the Principles may also increase the risk of divergent interpretation by the parties as to the contents of the obligation of disclosure, which may eventually play against the interests of franchisees. Consequently the protective aim of the rule, that is, to prevent situations where the franchisee gives defective consent, could not be met. On the other hand, under a more formal rule, like in France and Spain, there is a risk of an outcome which does not correspond to the actual circumstances of the case. As a result, the franchisee may be over or under protected. Eventually, compliance with the requirements of form and contents of the rule (irrespective of whether these are generic or more detailed) is not the decisive factor in determining the liability of the franchisor according to French and Spanish national case-law. The three regimes require mistake to be fundamental and excusable for it to be a ground to claim the application of the remedies for mistake. French and Spanish rulings reveal that courts focus on this second requirement. They seem to be reluctant to conclude the existence of fundamental mistake in franchising because franchisees are considered professionals who are in the position to prevent mistakes from happening. In addition, under the Principles, the franchisee would also have to prove that the franchisor knew or ought to have known of the mistake. This makes the regime under the Principles stricter on the franchisee than the regime under French or Spanish law. These adverse conditions for the interests of franchisees may be however moderated in France if the presumption of mistake would operate in cases where the franchisor does not prove that he has provided all necessary information. However, this point is only raised in legal writing and has not been clarified in case-law. In Spain, some scholars have explicitly opposed to acknowledging a presumption of mistake for franchising. The remedy if the existence of fundamental mistake is concluded is the same under the Principles as under French and Spanish law: avoidance of the contract. However, the Principles grant to the franchisor the possibility to prevent the franchisee from pursuing the invalidity of the agreement by proposing to perform the contract as the franchisee understood it. This possibility does not exist under French or Spanish law.

100

Chapter III. Description and Comparison

The regime under the Principles would be however more favourable to the interests of franchisees, if compared with French or Spanish law, for the granting of the remedy of damages for the non-performance of the franchisor, even if fundamental mistake is not proven.

Section 3. Franchisor’s obligation to license Intellectual Property Rights 3.1

PEL CAFDC: Article 3:201

3.1.1

Introduction

Pursuant to the PEL CAFDC, the effective and undisturbed use by the franchisee of the franchisor’s intellectual and industrial property rights is indispensable, because consumer recognition of and confidence in the distinctive signs of the franchisor’s business are the lifelines of a successful franchise system.374 Moreover, the attraction of the trademark and other intellectual property rights of the franchisor is described as the main reason for franchisees to consider entering the franchise network.375 In order to safeguard this basic interest of franchisees, the Principles in Article 3:201 impose on the franchisor a mandatory obligation to give to the franchisee the right to use the intellectual property rights that will allow the latter to operate the franchise business. Article 3:201 reads as follows: (1) The franchisor must grant the franchisee a right to use the intellectual property rights to the extent necessary to operate the franchise business. (2) The franchisor must make reasonable efforts to ensure the undisturbed and continuous use of the intellectual property rights. (3) The parties may not derogate from this provision.

The contents of the franchisor’s obligation concerning intellectual property rights pursuant to Article 3:201 are twofold: to provide the franchisee with the intellectual property rights which the franchisee needs to operate the franchise business and to undertake reasonable efforts to ensure that the franchisee is not disturbed in the continuous use of the intellectual property rights. The mandatory character given to the rule strengthens the protection of the contractual expectations of franchisees: parties may not exclude this obligation by agreement.

374 375

See Article 3:201 of the PEL CAFDC, Comment B. Ibid.

102

Chapter III. Description and Comparison

The obligation to provide intellectual property rights is considered a main obligation and is therefore included in the definition of franchising in Article 3:101. Accordingly, if the parties do not include in their agreement an obligation for the franchisor to license the use of his intellectual property rights to the franchisee, then their relationship cannot under the Principles be classified as a franchise agreement.

3.1.2

Necessary intellectual property rights

In the wording of Article 3:201 (1), the franchisor has to grant the right to use the intellectual property rights “to the extent necessary” to operate the franchise business. Pursuant to the Comments to this rule, the intellectual property rights that franchisees need to operate the business concern trademarks, trade names, shop signs, logos, insignia, utility models, designs, copyrights and related rights, software, drawings, plans and patents held by the franchisor for the operation of the franchise business. In short, the necessary intellectual property rights are all the proper licences which are necessary in the particular franchise business in order to be able to operate the attraction of the trademark.376 The obligation is one of result: the franchisor has to guarantee that the franchisee can use the necessary intellectual property rights.377 The Principles impose no form requirement regarding ownership or registration of the intellectual property rights. The Comments to the provision nevertheless indicate that the license of intellectual property rights implies that the franchisor owns or has legal rights to license the said rights, and that the specific concrete requirements as to form depend on the legislation on intellectual property rights in each EU system. 378

3.1.3

Undisturbed and continuous use of the rights

Article 3:201 also imposes on the franchisor the obligation to make reasonable efforts to guarantee the undisturbed use of the intellectual property rights by the franchisee for the time the contract is in effect. According to the explanatory Comments, this obligation requires that the franchisor observes due diligence (obligation of means) to prevent and rectify situations where third parties claim that they have a better right to the intellec-

376 377 378

See Article 3:201 of the PEL CAFDC, Comment E. See Article 3:201 of the PEL CAFDC, Comment A. See Article 3:201 of the PEL CAFDC, Comment D.

Section 3. Franchisor’s obligation to license Intellectual Property Rights

103

tual property and consequently disturb the use of the rights by the franchisee.379 The obligation to guarantee the undisturbed and continuous use of the rights may require the franchisor, depending on the national system, to fulfil validity requirements regarding registration during performance.380 Hence, this particular obligation is also linked to the obligation of the franchisor under paragraph (1) to maintain a valid title to the intellectual property rights for the duration of the agreement. As the obligation to comply with registration requirements is an obligation of result, it would have been more appropriate to frame it under paragraph (1), given that paragraph (2) merely requires the franchisor to observe due diligence.

3.1.4

Remedies

The franchisor´s non-performance gives the franchisee the right to claim specific performance from the franchisor, irrespective of whether the nonperformance is fundamental or not (Article 9:102 of the PECL). Termination of the contract can only be pursued if the non-performance is fundamental (Article 9:301 of the PECL). If the franchisee has suffered any loss, he is entitled to claim damages (Article 9:105 of the PECL), which include the loss that the franchisee has actually suffered and the gain of which he has been deprived (Article 9:502 of the PECL). Indemnity for goodwill may also be granted in cases where the relationship has come to an end (Article 1:305 of the PEL CAFDC). According to Article 1:304 of the PEL CAFDC, whether performance is fundamental is to be assessed within the meaning of Articles 8:103 (b) and (c) of the PECL. Hence, a franchise contract may only be terminated by the franchisee when (i) the non-performance substantially deprives him of what he was entitled to expect under the contract, or (ii) the non-performance is intentional and gives the franchisee reason to believe that he cannot rely on the other party’s future performance. Article 1:304 of the PEL CAFDC provides an exception to the general rule in Article 8:103 (a) of the PECL, which allows for immediate termination in cases where strict compliance with the obligation is itself of the essence of the contract.

379 380

See Article 3:201 of the PEL CAFDC, Comment F. See Article 3:201 of the PEL CAFDC, Comment D.

104

Chapter III. Description and Comparison

3.2

France

3.2.1

Introduction

In most decisions by French courts regarding franchising and in French legal writing on franchising, the transfer of intellectual property rights by the franchisor is described as a main obligation.381 There is however no specific substantive law that imposes such a duty on the franchisor. The French legislator nevertheless acknowledges the importance of this obligation within the rule on disclosure. Pursuant to Article L. 330-3 of the Commercial Code, the franchisor is required to provide pre-contractual evidence to the franchisee that the intellectual property rights regarding the franchise business have been registered.382 Most judicial decisions concerning the transfer of intellectual property rights in franchising involve proceedings started by franchisees in which they pursue the annulment or (alternatively) termination of the contract, because their franchisors have not provided the intellectual property rights that would have allowed them to successfully operate the franchised business.383 In these decisions, the French courts have described the obligation 381

382

383

Cass. com. 4 November 1986, D. 1998, somm, p. 23, obs. D. Ferrier; Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin: the franchisee proved that there had been no transfer of know-how or assistance. Furthermore, the intellectual property rights in question were not well-known. The contract was annulled; Cass. civ. 11 June 1996, D. 1997, somm. p. 57, obs. D. Ferrier; Cass. soc. 25 February 1998, 95-44096 (pub.bull), http://www.legifrance.gouv.fr: the relationship could not be classified as franchising without verifying the adequacy of the knowhow, the well-known character of the distinctive signs and an obligation to assist by the franchisor …; CA Paris 4 March 1991, D. 1991, IR, p. 103; CA Paris, 22 September 1992, D. 1995, somm., p. 77, obs. D. Ferrier; CA Versailles, 27 May 1993, D. 1995, somm, p. 78, obs. D. Ferrier; CA Paris 11 February 2000, 1997/23653 (pub.bull), http://www.legifrance.gouv.fr, 8 July 1997, D. Aff. 1997, p. 960; CA Colmar 9 June 1982, D. 1982, p. 553, annotated by J.-J. Burst: “Un contrat de franchise doit comporter la mise à la disposition du franchisé par le franchiseur d’un nom commercial, de sigles et symboles, d’une marque …” In the literature, see Huet, 2002, p. 559; Amiel-Cosme, 1995, p. 29; Ferrier, 2002, p. 106; Clément, 1996, p. 144; Leloup refers to franchising as a contrat d´enseigne, in Leloup, 2004, p. 30; Clément, 1994, p. 340: “La marque, selon la jurisprudence française et communautaire … est donc l’un des deux piliers de la franchise.” See Article 1 (2) of décret no. 97-337, which further defines the provisions of Article L. 330-3 of the Commercial Code. Cass. com. 12 October 1982, JCP 1984, II, 20166, annotated by G. Signoret; 12 July 1993, Lettre distrib. 1993-11; 30 January 1996, JCP 1996, I, 3929, obs. Ch.

Section 3. Franchisor’s obligation to license Intellectual Property Rights

105

to transfer intellectual property rights as the causa of the obligations undertaken by the franchisee. This means that if the parties to a franchise contract do not agree on an obligation for the franchisor to provide intellectual property rights, the contract cannot be classified as a franchising agreement.384 It also means, as has been established by French courts, that the intellectual property rights that are transferred must be fit for purpose, i.e. they must allow the franchisee to operate the business correctly. If the intellectual property rights do not comply with the required conditions at the the moment the contract is concluded, then the contract may be invalidated for lack of causa.385 In accordance with French case-law, the determination of whether the franchisor’s intellectual property rights are suitable to allow the franchisee to properly operate the business depends on three main conditions: on whether the franchisor has a valid title to license the rights; on whether the rights consist of signs to attract clientele and on whether these signs are wellknown. According to legal writing, there is a fourth condition: that the franchisor provides intellectual property rights which can be used by the franchisee without any disturbance arising from claims or infringements by third parties.

384

385

Jamin; 26 March 1996, Cont. conc. cons. 1996, 136, obs. L. Leveneur; 4 June 2002, 99-19464 (inédit), http://www.legifrance.gouv.fr; 11 February 2003, D. 2003, juris., p. 2304, annotated by H. Kenfack; 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr; CA Versailles 8 December 1987, Cah. dr. entre. no. 2, p. 40, annotated by J.-J. Burst; CA Paris 11 February 2000, 1997/23653 (pub.bull), http://www.legifrance.gouv.fr and 23 January 1992, D. 1992, somm., p. 392, obs. D. Ferrier. CA Paris 28 April 1978, Cah. dr. entrep. no. 42, October 1980, p. 6: the lack of a trademark was one of the grounds for reclassifying the contract as an employment agreement. See the comments to this decision by Leloup, Cah. dr. entrep. no. 42, October 1980, p. 10: “Il ne saurait en effet exister de franchise sans la mise à disposition du franchisé de droits de propriété industrielle permettant de proclamer son appartenance au réseau.” Also Clément, 1996, p. 144; Ferrier, 2002, p. 106 and Leloup, 2004, p. 39. Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr; Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin.

106

3.2.2

Chapter III. Description and Comparison

Title to license the intellectual property rights

French courts and literature point out that the franchisor is required to have a valid title to the intellectual property rights that he licenses.386 Although the interpretation in part of the case-law and doctrine is that the franchisor must be the owner of the trademark which is assigned,387 other scholars have emphasised that ownership is not the only valid title allowing the franchisor to license the right to the franchisee, as the franchisor himself may be a licensee of the intellectual property rights with the right granted to him by the owner to in turn license them to the franchisees.388 The title to the intellectual property rights must according to French mandatory rules on intellectual property be registered with the National Institute of Industrial Property (INPI), so that rights to the intellectual property can be enforced against third parties.389 According to the case-law and legal writing, compliance with the mandatory requirements of the rules on intellectual property rights is a pre-condition for their validity.390 386

387

388

389

390

In this respect, the Cour de Cassation in a decision of 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr, annulled a contract because it was considered to have been concluded on the basis of an inexistent trademark as far as the particular franchise relationship was concerned, given that the franchisor had no prior valid title to license the trademark; Leloup, 2004, p. 48; Ferrier, 2002, p. 374; Burst, 1988, p. 40. TGI Bressuire 19 June 1973, D. 1974, p. 195, annotated by F. Bories or CA Paris 28 April 1978, Cah. dr. entrep. no. 42, October 1980, p. 10, annotated by J.M. Leloup. Some scholars explicitly refer to ownership of the intellectual property rights, such as Bessis, 1991, pp. 23 and 74; Gunther, 2000, p. 271 and Vidts, 2001, p. 62. Leloup, 2004, p. 48; Ferrier, 2002, p. 374: “le franchiseur doit être titulaire d’un droit, de propriété ou d’usage, sur les éléments constitutifs d’une image commerciale …” Burst, 1988, p. 40. Code de la proprieté intellectuelle, Livre VII, Titre Ier: marques de fabrique, de commerce ou de service. Partie Législative (Articles L711-1 to 717-7) and Partie Réglementaire (Articles R711-1 R718-4). See especially Articles L712-1 and R712-1 of the Code de la propriété intellectuelle. In several cases, courts have verified whether the franchisor had a valid title to the rights (Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance. gouv.fr) or whether the trademark was correctly registered at the INPI (CA Colmar 9 June 1982, D. 1982, p. 553 and CA Paris 11 February 2000, 1997/23653 (pub.bull), http://www.legifrance.gouv.fr). See for legal doctrine the opinion of Leloup, in Leloup, 2004, p. 48 and Ferrier, comments to the decision of the civil chamber of the Cour de Cassation of 11 June 1996, D. 1997, somm., p. 57: “Le contrat de franchise repose sur la mise à disposition d’une marque dépósee …”

Section 3. Franchisor’s obligation to license Intellectual Property Rights

107

The validity of the title and thus of the right to license intellectual property rights must be guaranteed throughout the duration of the contract, and not just at its commencement.391 This has been expressly held in French court proceedings where the franchisee argued that the franchisor had not complied with his obligation to renew registration.392

3.2.3

Intellectual property rights as signs to attract clientele

As regards the type of intellectual property rights that are to be provided in franchising relationships, French courts and scholars refer indistinctly to distinctive signs (l´enseigne), trademark (la marque) or symbols (les symboles), among others.393 However, often the more generic concept of signs attracting clientele (signes de ralliement de la clientèle) is used.394 In the words of Ferrier, the relevant intellectual property rights are those which give shape to the commercial image of the business of the franchisor.395 There have been no cases in which franchisees have claimed that the intellectual property rights do not allow the clientele to identify the business.

3.2.4

Well-known intellectual property rights

French courts require that the intellectual property rights are well-known (la notoriété).396 However, in their assessment of compliance with this requirement the courts do not take a strict approach. The test applied by the courts is not whether the intellectual property rights are prestigious in the eyes of the French public, but rather whether they allow the franchisee to obtain a

391 392

393

394

395 396

Articles L712-1 and L712-9 of the Code de la propriété intellectuelle. See for example Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance. gouv.fr and CA Versailles 9 December 1987, Cah. dr. entr. no 2, p. 40, annotated by J.-J. Burst. Cass. com. 4 June 2002, 99-19464 (inédit), http://www.legifrance.gouv.fr; CA Colmar 9 June 1982, D. 1982, p. 553, annotated by J-J. Burst; Huet, 2002, p. 559; Gunther, 2000, p. 271. Cass. com. 6 May 2003, 01-00515; Vidts, 2001, p. 61; Le Tourneau, 2003, p. 35; Leloup, 2004, p. 39. Ferrier, 2002, p. 374. Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin; Cass. soc. 25 February 1998, 95-44096; CA Paris 16 April 1991, D. 1992. somm., p. 392, obs. D. Ferrier; CA Paris 22 September 1992 and 29 September 1992, D. 1995. somm., p. 78, obs. D. Ferrier.

108

Chapter III. Description and Comparison

privileged position in the market vis-à-vis competitors.397 Accordingly, the Cour de Cassation in a 1993 case held that the fact that the trademark of an American franchisor was new to France, and therefore not known to the public, did not make it inadequate, as the franchisee claimed, provided that the franchisee was required to pay for its use in accordance with its real value and provided that the franchisor made an extra effort to promote the trademark to compensate for any lack of prestige.398 The analysis in the legal doctrine reflects the relevance of this requirement as to the contents of the obligation to license intellectual property rights.399 Leloup supports the approach taken by the courts, which is to focus on whether the franchisee has achieved a competitive advantage rather than putting the emphasis on strict compliance with the requirement of the wellknown character of the rights.400

3.2.5

Protection against third-party infringements or claims

According to legal writing, franchisors are also obliged to provide an adequate response to any third-party claims concerning the intellectual property rights or to any attempt to infringe such rights.401 Leloup bases this obligation on the analogous application of the rules concerning sales contracts: under French law, the seller must guarantee to the buyer the undisturbed use of the purchased good free from claims by third parties that they have a 397

398 399

400 401

Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin and 12 July 1993, Lettre distrib. 1993-11. Lower courts have also applied this criterion. See for example CA Paris 11 June 1992, D. 1992, somm., p. 392, obs. D. Ferrier. Cass. com. 12 July 1993, Lettre distrib. 1993-11. See Leloup, comments to the decision of the Cour d’appel of Paris of 28 April 1978, Cah. dr. entrep. no. 42, October 1980, p. 10: “la valeur d’une franchise s’apprécie par la notoriété de son enseigne.” Also Leloup, 2004, p. 39: “Dés lors que le franchiseur … a conquis le succès qui l´a conduit à la notoriété, le premier apport qu´il va faire au profit des franchisés est de les faire bénéficier des signes de ralliement de la clientèle auxquels cette notoriété est attachée.” See in the same vein Ferrier commenting on the judgments of the Paris Cour d’appel of 16 April 1991 and 29 May 1992, D. 1992, somm., p. 392: “le contrat de franchise organise la réitération par le franchisé de la réussite commerciale du franchiseur. Cette réussite commerciale s’exprime à travers la notoriété de signes distinctifs.” Also Ferrier, 2002, p. 375; Bessis, 1991, p. 23: “C’est grâce à la notoriété de cette marque que le franchise bénéficiera de la clientèle recherchant les produits ou des services ou la marque est la garantie.” Huet, 2002, p. 559; Vidts, 2000, p. 61; Clément, 1994, p. 59. See Leloup, 2004, p. 49. Gunther, 2000, p. 271; Ferrier, 2001, p. 106; Leloup, 2004, p. 49.

Section 3. Franchisor’s obligation to license Intellectual Property Rights

109

better right to the good (garantie d’éviction).402 This obligation has so far not been considered in the case-law.

3.2.6

Remedies

3.2.6.1 Nullity If the parties to a franchise contract have not agreed on an obligation for the franchisor to provide intellectual property rights, the contract cannot be classified as a franchising agreement under French law. The lack of causa then implies the nullity of the franchise contract. The lack of trademark has led courts to reclassify a franchise contract as a labour agreement.403 French courts have, however, declared franchise contracts null and void based on Article 1131 of the Civil Code where they established that the franchisor’s intellectual property rights did not fulfil the requirements for validity at the time when the contract was concluded,404 for example when the licensed trademark was not so well-known as to be able to lead to the anticipated profits405 or when the franchisor had no valid title to license a trademark.406 Non-compliance with these requirements implies the absence of a causa, according to French courts. Nullity was not granted in several other judgments, however, as the court concluded that the franchisee had in fact obtained a competitive advantage in the market by using the franchi-

402

403

404

405

406

Article 1626 ff. of the Civil Code. Leloup, 2004, p. 49: “en vertu de la garantie d’éviction, le franchiseur a le devoir de protéger ses franchisés contre toute usurpation par un tiers des signes distinctifs du réseau.” CA Paris 28 April 1978, Cah. dr. entrep. no. 42, October 1980, p. 6: the lack of a trademark was one of the grounds for reclassifying the contract as a labour agreement. See the comments to this decision by Leloup, Cah. dr. entrep. no. 42, October 1980, p. 10: “Il ne saurait en effet exister de franchise sans la mise à disposition du franchisé de droits de propriété industrielle permettant de proclamer son appartenance au réseau.” Also Leloup, 2004, p. 39: “Pour qu´il y ait contrat de franchise, il faut que ces signes soient mise à la disposition du franchisé.” Ferrier, 2002, p. 106; Clément, 1996, p. 144. Article 1131 of the Civil Code: L'obligation sans cause, ou sur une fausse cause, ou sur une cause illicite, ne peut avoir aucun effet. Cass. com. 30 January 1996, RJDA 6/1996, no. 776, JCP 1996, I, 3929, obs. Ch. Jamin. Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr.

110

Chapter III. Description and Comparison

sor’s intellectual property rights, even though the requirements discussed above had not been fulfilled.407 As has already been explained, that the contract is null implies that it never existed. This results in the obligation for the parties to return whatever they have received from the other party.408 However, the character of franchising contracts as contracts giving rise to successive performance means that the parties are not obliged to undo performances already rendered. Decisions reported on the inadequate transfer of intellectual property rights give almost no indication as to the economic consequences of the annulment of the contract. In its decisions of 11 February 2003409 and 6 May 2003,410 the Cour de Cassation both times annulled the contract and ordered the franchisor to repay the entrance fee to the franchisee and to pay damages. In these decisions it was not discussed whether royalties were to be reimbursed.

3.2.6.2 Remedies for non-performance When the obligations are to be fulfilled during the stage of performance, i.e. when the franchisor has to renew registration or when he has to provide an adequate response to a third party’s claim concerning the intellectual property rights or to an attempt to infringe such rights, non-compliance is not governed by the rules on validity, but by the rules on non-performance. Under French law (Article 1184 of the Civil Code) the franchisee is entitled to claim specific performance or termination (résolution) of the contract in such cases.411 Termination can only be granted by the courts.412 407

408

409 410 411

Cass. com. 12 July 1993, 91-20540, regarding a trademark that was not wellknown and Cass. com. 26 March 1996, Cont. conc. cons. 1996, 136, obs. L. Leveneur, regarding a trademark whose registration was not renewed. The consequences of declaring the nullity of a contract were explained where this remedy was described as the applicable response to the franchisor’s non-compliance with a mandatory pre-contractual obligation to disclose. See 2.2.5.1 in this Chapter, above. Cass. com. 11 February 2003, D. 2003, juris., p. 2304, annotated by H. Kenfack. Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr. Article 1184 of the Civil Code: “(1) La condition résolutoire est toujours sousentendue dans les contrats synallagmatiques, pour le cas où l'une des deux parties ne satisfera point à son engagement. (2) Dans ce cas, le contrat n'est point résolu de plein droit. La partie envers laquelle l'engagement n'a point été exécuté, a le choix ou de forcer l'autre à l'exécution de la convention lorsqu'elle est possible, ou d'en demander la résolution avec dommages et intérêts.” Malaurie & Aynès, 1999, p. 427 ff.

Section 3. Franchisor’s obligation to license Intellectual Property Rights

111

The Cour de Cassation in its decisions of 6 May 2003 and 12 October 1982 held that if the intellectual property rights do not comply with the requirements set, this is sufficient ground for upholding the franchisee’s claim for termination.413 This is also the case in the event of non-compliance with the obligation to renew registration, as emerged from a decision by the Versailles cour d’appel of 9 December 1987.414 Termination of a contract under French law implies the non-existence of the contract with retroactive effect (l´anéantissement rétroactif du contrat), like in the case of invalidity.415 This remedy aims to place the parties in the same situation as before the contract was concluded.416 However, in the case of franchising contracts, which are long-term agreements comprising successive performance, retroactive effect is limited: performance which has already taken place remains valid and the franchisor accordingly does not have to reimburse the franchisee for the price which the latter has paid for performance already rendered.417 However, the Versailles Cour d’appel decided otherwise on 9 December 1987, as it required the franchisor to repay the entrance fee and the royalty payments and awarded damages.418

3.3

Spain

3.3.1

Introduction

The statutory definition of franchising provided in RD 2485/1998 indicates that the transfer to the franchisee of the right to use the intellectual prop-

412

413

414

415 416 417

418

Article 1184 (2) and (3) of the Civil Code; See Ghestin, 2001, p. 489; Carbonnier, 2004, p. 2233 and Malaurie & Aynès, 1999, p. 430. Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr and 12 October 1982, JCP 1984, II, 20166, annotated by G. Signoret. CA Versailles 9 December 1987, Cah.dr.entr. no. 2, p. 40, note J.-J. Burst. The Cour d’appel set aside the decision of the tribunal de commerce because the nonrenewal of the contract was a type of non-performance that could not result in the annulment of the contract but had to result in termination. Ghestin, 2001, p. 541. Malaurie & Aynès, 1999, p. 432. Ghestin, 2001, p. 541 and Ghestin, annotation to the decision of the Assemblée plénière de la Cour de Cassation of 1 December 1995, JCP 1996, II, 22565, p. 34; Malaurie & Aynès, 1999, p. 432 and Carbonnier, 2004, p. 2235. CA Versailles 9 December 1987, Cah. dr. entr. 1988, no. 2, p. 40, annotated by J.-J. Burst.

112

Chapter III. Description and Comparison

erty rights of the franchisor is one of the obligations that must be necessarily agreed upon in order for an agreement to classify as a franchise contract.419 Spanish courts and legal doctrine acknowledge the importance of the franchisor’s obligation to license intellectual property rights. The Tribunal Supremo in a landmark judgment of 4 March 1997 held that in franchising, the franchisor typically has the title to a trademark, shop sign, etc. and entitles the franchisee to make use of these signs.420 The Audiencias Provinciales in their case-law generally provide detailed definitions that include the transfer of intellectual property rights as a main element.421 This is also the case in Spanish scholarly writing.422 The license of intellectual property rights is thus regarded as a main obligation in franchising by the Spanish legislator, courts and legal doctrine. This means that it is a condition for the validity of franchise contracts.423 If agreement as to the transfer of the right to use the franchisor´s intellectual property rights is lacking, the contract cannot be classified as a franchise agreement. 424 However, this has not yet been expressly decided in the actual case-law, as all Spanish judicial decisions concerning intellectual property

419

420 421

422

423

424

RD 2485/1998 (as implemented by RD 419/2006): La “actividad comercial en régimen de franquicia … comprende, por lo menos: a) el uso de una denominación o rótulo común u otros derechos de propiedad intelectual o industrial y una presentación uniforme de los locales o de los medios de transporte objeto del contrato;” STS 4 March 1997, RJ 1997\1642. See for example the following decisions: SAP La Rioja 13 July 1992, AC 1992\1072; SAP Barcelona 16 December 1996, AC 1997\1650 and 31 March 2001, JUR 2001\215218. Uría, 2002, p. 739; Alfaro, 1995, p. 3154; Echebarría, 1995, p. 305; Hernando Giménez, 2000, p. 205; Ortuño Baeza, 1997, p. 1536; Alonso Espinosa et al., 1999, p. 703; Alonso Soto, 2001, p. 196; Aguiló Piña, 1986, p. 4810; Villagómez Rodil, 1997, p. 125 and 126; Cano Rico, 2002, p. 767; Sánchez Calero, 2003-I, p. 185 and 2003-II, p. 427; Jiménez Sánchez, 2003, p. 284. For case-law, see for example: SAP Zaragoza 23 February 1999, ARP 1999\447; SAP Asturias 22 January 2001, AC 2001\959; SAP Barcelona 23 December 2003, AC 2004\433. For legal writing, see De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 377; Tintoré & Peña & Naranjo, 2001, p. 51. An explanation concerning the requirements for the validity of franchising contracts (Article 1261 of the Spanish Civil Code) and how this is connected with the determination of the main obligations of the parties has been provided above in the Chapter concerning the legal framework for franchising under Spanish law. See Chapter II, Section 2, above.

Section 3. Franchisor’s obligation to license Intellectual Property Rights

113

rights so far have dealt with claims by franchisees for the annulment of the contract due to a lack of registration of the intellectual property rights.425

3.3.2

Contents of the obligation regarding intellectual property rights

RD 2485/1998 defines the obligation to license intellectual property rights as an essential obligation, but does not specify the contents of the obligation any further. The Trademarks Act of 7 December 2001 (Ley de Marcas, hereinafter: LM) is also applicable in this context.426 It provides a common regime as regards the procedure and effects of registration of trademarks and trade names427 and mentions the contract of license of a trademark as one of the possibilities to dispose of intellectual property rights.428 However, it does not outline the obligations of the licensor of the intellectual property rights (i.e., in franchising: the franchisor). Some aspects as to the contents of the franchisor’s obligations regarding intellectual property rights could nevertheless be inferred from RD 2485/1998, in particular from the definition of franchising contained in Article 2 and from the rule on disclosure in Article 3. These aspects regard the type of intellectual property rights that are to be licensed and the requirement of a valid title actually allowing the franchisor to license the intellectual property rights. This second obligation has also been dealt with 425

426

427

428

SAP Zaragoza 23 February 1999, ARP 1999\447; SAP Asturias 22 January 2001, AC 2001\959; SAP Barcelona 10 May 2000, JUR 2000\211264; SAP Zaragoza 18 July 2000, JUR 2000\272692 and 16 September 2003, AC 2003\1507; SAP Barcelona, 23 January 2001, JUR 2004\54712 and 31 March 2001, JUR 2001\215218. Statute 17/2001 of 7 December 2001 de Marcas (BOE 8 December 2001, n. 294), effective as of 31 July 2002. See also Statute 11/1986 of 20 March 1986 de Patentes (BOE 26 March 1986, n. 73). According to Article 1 of the LM which deals with the scope of application, the LM exclusively covers trademarks and trade names, while shop signs fall within the scope of the national competition laws (see Preamble to the LM). However, the term trademark is very broadly defined as any sign that may be graphically represented and in the market distinguishes the goods of services of one undertaking from those of another (Article 4 of the LM). A trade name is defined as any sign which may be graphically represented and which serves to identify an undertaking in the market and differentiates this undertaking from other undertakings carrying out the same or similar activities (Article 87 of the LM). It is applied in documents that are used to identify the business (correspondence, catalogues, advertising, etc.). Article 46 of the LM.

114

Chapter III. Description and Comparison

in case-law regarding the registration of intellectual property rights. In some of these decisions, Spanish courts have concluded that registration is a precondition for holding a valid title to license intellectual property rights, but in others courts have decided that the relevant criterion is whether the franchisee can effectively use the intellectual property rights. In addition, in the opinion of some authors favouring the application by way of analogy of the substantive Civil Code provisions on the delivery of goods in contracts of sale429 and lease,430 three further main obligations for the franchisor concerning the license of intellectual property rights can be identified. These are the obligation to effectively deliver the intellectual property rights, the obligation to guarantee that they are adequate for the use agreed for the duration of the contract and the obligation to guarantee that the franchisee is not disturbed in the use of these intellectual property rights by third-party infringements or claims. The obligation to deliver is considered fulfilled when the intellectual property rights are placed at the disposal of the franchisee (Articles 1464 and 1554 (1) of the Civil Code). 431 I will now discuss the four other obligations identified.

3.3.2.1 Distinctive signs Article 2 of RD 2485/1998 states that the franchised activity must include the use of a common denomination or shop sign or any other intellectual or industrial property right and a uniform presentation to the public of the outlets or the means of transport that are the object of the contract. The key factor is therefore that the intellectual property rights that are licensed allow the franchisee to use the image of the network. Article 3 of RD 2485/1998 accordingly refers to the license of the distinctive signs related to the franchise business. This is also the approach taken in the case-law and legal writing.432 429 430 431

432

Articles 1445 ff. of the Civil Code. Articles 1542 ff. of the Civil Code. SAP Granada 5 June 2000, JUR 2000\225079: the franchisor is under a duty to place the immaterial assets of the undertaking at the disposal of the franchisee. The Audiencia Provincial of Barcelona in its judgment of 24 March 2004, JUR 2004\122633, held that, contrary to the arguments of the franchisee, the distinctive signs that were transferred were the signs necessary to create a uniform image of the business. No remedies were granted. In two previous judgments of 23 January 2001, JUR 2004\54712 and 31 March 2001, JUR 2001\215218 the Barcelona Audiencia Provincial held that a franchise contract may involve only the transfer of a trade name, but not of a trademark, provided that the trade name is the necessary distinctive sign to allow the creation of a common image throughout the

Section 3. Franchisor’s obligation to license Intellectual Property Rights

115

3.3.2.2 Title to license the intellectual property rights Prior to the conclusion of the contract, the franchisor has to demonstrate to the franchisee that the franchisor owns or at least has the right to use the distinctive signs related to the franchise business (Article 3(b) of RD 2485/1998).433 This type of information must also be registered by the franchisor in the franchisors’ register (Article 7(1)(b) of RD 2485/98).434 Similarly, the Tribunal Supremo in a decision of 4 March 1997 referred to the franchisor as the holder of the title to a trademark, trade name, shop sign, etc. who transfers the right to use the elements to which he so holds title.435 Given that under the LM, the ownership of the distinctive signs can only be obtained through registration at the Spanish Patent and Trademark Office (Oficina Española de Patentes y Marcas), it follows that registration is a prerequisite for the licensing of distinctive signs to the franchisee.436 However, the case-law of the Audiencias Provinciales concerning franchisees’ claims for invalidity of the contract absent the registration of the distinctive signs offers a contradictory view on whether registration is necessary. There are five relevant decisions concerning this issue. In two of these (Zaragoza Audiencia Provincial of 23 February 1999 and Asturias Audiencia Provincial of 22 January 2001) the courts in question held that the trademark must indeed be registered, because if the franchisor is not the owner or has no right to use the trademark, he is unable to license it to another party. 437 As a result, non-registration of the trademark leads to the annulment of the

433

434 435

436 437

network. Spanish literature also emphasises the importance of a uniform image throughout the network. See Alonso Espinosa et al., 1999, p. 704; Martínez Sanz, 1995, p. 360; Alfaro, 1995, p. 3154; Echebarría, 1995, p. 39 and 304; Hernando Giménez, 2000, p. 206; Martín Trilla & Echarri Ardanaz, 2000, pp. 38 and 56. Article 3(b) of the RD: “… Acreditación de tener concedido para España, y en vigor, el título de propiedad o licencia de uso de la marca y signos distintivos de la entidad franquiciadora; y de los eventuales recursos contra aquéllos, si los hubiere, con expresión, en todo caso, de la duración de la licencia.” Article 2 of the LM. STS 4 March 1997, RJ 1997\1642: “La característica fundamental de esta modalidad contractual estriba en que una de las partes, que es titular de una determinada marca, rótulo, patente, emblema, fórmula, método o técnica de fabricación o actividad industrial o comercial, otorga a la otra, el derecho a utilizar … aquello sobre lo que ostentaba la titularidad …” Article 2 (1) of the LM. SAP Zaragoza 23 February 1999, ARP 1999\447 and SAP Asturias 22 January 2001, AC 2001\959.

116

Chapter III. Description and Comparison

contract for failure to comply with validity requirements.438 However, in the remaining three judgments the respective courts concluded that lack of registration was irrelevant. These courts considered that the relevant question was whether the franchisee could use the distinctive signs without being disturbed.439 Legal doctrine does not indicate whether it considers registration as a prerequisite for the validity of the franchise contract, but merely underlines the advantages of using a registered trademark in accordance with the LM.440

3.3.2.3 Adequate for the agreed use Some authors argue that the analogous application to franchising of the rules concerning the delivery of goods in sales contracts and of the rules on contracts of lease results in the obligation of the franchisor to guarantee that the intellectual property rights are fit for the purpose agreed.441 Pursuant to Article 1484 of the Civil Code concerning delivery, the franchisor is obliged to cure any hidden defects that would make the distinctive signs inadequate for use in the operation of the business (garantía por vicios ocultos).442 As hidden defects are defects that exist at the time when the contract is concluded, this obligation actually corresponds to the two obligations mentioned above, namely the obligation of holding a title to the intellectual property rights and the obligation of delivering the intellectual property rights which identify the franchisor’s business. The analogy concerning contracts of lease imposes a new obligation: Article 1554 (2) of the Civil Code requires that the franchisor does all that is necessary to guarantee that the intellectual property rights are fit for the use 438

439

440

441 442

The Tribunal Supremo also took this approach in the following cases concerning the license of trademarks: STS 31 January 1963, RJ 1963\753, 9 May 1980, RJ 1980\1790 and 29 April 1997, RJ 1997\3409. SAP Barcelona 10 May 2000, JUR 2000\211264; SAP Zaragoza 18 July 2000, JUR 2000\272692 and SAP Zaragoza 16 September 2003, AC 2003\1507. Hernando Giménez, 2000, p. 233 and 326; Martín Trilla & Echarri Ardanaz, 2000, p. 38. Echebarría is the only author arguing that registration is not a validity requirement, because it only serves to give effects to the licence in the face of third-party claims, in Echebarría, 1995, p. 304. Hernando Giménez, 2000, p. 236. Article 1484 of the Civil Code: “El vendedor estará obligado al saneamiento por los defectos ocultos que tuviere la cosa vendida, si la hacen impropia para el uso a que se la destina, o si disminuyen de tal modo ese uso que, de haberlos conocido el comprador, no la habría adquirido o habría dado menos precio por ella.”

Section 3. Franchisor’s obligation to license Intellectual Property Rights

117

agreed.443 This obligation requires the active behaviour of the franchisor for the duration of the contract to maintain and where possible improve the business value of the distinctive signs by adapting them to market needs.444

3.3.2.4 Undisturbed use of the intellectual property rights According to some legal authors, the application of the substantive rules of the Spanish Civil Code give rise to the franchisor’s obligation to guarantee for the duration of the contract the undisturbed use of the distinctive signs (garantía de evicción).445 This means that the franchisor has to do all that is necessary to prevent or resolve situations where a third party claims to have a better right to the distinctive signs or attempts to infringe them. In franchising, the parties must observe the due diligence of the organised businessman, which is a further qualification of the due diligence of the good father of a family under Article 1104 of the Civil Code.446 This obligation is not mentioned in the case-law – apart from in one decision by the Granada Audiencia Provincial –447 but is regularly discussed in legal writing.448 The Spanish legislator also acknowledges the importance of this question and for this reason RD 2485/1998 imposes an obligation on the franchisor to provide pre-contractual information to the franchisee concerning any existing claim by third parties in respect of the distinctive signs.449 443

444 445

446

447 448 449

Article 1554 of the Civil Code: “El arrendador está obligado … 2. A hacer en ella [la cosa] durante el arrendamiento todas las reparaciones necesarias a fin de conservarla en estado de servir para el uso a que ha sido destinada.” Alfaro, 1995, p. 3154; Echebarría, 1995, p. 306; Hernando Giménez, 2000, p. 236. Articles 1474 (1) (sales) and 1554 (3) (lease) of the Civil Code. Article 1474 of the Civil Code: “En virtud del saneamiento a que se refiere el artículo 1461, el vendedor responderá al comprador: 1. de la posesión legal y pacífica de la cosa vendida.” Article 1554 of the Civil Code: “El arrendador está obligado … 3. A mantener al arrendatario en el goce pacífico del arrendamiento durante todo el tiempo del contrato.” The diligence of the good father of a family is the general standard of care in the Spanish law of obligations. It is an objective standard of diligence, which is therefore not to be assessed in the light of the particular capacities of each party involved. The criterion of the diligence of a good businessman, which qualifies the general standard of care, was for the first time required by Article 127 of the Act on Sociedades Anónimas and was subsequently included in Article 9 (2)(a) of the Commercial Agency Act. SAP Granada 5 June 2000, JUR 2000\225079. Alfaro, 1995, p. 3154; Echebarría, 1995, p. 306; Hernando Giménez, 2000, p. 269. Article 3 (b) of RD 2485/1998: “Acreditación de tener concedido para España, y en vigor, el título de propiedad o licencia de uso de la marca y signos distintivos de la entidad

118

Chapter III. Description and Comparison

Some authors underline that this obligation implies that the only way in which the protection afforded under the LM against third-party disturbance of the distinctive signs can become effective is if the franchisor complies with the requirements regarding registration imposed by the LM (renewal, modification, etc.).450 However, as has been indicated above, the actual importance of the registration requirement is questionable in view of the unclear position taken by the Spanish courts.

3.3.3

Remedies

3.3.3.1 Nullity Spanish law considers the license of distinctive signs as a requirement for the validity of the contract, which means that the contract is invalid if the parties do not expressly include this obligation (Article 1261 of the Civil Code). This has however not yet been borne out in practice through the case-law. All the available case-law concerning distinctive signs deals with claims of franchisees for the invalidity of the contract due to lack of registration of the trademark by the franchisor. The position of the courts concerning the question of whether registration is a requirement for the validity of the contract is unclear, however: in some decisions this is considered the case, while in others it is not. Whenever registration was considered a validity requirement, however, its lack always led to the annulment of the contract.451 In theory, non-compliance with the obligation to provide the distinctive signs of the franchisor’s business at the time of the contract’s conclusion could also be invoked as a ground for annulment due to lack of compliance with a validity requirement.452 As has already been indicated above in the discussion of annulment in the context of the pre-contractual duty to disclose, the Audiencias Provinciales have held that annulment works retroactively in respect of the validity of the contract, but not in respect of the obligations that have already been performed. This means that the franchisor does not have to reimburse the money paid by the franchisee in exchange for the obligations that the fran-

450

451

452

franquiciadora; y de los eventuales recursos contra aquéllos, si los hubiere, con expresión, en todo caso, de la duración de la licencia.” Articles 31 ff. of the LM. See Echebarría, 1995, p. 304; Ortuño Baeza, 1997, pp. 1506 and 1513. SAP Zaragoza 23 February 1999, ARP 1999\447 and SAP Asturias 22 January 2001, AC 2001\959. Esteve Sanz & Ulloa y Suelves, 2004, p. 4.

Section 3. Franchisor’s obligation to license Intellectual Property Rights

119

chisor has already performed. This has been confirmed in decisions concerning intellectual property rights.453

3.3.3.2 Remedies for non-performance Under Spanish law, non-compliance with obligations during the performance stage does not lead to the annulment of the contract, as this does not concern matters related to the fulfilment of validity requirements in franchising. Such non-compliance is therefore to be dealt with in accordance with the general rules of contract law concerning non-performance. The obligations in question are: the obligation to renew registration, the obligation to provide updated intellectual property rights if necessary to identify the network, the obligation to do all that is necessary to maintain and promote the fitness for purpose of the intellectual property rights and the obligation to guarantee the undisturbed use of the rights. No actual cases on these issues have been decided yet, however. According to Article 1124 of the Civil Code, the franchisee may either claim specific performance or termination of the contract, with the right in both cases to be compensated for any damages suffered (Article 1101 of the Civil Code). However, according to the case-law of the Tribunal Supremo, termination of the contract can only be pursued when the non-performance of one of the parties has definitively led to the frustration of the contractual expectations of the other party.454 If the defective performance of the franchisor can be cured, then the franchisee should, out of respect for the principle of good faith and maintenance of the contract, ask for specific performance or for the reduction of the price, as was explicitly held by the Orense Audiencia Provincial in a decision regarding franchising of 7 January 1999.455 If the defective performance cannot be cured, the general contract law remedies apply and the franchisee may claim termination of the contract and damages on the basis of Articles 1124 and 1101 of the Civil Code.

453

454

455

SAP Asturias 22 January 2001, AC 2001\959 and SAP Zaragoza 16 September 2003, AC 2003\1507. See decisions of the Tribunal Supremo of 8 February 1980 (R. 933); 21 March 1986 (R. 1275) and 29 February 1988 (R.1310). SAP Orense 7 January 1999, AC 1999\79. In legal writing see Pellisé de Urguiza, 2001, p. 145.

120

Chapter III. Description and Comparison

3.3.3.3 Specific remedies If the provisions of the Civil Code regarding delivery of goods were to apply by way of analogy, then the franchisee could require the franchisor (as the party which delivers the intellectual property rights) to cure any hidden defects with respect to the intellectual property rights. This is because the franchisor could be required to obtain a valid title to license the intellectual property rights or to provide the intellectual property rights which identify the franchise business. When it turns out that the defects cannot be cured,456 the franchisee may either terminate the contract and recover his money (actio redhibitoria) or pay less (actio quanti minoris) (Article 1486 of the Civil Code).457 However, these remedies do not apply if the parties have excluded the guarantee given in the case of hidden defects from their agreement.458 If the provisions on contracts of lease were to apply, the franchisee could pursue the application of the remedies under Article 1556 of the Civil Code. This Article states the remedies applicable in case of non-performance by the franchisor (as the lessor of the distinctive signs) of his ongoing obligation to do all that is necessary to guarantee that the distinctive signs are adequate to be used in the operation of the business and his obligation to guarantee the undisturbed use of the distinctive signs. Pursuant to this Article, the franchisee can claim termination of the contract and indemnity or only indemnity if he wants the relationship to continue.

3.4

Comparison

3.4.1

Introduction

The PEL CAFDC provide an obligation for the franchisor to grant to the franchisee the right to use the intellectual property rights related to the franchise business. In France there is no such rule, but French courts and legal scholars have unanimously held that this is a main obligation in franchising. In Spain, the statutory definition of franchising under RD 2485/1998 refers to the licensing of intellectual property rights as one of the 456

457

458

An example of a situation that cannot be cured would be when the trademark cannot be registered due to the fact that it has already been registered by a third party. Article 1486 of the Civil Code: “… el comprador podrá optar entre desistir del contrato, abonándosele los gastos que pagó, o rebajar una cantidad proporcional del precio, a juicio de peritos.” Article 1475 (3) of the Civil Code.

Section 3. Franchisor’s obligation to license Intellectual Property Rights

121

indispensable obligations under franchising contracts and the Spanish courts and literature have also emphasised this. Under both the French and the Spanish systems the license of intellectual property rights by the franchisor is described as a precondition for the validity of franchising contracts. This means that agreement between the parties concerning the obligation to license intellectual property rights is a conditio sine qua non for classifying the contract as a franchising contract. This is also the case under the Principles. The obligation to license intellectual property rights is included in the definition of franchising provided in Article 3:101 concerning the scope of application. This means that if the parties to a contract which is governed by either the Principles, French law or Spanish law do not agree on the obligation to license intellectual property rights, then the contract cannot be classified as a franchising agreement. No French or Spanish case-law is available however concerning lack of explicit agreement on the obligation to license intellectual property rights and for this reason no contracts have so far been declared invalid on these grounds under French or Spanish law. The cases that have reached the French and Spanish courts all concerned claims by franchisees who argued that the licensed intellectual property rights did not comply with the required conditions to allow the successful operation of the business. More in particular, French proceedings have mainly concerned the lack of a valid title to the intellectual property rights, due to a lack of registration or renewal of registration and the lack of prestige of the intellectual property rights. In Spain, courts have only had to deal with claims regarding lack of registration.

3.4.2

Contents and form of the obligation to license intellectual property rights

In the PEL CAFDC, as well as under French law, the emphasis is on the particular contents of the obligation to license intellectual property rights. The franchisor is required to comply with particular obligations as to the quality of the intellectual property rights that he licenses. Under these two systems, if this specific obligation is to succeed in its aim, it has to guarantee that the franchisee receives the intellectual property rights that will allow him to operate the method of the franchisor. The Principles leave it to national law to determine whether compliance with these requirements as to the contents of the obligation regarding intellectual property rights involves particular requirements of form, for instance registration of the intellectual property rights. In Spain, the particularities of the obligation regarding the license of intellectual property rights have not been explicitly defined in RD 2485/1998 or in the case-law. However, some characteristics could be inferred from the

122

Chapter III. Description and Comparison

wording of RD 2485/1998 and from the view of some Spanish scholars who endorse that the rules on sales and lease contracts apply by way of analogy to franchising. As is the case under the Principles and under French law, the resulting particular obligations concern the quality of the intellectual property rights. Spanish courts have dealt with questions regarding registration of the intellectual property rights. However, the position of Spanish courts is not clear as to whether registration is required or not.

3.4.2.1 Requirements as to contents Pursuant to the Principles, the franchisor has to license the intellectual property rights that are necessary to operate the franchise business. According to the Comments to Article 3:201, this generically formulated “necessity test” is comprised of two particular obligations: on the one hand, the franchisor must have a title that allows him to license the intellectual property rights to the franchisee. On the other hand, the franchisor has to license all the intellectual property rights that are relevant to operate the attraction of the trademark. The Principles explicitly indicate that the title to license is to be kept valid for the duration of the contract. This indication has not been made as regards the obligation to provide the intellectual property rights that allow operating the attraction of the trademark. A third obligation is added in Article 3:201 (2), namely that the franchisor has to provide an adequate response when an action, claim or proceedings are brought or threatened by a third party concerning the intellectual property rights related to the franchise business. The first two specific duties, which the Principles link with the necessity test, are similarly imposed under French and Spanish law. In France, the obligation to have a title to the intellectual property rights is a condition for the validity of a franchise contract, as determined by French courts and scholars. This is also the case regarding the license of intellectual property rights which allow clientele to identify the franchise business. In Spain, the existence of these two obligations can be inferred from the contents of RD 2485/1998. Although not explicitly indicated in the RD, some authors base the ongoing character of these obligations on the substantive rules in the Spanish Civil Code regarding lease contracts, which may apply by way of analogy to franchising. These rules impose an obligation to do all that is necessary for the duration of the contract to guarantee that the items that are leased are fit for purpose. The third obligation imposed by the Principles, namely to guarantee the undisturbed use of the intellectual property rights, has been discussed in French and Spanish legal doctrine. Under both these national jurisdictions the existence of this obligation is linked to the analogous application of the rules on sales, according to which the seller has to guarantee to the buyer

Section 3. Franchisor’s obligation to license Intellectual Property Rights

123

the undisturbed use of the purchased good, free from third-party interference. In Spain, not only the rules on sales, but also those on lease contracts lead to this result. The French system imposes far-reaching duties on the franchisor, as intellectual property rights should under French law also be well-known. This is not required under the Principles or Spanish law. Under the Spanish system, unlike under the Principles and French law, scholars have emphasised the importance of guaranteeing fitness for purpose for the duration of the contract.

3.4.2.2 Form requirements The PEL CAFDC impose no form requirements as to the obligation to grant the use of intellectual property rights. However, it is acknowledged in the Comments to the provision regarding intellectual property rights that such requirements may be imposed in accordance with national rules. Under French law, the intellectual property rights must be registered. Registration and renewal of registration are obligations imposed by the French mandatory rules on intellectual property and have been confirmed in case-law and legal writing. Similar to the French system, the Spanish rules on intellectual property require registration of the intellectual property rights as a pre-requisite for obtaining a valid title to license the intellectual property rights. However, Spanish courts are not strict in verifying compliance with this requirement. In three of the five rulings concerning lack of registration of the intellectual property rights, the courts in question concluded that registration is not relevant and that the primary criterion is whether the franchisee has been able to effectively use the intellectual property rights without being disturbed.

3.4.2.3 Pragmatic approach Compliance with the requirements set out above is indispensable under all three systems. As the comments to Article 3:201 PEL CAFDC explicitly acknowledge, the adequate fulfilment of the contractual expectations of the franchisee regarding the intellectual property rights is indispensable and therefore the rule is mandatory. In France and Spain, the adequacy of the intellectual property rights at the time the contract is concluded is also a requirement for the validity of franchise contracts. However, there are examples of judgments rendered in the two national systems in which courts have taken a flexible approach which does not focus on verifying compliance with the particular obligations, but on determining whether the franchisee has been able to operate the business adequately.

124

Chapter III. Description and Comparison

This has been the case in France regarding the assessment of whether the intellectual property rights are well-known, but not regarding compliance with the registration requirement. Differently, in Spain this approach has also been followed as regards claims for lack of registration.

3.4.3

Remedies

Under all three regimes compared, the lack of agreement upon the existence of an obligation concerning intellectual property rights implies that the contract in question cannot be classified as a franchising contract. The lack of compliance of the franchisor with the obligation to license intellectual property right leads to different consequences depending on whether the Principles apply or whether French or Spanish law applies. Pursuant to the Principles, the non-compliance with the particular obligations regarding the intellectual property rights results in contractual nonperformance by the franchisor, for which reason the available remedies for non-performance in the PECL apply. When the non-compliance amounts to fundamental non-performance the franchisee is entitled to claim termination of the contract. If the franchisee has suffered any loss he is entitled to damages, which include the loss that the franchisee has suffered and the gain of which he has been deprived. Unlike the Principles, French and Spanish case-law do not consider the lack of compliance with the particular contents of the obligation on intellectual property rights at the time the contract is concluded as a case of nonperformance. As far as French and Spanish courts are concerned, the intellectual property rights that do not comply with the requirements should be dealt with as if they were non-existent, and consequently the contract must be annulled for not including one of the necessary conditions for validity. Nullity has retroactive effect under both national systems. However, in franchising, given that the franchise contract is one of successive performance, parties are not obliged to return the performance that has already been provided. However, the remedies granted pursuant to the rules on validity are intended to apply only to the requirements that have to be fulfilled at the time of conclusion of the contract. Lack of compliance with the ongoing obligations regarding intellectual property rights should, in theory, be dealt with as a case of non-performance, now that the contract has already been validly concluded. Similar to the situation under the Principles, the franchisee under both the French and the Spanish regime is entitled to specific performance or termination of the contract, with a right to damages in both cases. In France, unlike under the Principles and under Spanish law, it is for the judge to determine whether non-performance is to be considered a ground for granting termination of the contract. Furthermore, termination

Section 3. Franchisor’s obligation to license Intellectual Property Rights

125

under French law implies that the contract ceases to exist with retroactive effect. This is not the case under the PEL CAFDC and Spanish law. In Spain, some authors have argued in favour of the analogous application of the rules on sales contracts and on lease contracts to the license of intellectual property rights. These particular rules provide specific remedies, which would apply as lex specialis, and would exclude the application of the general remedies for non-performance. However, this discussion has so far been limited to doctrine and no reference has so far been made in the caselaw to the possibility of applying these rules.

3.4.4

Conclusion

If the Principles were adopted to govern a franchise contract that is subject to French law, this would not greatly alter the rules regulating the contract. The Principles and the French system provide the same specific contents for the obligation on intellectual property rights, except for the requirement that the intellectual property rights are well-known. The Principles would apply together with French national intellectual property law, which means that registration would also be a requirement. The requirement imposed by French courts that the intellectual property rights must be well known gives added protection to the interests of franchisees, as it aims to guarantee that the intellectual property rights involved do indeed have the power to attract clientele. However, the existence of this added requirement would eventually not result in remarkable differences between the two regimes, because French courts have taken a pragmatic approach which does not focus on verifying compliance with each of the requirements, but rather on whether the intellectual property rights have allowed the franchisee to operate the attraction of the trademark. The consequences of lack of compliance with the obligation regarding intellectual property rights are more drastic in France, because both annulment and termination of the contract result in its dissapearance with retroactive effect. Under the Principles, only the remedies for non-performance are available and termination does not invalidate the agreement. The application of the Principles to a contract that is in principle governed by Spanish law would bring no change as regards the particularities of the franchisor’s obligation. Both systems impose the same requirements. As to the remedies, lack of compliance with the requirements at the time that the contract is concluded under Spanish law would lead to annulment of the contract and this remedy is not provided under the Principles. As far as the remedies for non-performance are concerned, they are the same under the Principles and under Spanish law. Unlike under French law, termination under Spanish law does not imply the dissapearance of the franchise contract with retroactive effect.

Section 4. Franchisor’s obligation to communicate Know-How 4.1

PEL CAFDC: Article 3:202

4.1.1

Introduction

Pursuant to the PEL CAFDC, the know-how of the franchisor, i.e. the information concerning the business method of the franchisor and concerning how the method is to be operated, plays a central role in the franchise system, especially for the franchisee, who depends on such information to be able to operate the business.459 For this reason, know-how, like intellectual property rights, is perceived as a main business value which the franchisor offers to the franchisee. Accordingly, the Principles include a provision regarding know-how that is similar to the provision on intellectual property rights. The obligation under Article 3:202 on know-how is formulated in the following terms: (1) Throughout the duration of the contract, the franchisor must provide the franchisee with the know-how which is necessary to operate the franchise business. (2) The parties may not derogate from this provision.

The obligation on know-how is a typical obligation in franchising according to the provision concerning scope in Article 3:101. If the parties fail to agree on an obligation regarding know-how, the contract cannot under the Principles be classified as a franchising agreement. The Principles aim to reinforce the protection of the contractual expectations of franchisees by providing a mandatory rule, which means that the parties may not exclude this obligation by agreement. A provision like this is also said to benefit franchisors and by extension all members of the network, because it ensures that the same method of exploitation will be used throughout the network and consequently that the standards and prestige of the whole franchise chain will be maintained.460

459 460

See Article 3:202 of the PEL CAFDC, Comment B. See Article 3:202 of the PEL CAFDC, Comment B.

Section 4. Franchisor’s obligation to communicate Know-How

4.1.2

127

Necessary know-how

Article 3:202 explicitly requires that the know-how which the franchisee needs to operate the business is communicated. In determining what this “necessary” know-how consists of precisely, the criteria established in the Block Exemption Regulation (BER) 2790/99 on vertical restraints have been adopted in the Principles: the information has to be practical information that has not been patented, must have been previously tested, and must be secret, substantial and identified.461 According to the BER, secret means that the information cannot be easily known or easily accessed, substantial means that the information is indispensable for operating the business and identified means that it is described in a comprehensive manner so as to verify the conditions of secrecy and substantiality.462 The Principles add that the know-how must be necessary not only as part of the initial package to enable the franchisee to start the operation of the business, but also for the duration of the agreement.463 It follows that the franchisor has an obligation to provide the franchisee with know-how that is up to date for the duration of the contract.464 The Comments indicate that know-how includes technical information, financial data, advice on site selection and the layout of the premises, the provision of start-up materials and any other specifications relating to the system and the intellectual property rights.465 These are all conditions as to the contents of the information. The Principles do not impose any form requirement as regards the communication of know-how. However, it is acknowledged in the Comments to Article 3:202 that in commercial practice know-how is generally provided by means of operational manuals or is included in the agreement.466 It can also be transmitted through assistance (for example, in selecting the location of the outlet), especially when the franchisor transmits his general knowledge and experience. Accordingly, know-how must be regularly reviewed by updating the operational manuals and by assisting the franchisee in adapting to the changes.467

461 462 463 464 465 466 467

Article 1 (f) of the BER 2790/99. Ibid. See Article 3:202 of the PEL CAFDC, Comment A. See Article 3:202 of the PEL CAFDC, Comment E. See Article 3:202 of the PEL CAFDC, Comment D. See Article 3:202 of the PEL CAFDC, Comment D. See Article 3:202 of the PEL CAFDC, Comment E.

128

4.1.3

Chapter III. Description and Comparison

Relation to Assistance

The Principles refer to assistance as part of the obligation on know-how. On the one hand, part of the know-how of the franchisor (for example, the franchisor’s general knowledge and experience or the assistance given in selecting the site of the franchisee’s business) can only be provided through assistance.468 On the other hand, assistance is described as the manner in which the franchisor helps the franchisee to adapt to the changes in the business method.469

4.1.4

Remedies

The franchisee can claim specific performance from the franchisor irrespective of whether the non-performance is fundamental or not (Article 9:102 of the PECL). Termination of the contract can only be claimed when the nonperformance is fundamental (Article 9:301 of the PECL). If the franchisee has suffered any loss he is entitled to damages (Article 9:105 of the PECL), which include the loss that the franchisee has suffered and the gain of which he has been deprived (Article 9:502 of the PECL). If the relationship comes to an end, indemnity for goodwill may also be granted (Article 1:305 of the PEL CAFDC).

4.2

France

4.2.1

Introduction

French courts and scholars are in unanimous agreement concerning the fundamental character of the franchisor’s obligation to provide know-how to the franchisee as to how to operate the franchise business (le savoir-faire).470 468 469 470

See Article 3:202 of the PEL CAFDC, Comment A. See Article 3:202 of the PEL CAFDC, Comment E. CA Paris 10 March 1989, Gaz. Pal. 1989, 2, p. 544 ff, obs. Jamin: “Le savoir-faire et les modalités de son exécution constituent l’obligation primordiale du franchiseur.” CA Colmar 9 March 1990, somm., p. 371, obs. D. Ferrier: “La franchise s’analyse comme la réitération d’une réussite commerciale fondée sur un savoir-faire et suppose, donc, l’existence de ce savoir-faire et sa communication au franchisé.” Compare CA Paris of 27 May 1993, 18 June 1992, 22 September 1992, 29 September 1992, 26 November 1992, D. 1995, somm, p. 78, obs. D. Ferrier. Among scholars see Huet, 2002, p. 560: “le savoir-faire est donc au cœur de l’opération …” Ferrier, 2001, p. 106; Clément, 1996, p. 144 or Bessis, 1991, p. 30.

Section 4. Franchisor’s obligation to communicate Know-How

129

This know-how must be communicated at the beginning of the relationship in order to allow the franchisee to start the operation of the business471 and must continue to be communicated for the duration of the contract.472 There is however no statutory obligation for franchisors to provide knowhow. Most claims that have reached French courts so far where know-how is concerned have been claims brought by franchisees for annulment or (alternatively) termination of the contract due to the franchisor’s noncompliance with the obligation to transfer the know-how which would have allowed these franchisees to successfully operate the business.473 These claims are therefore concerned with the quality of the franchisor’s knowhow. French courts have determined that the know-how -together with the franchisor’s intellectual property rights- is the main reason for the franchisee to contract with the franchisor, i.e. the causa for the franchisee to contract and the element that differentiates franchising from other similar agreements.474 The transfer of know-how is therefore a requirement for the valid471

472

473

474

CA Paris 10 March 1989, Gaz. Pal. 1989, 2, p. 544 ff., obs. Jamin: “… le savoirfaire doit être transmis dès la signature du contrat …” Leloup, 2004, p. 58: “Il n’y a pas en effet de savoir-faire éprouvé s’il ne peut être transmis au moment de la conclusion du contrat.” In a decision of the Paris Cour d´appel of 22 September 1992, D. 1995, somm., p. 78, obs. D. Ferrier, the court concluded that the franchisor had complied with the ongoing obligation to communicate know-how, because he had continuously provided the franchisee with the operational manuals, circulars and catalogues of the new products selected for each collection. In the literature, see the comments of Leloup to the decision of the Paris Cour d’appel of 28 April 1978, Cah. dr. entrep. no. 42, October 1980, p. 10: “… la transmission du savoir-faire ne s’accomplit pas seulement au début de la relation contractuelle mais tout au long de sa vie.” See also Ferrier, 2001, p. 106. See decisions of the Cour de Cassation of 9 October 1990, Lettre distrib. 1990-12; 19 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier; 24 May 1994, Cont. Conc. Consomm. 1994, no. 191, obs. L. Leveneur; 29 April 1997, D. 1998, somm., p. 338, obs. D. Ferrier; 1 July 2003, 01-12699 (inédit), http://www.legifrance. gouv.fr and decisions of the Paris Cour d’appel 27 May 1993, 18 June 1992, 22 September 1992, 29 September 1992, 26 November 1992, D. 1995, somm, p. 78, obs. D. Ferrier. See for example the decision of the Paris Cour d’appel of 29 September 1992, D. 1995, somm, p. 78, obs. D. Ferrier: “Dans la convention de franchise, le transfert par le franchiseur au franchise d’un savoir-faire réel, objectif et original, constitue la cause essentielle, avec la notoriété de la marque, des obligations contractées par l’adhérent” or CA Paris 10 March 1989, Gaz. Pal. 1989, 2, p. 547, obs. Ch. Jamin:

130

Chapter III. Description and Comparison

ity of franchise contracts under French law. This does not only mean that the contract has to include an obligation to provide know-how before it may be validly concluded, but also that at the time the contract is concluded the know-how must fulfil certain requirements so as to be of a quality that allows the franchisee to properly run the franchise business.475 This view is shared by French legal scholars.476 The task faced by French courts has so far been to verify on a case-bycase basis whether the know-how, the adequacy of which is questioned by the franchisee, is of the quality required.477 The main conditions that have to be fulfilled in order to be able to conclude that the know-how is adequate (la pertinence du savoir-faire) can be identified from this case-law.478 Some of these conditions as to the contents of the obligation on know-how have to be fulfilled at the time when the contract is concluded and some have to be fulfilled during performance.

475

476

477 478

“un savoir-faire original et spécifique, élément essentiel du contrat de franchise, propre à le distinguer d’un simple accord de distribution.” In the literature, see Huet, 2002, p. 559: “La mise à disposition d´un savoir-faire est ce qui distingue la franchise des autres modalités de distribution …” and Amiel-Cosme, 1995, p. 29. The Cour de Cassation has stated (e.g. Cass. soc. 25 February 1998, 95-44096 (pub. bull) http://www.legifrance.gouv.fr) that a relationship cannot be classified as a franchising relationship without first verifying the adequacy of the knowhow. See also CA Paris of 19 February 1991, D. 1992, somm., p. 392: “la réussite commerciale s’exprime à travers la notoriété des signes distinctifs du fournisseur et la pertinence du savoir-faire …” Ferrier refers to the adequacy of the know-how in his comments to the judgments of the Paris Cour d´appel of 16 April 1991 and 29 May 1992, D. 1992, somm., p. 392. Huet, 2002, p. 560: “le savoir-faire est donc au cœur de l’opération: en son absence le contrat ne saurait être considéré comme valable.” Bessis, 1991, p. 30: “Sans savoir-faire réel, il n’y a pas de contrat de franchise.” Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998, p. 662: “dans le contrat de franchise, la cause de l´obligation de verser une redevance du franchisé réside dans la transmission du savoir-faire du franchiseur.” Leloup, annotation to the decision of the Paris Cour d’appel of 28 April 1989, Cah. dr. entrep., no. 42, 1980, p. 8; Also Leloup, 1982, p. 16 and 2004, pp. 12 and 38-53; Clément, 1996, p. 144; Gunther, 2000, p. 272 and Ferrier, 2001, p. 106. Ferrier, 2001, p. 106. See decision of Cour de Cassation of 3 October 1989, D. 1990, somm., p. 370, obs. D. Ferrier; TGI Bressuire 19 June 1973, D. 1974, p.105, annotated by F. Bories; CA Paris 18 June 1992, 22 September 1992 and 27 May 1993, D. 1995, somm, p. 78, obs. D. Ferrier.

Section 4. Franchisor’s obligation to communicate Know-How

4.2.2

131

Pertinence of the know-how

4.2.2.1 Requirements as to contents Both French courts and French literature make frequent reference to the elements of the know-how required under European competition law. According to the BER 2790/99 on vertical restraints, the know-how must be a non-patented package of information, experimented and tested by the franchisor, and must be secret to competitors, substantial and identified.479 French courts have specified the requirements of European competition law by applying them to questions of private law, especially the conditions of secrecy, substantiality and identity. In the terminology of French courts, the know-how consists of (a) commercial techniques, (b) which are tested, (c) specific, (d) original and (e) up-dated. These characteristics recur in the analysis of some scholars.480 In addition, legal doctrine refers to the requirement of the transmissibility of the know-how (f). (a) The concept of commercial know-how may comprise information concerning all areas involved in the business activity in question: technical, commercial, administrative, financial and promotional.481 A great variety of practices may amount to know-how according to French courts: a series of

479

480

481

Article 1 (f) of BER 2790/99, see 4.1.2 in this Chapter, above. In some decisions, courts have adopted competition law terminology. See for example CA Paris 7 June 1990, D. 1990, inf. rap., p. 176. Among scholars, see Gunther, 2000, p. 267 and Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998, II, 10057. In part of the literature the court’s description has been taken over: Leloup, comments to the decision of the Paris Cour d’appel of 28 April 1978, Cah. dr. entrep. no. 42, Octobre 1980, p. 8; Bessis, 1991, p. 31; Amiel-Cosme, 1995, p. 30. Leloup’s interpretation is that for private law purposes the substantiality requirement under the competition rules is divided into two more specific requirements: originality and specificity of the know-how, and that the requirement of transmissibility corresponds to that of identity under competition rules, see Leloup, 2004, p. 56. CA Paris 18 June 1992, D. 1995, somm, p. 78, obs. D. Ferrier. According to Ferrier, who adopts the approach of the ECJ in Yves Rocher (Case 87/14, Yves Rocher [1987], OJ L8/49), commercial techniques can amount to any information concerning the different aspects of the commercial activity, especially of a technical, commercial, promotional, administrative, financial or educational character and regarding management in general. Gunther considers it a package of information concerning methods of manufacturing, trading, managing and financing goods and services, in Gunther, 2000, p. 272.

132

Chapter III. Description and Comparison

documents which have to be updated periodically,482 access to a computer system which updates the offers of the market,483 a certain presentation of products,484 particular methods of organisation and management485 or a simple selection of products.486 (b) The information that the franchisee needs must be information on how to operate the particular business method that has already been tested by the franchisor.487 Both French courts and legal doctrine consistently point out that a franchise relationship consists of “the repetitive operation of a successful business concept” (“réiteration d´une réussite commerciale”) by the franchisee, which means that the concept must have been previously operated with success.488 (c) The content of the know-how must be specific, that is, it must suit to the sector of activity concerned and to the type of goods and services which are distributed.489 For instance, in the case of a franchise business for the 482 483 484 485 486 487

488

489

CA Paris 12 January 1994, RJDA, 1994, n 795, regarding a rent-a-car business. CA Paris 8 March 1996, D. 1996, inf. rap.,108, concerning a realtor’s business. CA Paris 18 June 1992 and 27 May 1993, D. 1995, somm., p. 78, obs. D. Ferrier. CA Paris 22 September 1992, D. 1995, somm., p. 78, obs. D. Ferrier. CA Paris 21 September 1989, D. 1990, somm., p. 369, obs. D. Ferrier. In a decision from the commercial section of the Cour de Cassation of 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin, the court upheld the franchisee’s claim because the franchisee had sufficiently proven that the franchisor was using the franchisee’s business as a pilot unit and could therefore not be said to have any previous experience in operating the business. See also the decision of the Paris Cour d’appel of 27 May 1993, D. 1995, somm., p. 78, obs. D. Ferrier. As regards references in French legal writing, see Leloup, comments to the decision of the Paris Cour d’appel of 28 April 1978, Cah. dr. entrep. no. 42, October 1980, p. 9: “… on ne peut, en franchise, parler de savoir-faire, s’il demeure dans les nuages de l’abstraction, il doit avoir subi l’épreuve de la réalité.” Also Bessis, 1991, p. 31 and Leloup 2004, p. 58. See Cass. com. 3 October 1989, D. 1990, somm., p. 370, obs. D. Ferrier; CA Paris 16 April 1991, D. 1992, somm., p. 392, obs. D. Ferrier; CA Paris 16 June 1993, D. 1995, somm., p. 79. Among legal authors see Amiel-Cosme, 1995, p. 22: “Il est, en effet, largement admis que la franchise ait d´abord une réussite commerciale que le franchiseur va chercher a réitérer.” Ferrier, 2002, p. 104:“la franchise repose sur une expérience commerciale développée de manière fructueuse par le franchiseur.” and Le Tourneau, 2003, p. 2. Cass. com. 19 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier; CA Paris 10 March 1989, Gaz. Pal. 1989, 2, p. 547, obs. Ch. Jamin; CA Paris 7 June 1990, D. 1990, IR, p. 176; CA Colmar 9 June 1982, D. 1982, p. 553, obs. J.-J. Burst; Bessis, 1991, p. 33: “la spécificité du savoir-faire peut s’apprécier par rapport au marché considéré qui dépend de l’activité du franchiseur.”

Section 4. Franchisor’s obligation to communicate Know-How

133

operation of a butcher’s shop, it may consist of communicating to the franchisee how to present the showcases and giving formation on how to choose and present the goods.490 But it may also consist of no more than the attraction of a well-known trademark, e.g. in the case of a business concerning the operation of a hairdressing outlet.491 (d) Know-how is original when the type of information given by the franchisor on how to operate the business is not accessible to competitors.492 But it may also be said to be original, according to French courts, when it consists of information that the franchisee cannot obtain by his own means.493 Accordingly, there are several decisions where courts have concluded that a know-how that adds nothing to the information already available to the franchisee cannot be considered original.494 However, the criterion of “difficult access” to the information does not seem to be definitive. In other decisions know-how was classified as original even though the franchisee could obtain the information by his own means, because it saved the franchisee the time and money he would have had to spend to obtain

490 491 492

493

494

CA Paris 18 June 1992, D. 1995, somm, p. 78, obs. D. Ferrier. CA Paris 26 November 1992, D. 1995, somm, p. 78, obs. D. Ferrier. Know-how is not original when the information turns out to be easily accessible to every professional, as was held by the Cour de Cassation in a decision of 24 May 1994, Cont. Conc. Consomm. 1994, no. 191, obs. L. Leveneur. This was also true according to the Tribunal de Grand Instance of Bressuire in a case of 19 June 1973, D. 1974, p. 105, annotated by F. Bories, where the court concluded that in a franchise contract for the operation of a dry-cleaning service no know-how was transferred because the methods and machinery used were identical or very similar to the methods and machinery used by competitors. Cass. com. 9 October 1990, Lettre distrib. 1990-12; Cass. com. 19 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier; CA Paris 25 February 1992, D. 1992, somm., p. 392, obs. D. Ferrier and 29 September 1992, D. 1995, somm, p. 78, obs. D. Ferrier. Cass. com. 9 October 1990, Lettre distrib., 1990-12: “… le savoir-faire contractuellement promis ne se distinguait pas des règles de l’art qu’en sa qualité de professionnel [le franchisé] connaissait ou était à même d’acquérir par ses propres moyens.” Similarly, CA Paris 25 February 1992, D. 1992, somm., p. 392, obs. D. Ferrier. See also CA Paris of 29 September 1992, D. 1995, somm, p. 78, obs. D. Ferrier: the court indicated that the technical documents which were supposed to contain the specific method which the franchisee had to apply in order to operate a certain machine turned out to be no more than the reproduction of a technical review previously edited by several syndicates of professionals. On these grounds the know-how was considered not to be original.

134

Chapter III. Description and Comparison

this know-how.495 Some authors favour this flexible approach as regards the assessment of the originality requirement.496 (e) In some court decisions concerning know-how it is pointed out that the franchisor is obliged to periodically review his know-how and to operate according to commercial and uniform techniques that are continuously updated and controlled.497 The literature also points out that there is a need to adapt the know-how to the changing conditions of the market.498

495

496

497

498

Cass. com. 19 February 1991, D. 1992, somm. p. 392, obs. D. Ferrier or 1 July 2003, 01-12699. This last decision concerned a franchise for the operation of a business concerning the mandatory inspection of vehicles. The franchisor had transferred to the franchisee, who was also a proffesional in the field of vehicles, several documents containing a complete description of the method and the technical and commercial aspects of the business. He also provided the informatic means. The court concluded that such know-how had to be considered original, because the franchisee could only have obtained it himself through lengthy and expensive personal research. This was also the conclusion reached in the judgment of the Colmar Cour d´appel of 9 June 1982, D. 1982, p. 553, annotated by J.J. Burst, concerning the operation of a dating agency. The franchisee had claimed that the know-how, which consisted of access to the files of clients and assistance, was not original. The court however concluded that the know-how was original, because it allowed the franchisee to obtain the information immediately and without having to spend money or time obtaining it himself. In the comments to the decision of the CA Colmar of 9 June 1982, D. 1982, p. 553, Burst indicates not to be in favour of the application of a criterion of absolute originality that would require the franchisor to provide a type of know-how which is completely unknown to professionals in the particular sector (TGI Bressuire 19 June 1973, D. 1974, p.105, note F. Bories). Compare Gunther, 2000, p. 272, who argues that know-how is original when it enables the franchisee to acquire immediate and useful knowledge, and Leloup, 2004, p. 56. TGI Bressuire 19 June 1973, D. 1974, p.105, annotated by F. Bories; CA Paris 28 April 1978, Cah. dr. entr. no. 42, October 1980, p 5; CA Colmar 9 June 1982, D. 1982, p. 553, note J.-J. Burst; CA Paris 22 September 1992, D. 1995, somm, p. 78, obs. D. Ferrier. This last decision concerned a franchise contract for the sale of wedding gowns. The court held that the franchisee could not claim lack of cause on the grounds of non-existent know-how when it had been proven that the franchisor’s commercial methods were up-dated to adapt them to the preferences of the clientele. See Leloup, comments to the decision of the Paris Cour d’appel of 28 April 1978, Cah. dr. entr. no. 42, October 1980, p. 10: “le savoir-faire ne peut être statique … Sans cesse, le franchiseur doit imaginer et essayer de nouveaux produits, de nouveaux services, de nouvelles methódes de vente, pour assurer la fidélisation de la clientèle.”

Section 4. Franchisor’s obligation to communicate Know-How

135

(f) Finally, some scholars refer to the transmissibility of the know-how as a requirement, but this has not been referred to in the case-law so far. Transmissibility means that the know-how must be communicated in such a way that it allows the franchisee to effectively use the information and to apply it in practice.499

4.2.2.2 Form requirements Neither French courts, nor French literature have attached any form requirements to the communication of know-how. In French commercial practice know-how is typically provided by means of operational manuals.500 However, the delivery of the operational manual may not suffice: the communication of adequate know-how may require that the franchisor also provides assistance.501 Accordingly, the know-how is mainly up-dated by inserting the necessary modifications in the operational manual502 or by providing refresher training to the franchisee.503

499

500

501

502 503

Bessis, 1991, p. 33: “Une des caractéristiques essentielles du savoir-faire est de ne pas rester figé”; also Ferrier, 2002, p. 378. Leloup, annotation to the decision of the Paris Cour d´appel of 28 April 1978, Cah. dr. entr. no. 42, October 1980, p. 10. Also Leloup, 2004, p. 56. This author points out that the requirement of transmissibility corresponds to the requirement of identity in competition law; Bessis, 1991, p. 34: “C´est ce caractère transmissible qui le différenciera d´une simple réussite liée à la personnalité ou le talent d´un commerçant.” CA Paris 22 September 1992, D. 1995, somm., p. 78, obs. D. Ferrier: the franchisee claimed the nullity of the contract for lack of cause. The court did not uphold this claim, because the franchisor, in addition to providing the licence to use the trademark, had also communicated his know-how by delivering to the franchisee a series of documents which contained information on methods of organisation, management and administration, and had also provided continuous assistance by means of circulars, periodic meetings and training sessions. CA Paris 14 February 1991, D. 1992, somm, p. 392, obs. D. Ferrier and 11 June 1992, D. 1992, somm., p. 391, obs. D. Ferrier. See also Ferrier, comments to the judgment of the Cour de Cassation of 3 October 1989, D. 1990, somm., p. 370, obs. D. Ferrier. Bessis, 1991, p. 34. CA Paris 22 September 1992, D. 1995, somm, p. 78, obs. D. Ferrier: the franchisor was considered to have complied with the ongoing obligation to communicate know-how, now that he had continuously provided the franchisee with the operational manuals, circulars and catalogues of new products selected for each collection. See also Ferrier, 2001, p. 106.

136

Chapter III. Description and Comparison

4.2.2.3 L’avantage concurrentiel Verifying compliance with the above-described criteria is how courts test whether the franchisee has received adequate know-how that will allow him to achieve an advantageous position in the market (l’avantage concurrentiel).504 However, the test applied by courts and scholars has become increasingly pragmatic and focused on verifying whether the know-how has allowed the franchisee to achieve an advantageous position as compared to competitors, rather than on verifying strict compliance with each of the requirements.505

4.2.3

Remedies

4.2.3.1 Nullity Lack of agreement as to an obligation for the franchisor to communicate his know-how would under French law imply that the contract cannot be classi504

505

See among scholars the comments of Ferrier to the decision of the Paris Cour d’appel of 19 February 1991, D. 1992, somm., p. 392: “la réussite commerciale s’exprime à travers la notoriété des signes distinctifs du fournisseur et la pertinence du savoir-faire commercial emportant un avantage concurrentiel pour le franchisé.” or Bessis, 1991, p. 32: “les connaissances techniques transmises par le savoir-faire au franchisé doivent représenter pour ce dernier un avantage et un intérêt certain lié à l’exercice de ce commerce”; Leloup, 2004, p. 37: “le franchisé repose sur un concept fondateur, l’avantage concurrentiel.” Cass. com. 13 december 1994, 92-19055 (inédit titré), http://www.legifrance. gouv.fr/; CA Paris 8 March 1996, D. 1996, inf. rap., p. 108; Bessis, 1991, p. 32; Ferrier, comments to the decision of the Cour de Cassation of 11 June 1986, D. 1997, somm., p. 57: “… cette attitude s’explique par une appréciation beaucoup plus aisée des effets de la réussite commerciale du franchisé que de ses causes.” and comments to the decisions of the Cours d’appel of Paris of 29 September 1989 and Colmar 9 March 1990 and of the Cour de Cassation of 3 October 1989, D. 1995, somm., p. 75: “… reconnaître l’existence du savoir-faire revient d’abord à constater cette réussite commerciale et, ensuite, à en identifier les arguments économiques, techniques, commerciaux …” Leloup, 1982, p. 18: “l´originalité et la spécificité du savoir-faire du franchiseur s´apprécient globalement, dans le système franchisé …” Also Leloup, 2004, p. 56 and 320: “La Cour de Cassation exige une analyse économique précise des contreparties fournies avant que puisse être prononcée la nullité pour défaut de cause.” See also Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998: “le savoir-faire … est le reflet de la réussite commerciale du franchiseur.”

Section 4. Franchisor’s obligation to communicate Know-How

137

fied as a franchise contract on the ground that one of the validity requirements (i.e. the causa) for the valid conclusion of a franchise contract has not been fulfilled. No corresponding court decisions are available. When under French law the obligation to communicate know-how is included in the agreement but does not comply with the requirements as to the contents of the obligation which are to be fulfilled at the time when the contract is concluded, French courts have interpreted this to mean that know-how is non-existent. On these grounds the courts have typically declared the contract null and void for lack of causa.506 In some decisions the courts reclassify the franchise contract as another type of contract.507

4.2.3.2 Remedies for non-performance The system of remedies differs if the non-compliance concerns requirements that are to be fulfilled during performance, rather than at the time the contract is concluded. In the case of unfulfilled requirements during performance, the general remedies for non-performance apply. In its decision of 9 June 1982 concerning a claim by a franchisee that the know-how communicated was not adequate for operating a dating agency, the Colmar Cour d’appel considered that the question was not whether there had been an adequate causa to contract, but whether the franchisor had correctly performed his obligations regarding know-how. The court concluded that the franchisor had failed to comply with his obligations during performance and accordingly ordered the termination of the contract, rather than the annulment claimed by the franchisee.508 This would also be the case for a claim of non-performance of the obligation to update the knowhow, as compliance with this requirement can only be verified at the time the contract is concluded and not during performance. This would therefore 506

507

508

Cass. com. 9 October 1990, Lettre distrib. 1990-12, 10 May 1994, Lettre distrib. 1994-07 and 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin; CA Paris 18 June 1992, 22 September 1992, 29 September 1992, 26 November 1992, 27 May 1993 and CA Versailles 27 May 1993, D. 1995, somm, p. 78, obs. D. Ferrier. Cass. Com. 4 June 2002, 99-19464 (inédit), http://www.legifrance.gouv.fr: the contract was reclassified as a distribution contract, because although it involved the provision of intellectual property rights and assistance, it did not involve the provision of know-how; CA Paris 7 june 1990, D. 1990, inf. rap., p. 176: the court concluded that the mere selection of products by the franchisor without technical and specific criteria being followed did not amount to know-how and therefore reclassified the contract as a sales contract. CA Colmar 9 June 1982, D. 1982, p. 553, annotated by J.-J. Burst. See also Cass. com. 4 November 1986, D. 1998, somm, p. 23, obs. D. Ferrier.

138

Chapter III. Description and Comparison

not constitute a ground to conclude that the causa is inadequate which would lead to annulment, but a ground to claim application of the remedies for non-performance (Article 1184 of the Civil Code).509 There have, however, been some judgments in which courts have granted termination of the contract, even though their reasoning indicates that the know-how was not adequate at the time of the conclusion of the contract.510 Jamin and Ferrier have criticised this lack of certainty as to the applicable remedy.511 According to Ferrier, the courts wrongfully equate lack of compliance with the obligation to transfer know-how with lack of compliance with the obligation to transfer adequate know-how. According to this author, the inadequacy of the know-how results in a situation where a validity requirement is lacking and may give rise to the annulment of the contract, not to its termination.512

4.2.3.3 Defences for the franchisor Several defences for the franchisor can be identified from French case-law concerning know-how, namely the moment at which proceedings are instituted, the independence of the franchisee, the need to alert the franchisor to the inadequacy of the know-how and the specific nature of the claim concerning the inadequacy of the know-how. As to the moment at which proceedings are instituted, French courts have held that proceedings cannot be brought too soon after the contract has been concluded, as in such cases it is not yet possible to assess the adequacy of the know-how,513 but not too late 509

510

511

512

513

The remedies for non-performance have been already described when the remedies fon non-performance of the obligation to provide intellectual property rights were discussed. See 3.2.6.2 in this Chapter, above. Cass. com. 19 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier, 24 May 1994, Cont. Conc. Consomm. 1994, no. 191, obs. L. Leveneur and CA Paris 25 February 1992, D. 1992, somm., p. 392, obs. D. Ferrier. Jamin, annotation to the decision of the Paris Cour d’appel of 10 March 1989, Gaz. Pal. 1989, 2, p. 550. See the comments by Ferrier to the decisions of the Cour de Cassation of 19 February 1991 and the Paris Cour d’appel of 25 February 1992, D. 1992, somm., p. 392; Mauger-Vielpeau agrees with Ferrier. See his comments concerning the decision of the Cour de Cassation of 21 May 1997, JCP 1998, p. 662. CA Paris 21 October 1986, D. 1988, somm., p. 23: “lorsqu’un franchisé, quelques semaines après la conclusion du contrat de franchise, met fin à la convention en invoquant l’insuffisance de l’assistance apportée par le franchiseur, sa précipitation, ne permettant pas, précisément, d’établir la défaillance du franchiseur, donne un caractère intempestif à la rupture qui doit être prononcée à ses torts.”

Section 4. Franchisor’s obligation to communicate Know-How

139

after the contract has been conluded either, because this would imply that the franchisee has been able to operate on the basis of the know-how for quite some time, for which reason it must be presumed that the franchisee was satisfied with the quality of the know-how.514 As to the independence of the franchisee, in some decisions it was held that there was no ground to claim inadequacy of the contents of the know-how, because at the time of the conclusion of the contract the franchisee had been aware of these contents and as a professional in the sector must assume the risk following from his signature of the contract.515 The franchisor can also claim in his defence that the franchisee did not previously alert him to the inadequacy of the know-how.516 Finally, the courts refuse to uphold claims from franchisees when these complain of the inadequacy of the know-how in abstract terms only.517 514

515

516 517

Cass. com. 29 April 1997, D. 1998, somm., p. 338, obs. D. Ferrier: the court did not declare the contract null because the franchisee only claimed that the knowhow was not adequate after five years of operating the business. The same conclusion was reached in the decisions of the Colmar Cour d’appel of 9 March 1990, D. 1990, p. 233, annotated by J.-J. Burst (the franchisee instituted proceedings after 6 months) and the Paris Cour d’appel 26 November 1992, D. 1995, somm., p. 78, obs. D. Ferrier (the franchisee instituted proceedings after two years). For example, the Paris Cour d’appel in its decision of 18 June 1992, D. 1995, somm., p. 78, obs. D. Ferrier held that a franchisee in a network for the operation of butcheries could not claim in court that the know-how was not adequate, because at the time when he signed the contract he knew, as a professional in the sector, and in accordance with the practice in the business sector involved, that the know-how consisted of no more than a certain way of presenting the displays and of training provided to the franchisees on how to choose and present the products. The same reasoning was followed by the Versailles Cour d’appel in a judgment of 27 May of 1993, D. 1995, somm., p. 78, obs. D. Ferrier: the court declined to decide in favour of the franchisee who claimed the nullity of the contract on the ground of lack of experience of the franchisor on the American market. The franchisee had concluded a contract to open a franchise business to sell French fashion and the court held that at the time of conclusion the franchisee had been aware of the fact that the franchisor was a French company with experience in France, but not on the American market. He had therefore been aware of the risks before entering into the contract. Similarly Cass. com. 10 May 1994, Lettre distrib. 1994-7. CA Colmar 9 March 1990, D. 1990, p. 233, annotated by J.-J. Burst. This was the case in a judgment of the Cour de Cassation of 29 April 1997, D. 1998, somm., p. 338, obs. D. Ferrier, by which a previous decision of a Cour d’appel was quashed. The court considered that there were no sufficient and precise grounds to conclude that know-how was lacking. The defendant had to provide

140

Chapter III. Description and Comparison

4.3

Spain

4.3.1

Introduction

The communication of know-how (saber-hacer) by the franchisor is one of the three obligations that according to Article 2 of RD 2485/1998 must be inevitably agreed on in franchising contracts. Article 2 states that a franchise contract comprises the communication by the franchisor to the franchisee of technical knowledge or know-how that must be characteristic, substantial and peculiar. 518 The Tribunal Supremo has held that know-how is an element that is characteristic of franchising contracts.519 In its decision of 21 October 2005, which regards a franchisee’s claim for the lack of existence of the franchisor’s know-how, the Tribunal Supremo refers to know-how as a basic requirement in franchise contracts.520 All other relevant judgments (i.e. concerning know-how) have so far been delivered by Audiencias Provinciales.521 In all of these decisions, the importance of the know-how element in franchising relationships is highlighted. For example, in the decision of the

518

519

520

521

concrete evidence as to the precise lack of performance, especially in this case where the franchisee had already been using the know-how of the franchisor for five years. Article 2 RD 2485/1998, as amended by Article 1 of RD 419/2006: “La actividad comercial en régimen de franquicia … comprende por lo menos: … (2) la comunicación por el franquiciador al franquiciado de unos conocimientos técnicos o un saber hacer, que deberá ser propio, sustancial y singular;” STS 27 September 1996, RJ 1996\6646, 30 April 1998, RJ 1998\3456 and 21 October 2005, Id Cendoj 28079110012005100801. STS 21 October 2005, Id Cendoj 28079110012005100801: “La transmisión de Know-how del franquiciador al franquiciado es un requisito básico del contrato de franquicia según la legislación comunitaria y la doctrina jurisprudencial.” SAP Valencia 21 May 1993, AC 1993\1024; SAP Zaragoza 10 April 2000, AC 2000\1287; SAP Valencia 28 April 2000, AC 2000\1193; SAP Barcelona 10 May 2000, JUR 2000\211264, 31 March 2001, JUR 2001\215218, 28 November 2003, JUR 2004\5933, 23 December 2003, AC 2004\433 and 24 March 2004, JUR 2004\122633; SAP Zaragoza 17 November 2003, AC 2003\2350; SAP Orense 28 April 2005, La Ley Juris 2022134/2005; SAP Madrid 27 September 2005, La Ley Juris 2178345/2005 and 16 January 2006, Id Cendoj 28079370142006100001; SAP Zaragoza 11 April 2006, Id Cendoj 50297370042006100187; SAP Barcelona 26 June 2006, Id Cendoj 08019370152006100136; SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558 and 22 December 2006, Id Cendoj 28079370132006100536.

Section 4. Franchisor’s obligation to communicate Know-How

141

Valencia Audiencia Provincial of 21 May 1993, the court held that franchising revolves around the transfer of know-how and used a highly illustrative metaphor to underline the importance of this element by describing knowhow as the “backbone” of a franchising business system.522 Legal doctrine also unanimously considers the obligation to communicate know-how as an essential obligation in franchising.523 Under Spanish law, therefore, agreement regarding the franchisor’s obligation to communicate know-how is considered a conditio sine qua non for the validity of a franchising contract.524 The case-law reported concerning know-how typically concerns two kinds of claims: claims based on the non-compliance of the know-how with the necessary requirements that would allow the franchisee to successfully operate the business,525 and claims based on non-compliance with the franchisor’s obligation to transfer all the know-how as agreed to in the contract.526

522

523

524

525

526

SAP Valencia 21 May 1993, AC 1993\1024: “la Franquicia está estructurada alrededor de una teoría: la de transferencia del know-how, que constituye su principio fundamental … por constituir la médula de este contrato …” See also SAP Valencia 28 April 2000, AC 2000\1193; SAP Madrid 27 September 2005, La Ley Juris 2178345/2005 and SAP Barcelona 26 June 2006, Id Cendoj 08019370152006100136. Uría, 2002, p. 739; Aguiló Piña, 1986, p. 4810; Broseta Pont, 2003, p. 128; Villagómez Rodil, 1997, p. 125 and 127; Fernández, p. 354; Jiménez Sánchez, p. 284; Cano Rico, 2002, p. 767; Sánchez Calero, 2003, p. 427 and Instituciones, p. 185; Echebarría, 1995, p. 306; Hernando Giménez, 2000, p. 205; Martín Trilla & Echarri Ardanaz, 2000, p. 25; Alonso Soto, 2001, p. 196. In the decisions of the Audiencia Provincial of Barcelona of 10 May 2000, JUR 2000\211264 and 23 December 2003, AC 2004\433, the know-how is described as the object of the contract. This view is shared by some authors: De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 377; Esteve Sanz & Ulloa y Suelves, 2004, p. 13; Tintoré & Peña & Naranjo, 2001, p. 51. Other scholars refer to know-how as the causa of the contract for the franchisee, see Echebarría, 1995, p. 306 and Hernando Giménez, 2000, p. 246. SAP Valencia 21 May 1993, AC 1993\1024; SAP Zaragoza 16 September 2003, AC 2003\1507 and 17 November 2003, AC 2003\2350; SAP Barcelona 24 March 2004, JUR 2004\122633; SAP Zaragoza 11 April 2006, Id Cendoj 50297370042006100187. SAP Valencia 28 April 2000, AC 2000\1193; SAP Zaragoza 25 July 2000, JUR 2000\273349; SAP Sevilla 28 January 2002, JUR 2002\47775; SAP Barcelona 21 March 2006, Id Cendoj 28079370212006100175; SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558.

142

4.3.2

Chapter III. Description and Comparison

Contents of the obligation regarding know-how

4.3.2.1 Requirements as to the contents The recently enacted RD 419/2006 amended Article 2 of the 1998 RD by inserting a reference to the requirements for know-how, which must be characteristic of the particular business, substantial and peculiar. The Spanish legislator did not however add any further explanation of the specific meaning of these terms. The elements of the contents of the know-how that have been mentioned so far by Spanish courts and scholars are the same as those required in the Block Exemption Regulation (BER) 2790/99: know-how must consist of a package of non-patented practical information that is secret, substantial and identified. The meaning given to those terms is the one contained in the BER.527 The courts and doctrine have added that such information typically concerns technical and commercial knowledge regarding the business.528 Furthermore, some authors have supplemented the description in the BER with two further requirements. The first is that the franchisor has to continuously adapt the technical and commercial information to the needs of the market in order to maintain its business value529 and to communicate

527

528

529

Article 1 (f) BER 2790/99, see 4.1.2 in this Chapter, above. Reference to the competition law definition of know-how is to be found in the decisions of the Tribunal Supremo of 27 September 1997, RJ 1996\6646, 30 April 1998, RJ 1998\3456 and 21 October 2005, Id Cendoj 28079110012005100801, and decisions of the Audiencias Provinciales of La Rioja 13 July 1992, AC 1992\1072; Valencia 21 May 1993, AC 1993\1024; Pontevedra 2 May 1997, AC 1997\1147; Barcelona 31 March 2001, JUR 2001\215218; Sevilla 28 January 2002, JUR 2002\47775; Tarragona 6 September 2002, JUR 2002\271881; Barcelona 9 September 2002, AC 2002\1728; Zaragoza 17 November 2003, AC 2003\2350 and Barcelona 28 November 2003, JUR 2004\5933. Also in legal writing: Uría, 2002, p. 739; Echebarría, 1995, p. 306; Hernando Giménez, 2000, p. 245 ff.; Martín Trilla & Echarri Ardanaz, 2000, pp. 24 and 37; Rodríguez, 1986, p. 878; Tintoré & Peña & Naranjo, 2001, p. 51. See for example SAP Zaragoza 10 April 2000, AC 2000\1287 or SAP Barcelona, 31 March 2001, JUR 2001\215218. Broseta Pont, 2003, p. 128; Jiménez Sánchez, 2003, p. 284. In the literature Gallego Sánchez, 1991, p. 144 ff; Echebarría, 1995, p. 307; Hernando Giménez, 2000, p. 250.

Section 4. Franchisor’s obligation to communicate Know-How

143

these adaptations to the franchisee.530 As has been explained in the context of the license of intellectual property rights under Spanish law, the existence of this obligation can be inferred lege data, if Article 1554 (2) of the Civil Code regarding lease contracts is analogously applied to franchising. This imposes on the franchisor an obligation to guarantee that the items in question remain fit for the use agreed in the contract. No franchise cases have however been decided yet concerning this particular issue. The second added requirement is that the franchisor has to guarantee the undisturbed use of the know-how by the franchisee without interference from third parties. Some authors infer this duty from the analogous application to franchising of Articles 1474 (1) and 1554 (3) of the Civil Code on contracts of sale and lease respectively, which impose the garantía de evicción.531 There has been one decision, delivered by the Granada Audiencia Provincial, where the existence of such an obligation was recognised.532 In some decisions and in the analysis of some scholars it is emphasised that the contents of the obligation to provide know-how may vary significantly, as these matters ultimately depend on the type of business operated.533 The concept of know-how has evolved under Spanish law from a limited scope (secret industrial knowledge) to a very generic scope which may include very different types of knowledge.534

530

531

532 533

534

Hernando Giménez, 2000, p. 334: “El proceso no se agota con la mera transmisión sino que ha de haber un constante desplazamiento del know-how durante todo el tiempo en que esté vigente el contrato”. See Cano Rico, 2002, 763; Hernando Giménez, 2000, p. 241. This obligation was already discussed when the obligation regarding intellectual property rights was analysed. See 3.3.2.3 in this Chapter, above. SAP Granada of 5 June 2000, JUR 2000\225079. STS 21 October 2005, Id Cendoj 28079110012005100801; SAP Barcelona 28 November 2003, JUR 2004\5933; SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558. In the literature Echebarría, 1995, p. 306 indicates that the matter of know-how gives rise to the most complex framework of rights and obligations for the parties; Hernando Giménez, 2000, p. 240 mentions as examples of know-how instructions on how to decorate the outlet, on how to present the goods, on how to provide the services, on how to organise transport, etc. SAP Zaragoza 11 April 2006, Id Cendoj 50297370042006100187; SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558 and 22 December 2006, Id Cendoj 28079370132006100536.

144

Chapter III. Description and Comparison

4.3.2.2 Requirements as to form RD 2485/1998 imposes no requirement as to how know-how should be communicated. The description contained in BER 2790/99 on vertical restraints, which is a recurring feature in many judgments and much of the scholarly writing, does not refer to the format in which know-how is to be delivered either. According to the courts in some rulings and according to legal writing, know-how in Spanish commercial practice is typically communicated by means of operational manuals (manuales de la franquicia).535 Moreover, the fact that an operational manual was provided has proven to be convincing evidence in court to demonstrate that know-how was indeed transferred.536 According to the rules on delivery in the Civil Code (if these are considered to apply analogously to the delivery of know-how in franchising), the effective delivery of know-how implies delivery of the items containing the knowledge in question (e.g. documents, plans, models, etc.).537 As in some decisions of Audiencias Provinciales and in legal writing the provision of assistance has also been considered as a means to communicate know-how to the franchisor,538 the rules on delivery may also be said to impose an obligation upon the franchisor to provide assistance.

535

536

537

538

SAP Valencia 21 May 1993, AC 1993\1024 and SAP Barcelona 24 March 2004, JUR 2004\122633. In legal writing see Hernando Giménez, 2000, p. 240; Tintoré & Peña & Naranjo, 2001, p. 51. SAP Valencia 21 May 1993, AC 1993\1024; SAP Barcelona 24 March 2004, JUR 2004\122633; SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558. However, in the decision of the Madrid Audiencia Provincial of 26 July 2006, Id Cendoj 28079370132006100293. the court held that the lack of delivery of the manual did not mean the lack of transference of the know-how, as was argued by the franchisee. Authors who defend the analogous application of Article 1462 ff. are Gómez Segade, in Gómez Segade, 1971, p. 419 and Hernando Giménez, 2000, p. 240. SAP Valencia 21 May 1993, AC 1993\1024; SAP Valencia 28 April 2000, AC 2000\1193; SAP Zaragoza, 25 July 2000, JUR 2000\273349; SAP Barcelona, 31 March 2001, JUR 2001\215218: the franchisor transmits to the franchisee certain technical and commercial knowledge and provides technical assistance for such knowledge to be used in practice; SAP Sevilla 28 January 2002, JUR 2002\47775. Echebarría, 1995, pp. 306 and 307 who bases this obligation on Article 3.2.b. of BER 4087/88.

Section 4. Franchisor’s obligation to communicate Know-How

145

4.3.2.3 Differentiation from competitors In the decision of the Tribunal Supremo of 21 October 2005 and in some case-law from different Audiencias Provinciales, the importance of the secrecy requirement is minimalised and emphasis is put on verifying whether the franchisor has complied with his obligation to transfer a type of know-how that serves to differentiate the franchised business from that of competitors.539

4.3.4

Remedies

4.3.4.1 Nullity Under Spanish law, the communication of know-how is considered a requirement for the validity of the franchise contract. If the agreement does not include a reference to the obligation to transfer know-how, it is not a valid franchising agreement due to the lack of one of the fundamental obligations of the contract.540 539

540

STS 21 October 2005, Id Cendoj 28079110012005100801: “… el secreto, entendido como difícil accesibilidad (no es generalmente conocido o fácilmente accesible por lo que parte de su valor reside en la ventaja temporal que su comunicación confiere al franquiciado …”; SAP Zaragoza 17 November 2003, AC 2003\2350: this case concerned the operation of a realtor’s office. The franchisee claimed that the commercial knowledge transferred by the franchisor did not result in the identification of the franchisee’s business. The court held that the know-how does not need to be substantially different from that transferred by other realtors, but that it nevertheless must have identifying characteristics that allow the differentiation of the franchisee’s business from that of competitors. As the know-how in question did not meet this requirement, the contract was invalidated; SAP Barcelona 24 March 2004, JUR 2004\122633: the franchisee claimed that the know-how regarding the operation of a chain of restaurants was not secret, i.e. not unavailable for competitors, and argued that the contract was therefore null and void. The court acknowledged that the know-how in question was not essentially different from that transferred by other franchisors who own restaurant chains, but that the know-how was still useful for the franchisee, because it enabled him to differentiate his business from that of competitors. The contract was not invalidated. See also SAP Vitoria 10 April 2006, Id Cendoj 01059370012006200128 and SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558. SAP Valencia 10 February 2006, Id Cendoj 46250370092006100018. In this decision the court indicated that the contract was not a franchise contract but a supply contract because the relationship did not include the obligation to transfer

146

Chapter III. Description and Comparison

Nullity of the contract is also the applicable remedy if the courts verify that, at the time when the contract was concluded, the know-how was not secret to competitors, substantial and identified. A lack of compliance with these requirements is interpreted as inexistence of the know-how and Spanish courts have accordingly granted the nullity of the contract due to lack of one of the requirements for validity.541 These cases are thus dealt with in accordance with the rules on validity, rather than the rules on nonperformance.542 Exceptionally, the Audiencia Provincial of Valencia in a decision of 21 May 1993 granted termination of the contract instead of granting nullity, even though the content of the know-how was considered insufficiently specified in the agreement.543

4.3.4.2 Remedies for non-performance Complaints as to lack of up-dated know-how and of non-fulfilment by the franchisor of his obligation to guarantee the undisturbed use of the knowhow can only be approached as cases of non-performance, because these requirements have to be fulfilled during performance and not at the time the contract is concluded. There have so far not been any decisions concerning non-compliance with the requirements concerning the contents of the know-how during performance. There has however been some case-law concerning non-compliance by the franchisor of his obligation to provide know-how, but these cases did not concern the contents of the know-how, but lack of compliance by the franchisor with his obligation as it was agreed in the contract.544 The available remedies for non-performance of the obligation to provide know-how are the same as those described for non-performance of the obligation to license the distinctive signs.545 Termination will be granted only if

541

542

543 544

545

the know-how. See for a similar decision SAP Málaga 22 May 2006, Id Cendoj 29067370052006100320. SAP Zaragoza of 16 September 2003, AC 2003\1507 and 17 November 2003, AC 2003\2350. SAP Madrid 16 January 2006, Id Cendoj 28079370142006100001. In this decision the court indicates that the remedy applicable to complaints concerning the lack of existence of the know-how is the nullity of the contract and not its termination. SAP Valencia 21 May 1993, AC 1993\1024. SAP Valencia 28 April 2000, AC 2000\1193; SAP Zaragoza 25 July 2000, JUR 2000\273349 and SAP Sevilla 28 January 2002, JUR 2002\47775. See 3.3.3.2 in this Chapter, above.

Section 4. Franchisor’s obligation to communicate Know-How

147

the non-performance cannot be cured and results in frustration of the franchisee’s expectations.546

4.3.4.3 Defences for the franchisor As has already been indicated, the relevant criterion for Spanish courts in determining the adequacy of the know-how is whether it allows for the differentiation of the business of the franchisee from that of competitors and not whether it is a secret to competitors.547 Some franchisee’s claims have been rejected because the franchisee had failed to warn the franchisor that the know-how was inadequate and had not requested him to cure the defects.548 The own expertise of the franchisee is also a relevant criterion that may exclude the liability of the franchisor.549

4.4

Comparison

4.4.1

Introduction

Under the PEL CAFDC, the franchisor has a legal obligation to transfer to his franchisees the know-how that is necessary to operate the franchise business. This obligation is explicitly laid down in Article 3:202. Franchisors involved in a franchising relationship regulated by French or Spanish law are also subject to this obligation. In France there is no statutory rule that explicitly imposes such a duty. However, French courts and the literature have established the existence and the particularities of the obligation to provide know-how in franchising relationships. In Spain, the courts, the literature and the legislator all acknowledge the importance of this obliga546 547

548

549

Ibid. SAP Zaragoza 17 November 2003, AC 2003\2350 and SAP Barcelona 24 March 2004, JUR 2004\122633. SAP Sevilla 28 January 2002, JUR 2002\47775: the franchisee’s claim for termination was rejected, because he had never complained of a lack of provision of know-how during the period of performance. See also SAP Barcelona 13 March 2006, Id Cendoj 08019370052006100101 and SAP Madrid 26 July 2006, Id Cendoj 28079370132006100293. SAP Valencia 28 April 2000, AC 2000\1193: the franchisee claimed that the know-how was not transferred in its entirety. The court held that the franchisee had not proven that the know-how had not been transferred. The court added that the franchisee’s claim was also unfounded because he was familiar with the field and consequently with the business method involved.

148

Chapter III. Description and Comparison

tion and it has been included as an essential element in the definition of franchising provided in RD 2485/1998. Know-how is perceived as the corner-stone of the franchising relationship. The systems compared do not differ on this point. Nor is there disagreement regarding the fact that a relationship cannot be classified as a franchising relationship when the transfer of know-how is not included in the contents of the agreement. Under the Principles and under Spanish law, know-how is included as one of the characteristic elements in the respective rules on scope of application (Article 3:101 of the PEL CAFDC and Article 2 of RD 2485/1998), which means that the absence of know-how implies that a contract cannot be considered a franchising contract. In line with the provision on scope of application enacted by the Spanish legislator, most definitions given by Spanish courts and the literature also include knowhow as an indispensable element of the franchise contract. There is no statutory definition of franchising in France, but the definitions provided by the French courts and by French legal authors generally include know-how as a characteristic element in franchising relationships. In any case, the decisive argument for concluding that know-how is a main element under the French and Spanish regimes is that it is unanimously considered by courts and scholars as a requirement for the validity of franchise contracts. If the obligation to transfer know-how is not agreed upon, the agreement cannot be classified as a franchise agreement. All three systems also concern themselves with the adequate contents of the know-how: not only must the obligation to provide know-how be agreed upon, but it also has to be performed in accordance with certain requirements in order to guarantee that the know-how transferred is adequate to allow the franchisee to operate the franchise business.

4.4.2

Contents and form of the obligation to communicate know-how

The disputes regarding know-how which have reached the courts both in France and Spain do not concern the question of the lack of explicit agreement on know-how at the time of conclusion of the contract, but the lack of adequacy of the know-how to allow the franchisee to successfully operate the business. In addition, some Spanish judgments deal with claims of franchisees for non-performance by the franchisor of his obligation to communicate know-how as agreed in the contract. The task of national courts in both jurisdictions has mostly consisted of verifying whether the know-how complies with certain requirements as to the contents of the know-how.

Section 4. Franchisor’s obligation to communicate Know-How

149

4.4.2.1 Requirements as to contents The requirements as to the contents of the know-how generally adopted in French and Spanish case-law and legal writing are the requirements contained in the BER 2790/99: the know-how must consist of a package of practical informations, that has been previously tested and is secret, substantial and identified. These are also the characteristics mentioned in the Principles. In addition to the characteristics contained in the BER, the three regimes emphasise the ongoing character of the obligation to transfer knowhow. Irrespective therefore of whether the Principles or French or Spanish law applies, the franchisor is obliged to guarantee that the know-how is adequate not only at the beginning of the relationship but throughout the duration of the contract. However, French courts have further specified the competition law requirements to adapt them to deal with the private law questions regarding know-how. Instead of secret, substantial or identified, French courts refer to the conditions of specificity and originality. French literature refers to the requirement of the transmissibility of the know-how, which is neither mentioned in the Principles, nor under Spanish law. In Spain, courts and the literature have continued to make use of the terminology of competition law. Scholars refer to an added criterion: the obligation for the franchisor to guarantee the undisturbed use of the knowhow by the franchisee, which is neither mentioned in the Principles, nor under French law. The Spanish legislator has very recently (RD 419/2006) modified the reference to the obligation regarding know-how in the RD 2485/1998 to include that the know-how is to comply with requirements as to the contents, namely that it has to be characteristic of the business in question, substantial and peculiar. The new terminology differs from that used in competition law. However, the meaning of those new terms has not yet been specified.

4.4.2.2 Form requirements None of the systems imposes any requirement as to the form of the knowhow. In commercial practice the know-how is typically transferred in the form of operational manuals. Its relevance is stressed in some Spanish judgments as a means to prove that the know-how has indeed been provided.

4.4.2.3 Pragmatic approach Compliance with the requirements as to the contents of the know-how has been thoroughly examined in French case-law. However, the approach of

150

Chapter III. Description and Comparison

courts has evolved towards a more pragmatic method which focuses on whether the franchisee has gathered an advantageous position with regard to competitors rather than on verifying compliance with each of the specific requirements. This practical approach is also noticeable in some decisions of Spanish courts. The importance of the secrecy requirement is played down to grant more relevance to the assessment of whether the know-how allows the differentiation of the franchisee’s business from that of competitors.

4.4.3

Remedies

Both in the Principles and under French and Spanish law, the legal consequence of the fact that the parties failed to include the obligation to communicate know-how in their agreement is that the contract cannot be classified as a franchising agreement. The remedies are different under the Principles and under French and Spanish law where the franchisor communicates know-how which does not comply with the requirements as to contents. According to French and Spanish case-law, the lack of compliance of the know-how with the required conditions at the time the contract is concluded implies that the know-how does not exist and that the contract is to be annulled for lack of a validity condition. If the Principles apply the franchisee can only substantiate a claim for non-performance of the franchisor with the particular obligations imposed by the rule on know-how but the validity of the contract cannot be questioned. Annulment is therefore the typical remedy granted both in France and Spain when courts conclude that the know-how does not comply with the required conditions at the time the contract is concluded. However, in France there are a few examples of judgments in which termination instead of annulment is granted even though the know-how is considered not to be adequate at the time the contract is concluded. This is also the case in one decision of a Spanish lower court. Some French scholars have criticised this uncertain approach in French case-law. In Spain there is no scholarly opinion on the issue. Regarding the non-compliance with the requirements as to the contents of the know-how which are to be fulfilled during performance, they are to be dealt with according to the general rules on non-performance, both in the Principles and under French and Spanish law. It means that the franchisee may pursue specific performance or termination of the contract, with the right to claim damages in both cases. The consequences under French law for termination are however different than under the Principles and under Spanish law because termination, similar to annulment, implies the extinction of the contract with retroactive effect. Under the regime in the Principles and Spanish law the existence of the contract until the moment the contract is terminated cannot be questioned.

Section 4. Franchisor’s obligation to communicate Know-How

4.4.4

151

Conclusion

The obligation for the franchisor to transfer his know-how to his franchisees is a characteristic obligation according to the Principles, to French law and to Spanish law. This obligation is to be agreed upon if the parties wish for their relationship to be classified as a franchising agreement. All three systems are moreover concerned with the quality of performance of the franchisor and for this reason all establish particular requirements as to the contents of the know-how in order to guarantee that the transferred know-how is an appropriate means for the franchisee to operate the franchisor’s method successfully. The particular requirements are basically the same under the three regimes because they all adopt the characteristics of know-how established in European competition law, and they all include an added condition, namely that the know-how is to be up-dated. However, the application of these abstract characteristics to practical cases has led national courts to further specify the meaning of these conditions in order to deal with the private law questions on know-how brought up in civil proceedings. In France, this has led courts to use a different terminology in naming the characteristics and to impose added requirements, namely that of the transmissibility of the know-how. The Spanish legislator has also used a different terminology in the new RD 419/2006: know how must be characteristic of the business, substantial and peculiar. These minor differences should not be of relevance because both French and Spanish courts will likely continue with a pragmatic approach in assessing compliance with the conditions as to the quality of the know-how. This approach consists of analysing whether the know-how has allowed the franchisee to obtain an advantageous position in the market with regard to competitors rather than verifying compliance with each of the specific conditions. The application of the Principles would imply modifying the French and the Spanish regimes as regards the legal consequences if the know-how transmitted is not of the quality required at the time the contract is concluded. According to French and Spanish law the consequence in these cases is the invalidity of the franchise contract whilst under the Principles the contract remains valid and the lack of compliance is to be dealt with as a case for non-performance. The remedies are the same in the three systems if the know-how does not comply with the conditions as to its contents which are to be fulfilled during performance, namely the general remedies for nonperformance.

Section 5. Franchisor’s obligation to give Assistance 5.1

PEL CAFDC: Article 3:203

5.1.1

Introduction

Pursuant to the PEL CAFDC, providing the franchisee with the right to use the franchisor’s intellectual property rights and know-how is not generally sufficient to allow the franchisee to operate the franchised business successfully. The franchisee may also need the franchisor’s assistance to put the franchisor’s business method into practice. 550 Accordingly, under Article 3:203 the franchisor has a duty to assist his franchisees. This provision reads as follows: (1) The franchisor must provide the franchisee with assistance in the form of training courses, guidance and advice, in so far as necessary for the operation of the franchise business, without additional charge for the franchisee. (2) The franchisor must provide further assistance, in so far as reasonably requested by the franchisee, at a reasonable cost.

Article 3:203 imposes two main obligations on franchisors. On the one hand, the franchisor is obliged to provide his franchisees with the assistance that franchisees in his network generally need to operate the franchisor’s business (paragraph (1)). On the other hand, he is obliged to respond to requests of franchisees for additional assistance when such extra assistance is needed to meet the needs of a particular franchisee (paragraph (2)). The obligation to assist however is not under the PEL CAFDC perceived as a main obligation in franchising contracts, and therefore it has not been included as a characteristic obligation in Article 3:101 on scope of application. It follows therefore that an agreement may be classified as a franchising contract even when it does not contain an obligation to assist for the franchisor.551 Accordingly, Article 3:203 is formulated as a default rule: parties may exclude the obligation to assist by agreement.

550 551

See Article 3:203 of the PEL CAFDC, Comment A. See Article 3:101 of the PEL CAFDC, Comment B.

Section 5. Franchisor’s obligation to give Assistance

5.1.2

153

Necessary assistance

5.1.2.1 Requirements as to contents Article 3:203 imposes a requirement as to the contents of the obligation to assist: the assistance to be provided has to be the ‘necessary assistance’, i.e. the assistance that all franchisees in the particular network generally need to operate the business. According to the wording of this rule, the necessary assistance consists of training courses, guidance and advice. The Comments to this provision further explain that the necessary support is to be given in commencing the operation of the business (initial assistance) and in solving problems which may arise throughout the duration of the relationship regarding the operation of the business concept (ongoing assistance).552 This necessity test serves to limit the scope of the obligation for the franchisor. On the one hand the franchisor is not obliged to provide more assistance than generally needed by all franchisees in his network. On the other hand, the franchisor cannot use assistance as an excuse to interfere with the independence of the business of his franchisees.553 The Principles do not define the requirements as to the contents of the obligation to assist any further than this.

5.1.2.2 No form requirements The Principles impose no form requirements as to the obligation to assist.

5.1.2.3 Costs included The Comments to the provision on assistance contain an indication as to whether assistance leads to costs for the franchisee. This clarification is needed because the provision on scope does not list assistance as one of the obligations to be fulfilled by the franchisor in exchange for remuneration. Under the system of the Principles, if the assistance in question is generally necessary, the assistance does not lead to extra costs for the franchisee, as the assistance is to be considered part of the business package which the franchisor must transfer to the franchisee in exchange for direct or indirect

552 553

See Article 3:203 of the PEL CAFDC, Comment A. See Articles 1:101, 3:101 and 3:303 of the PEL CAFDC.

154

Chapter III. Description and Comparison

financial remuneration (jointly with the intellectual property rights and know-how).554

5.1.3

Additional assistance at reasonable cost

As has been indicated above, the Principles do not oblige the franchisor to volunteer further assistance than what is typically needed to operate the network. However, he has to answer requests for assistance when these are intended to meet the particular needs of individual franchisees as regards the adequate operation of the business (“reasonable requests”). According to the Comments to Article 3:203, the costs of additional assistance are not included in the payment which franchisees make to operate a franchised business. Therefore, demands for specific assistance may lead to extra costs for the franchisee, insofar as the additional cost is reasonable. In accordance with Article 6:105 of the PECL, if this additional payment is to be unilaterally determined by the franchisor and the franchisor’s determination of the price is unreasonable, a reasonable price is substituted by law.

5.1.4

Remedies

If the obligation to assist is not excluded by agreement, then the franchisor is obliged to assist his franchisees in accordance with Article 3:203. The remedies which apply if the franchisor does not perform his obligation to assist are the same as those already mentioned regarding the nonperformance of the obligations to license intellectual property rights and to transfer know-how:555 specific performance (Article 9:102 of the PECL) or termination of the contract if the non-performance is fundamental (Article 9:301 of the PECL). If the franchisee has suffered any loss he is entitled to claim damages (Article 9:105 of the PECL). Indemnity for goodwill may also be granted (Article 1:305 of the PEL CAFDC).

5.2

France

5.2.1

Introduction

According to French courts and legal doctrine, a franchise contract involves the obligation for the franchisor to provide assistance to his franchisees. It is 554 555

See Article 3:203 of the PEL CAFDC, Comment F. See 3.1.4 and 4.1.4 in this Chapter, above.

Section 5. Franchisor’s obligation to give Assistance

155

generally described as one of the three characteristic obligations in franchising, together with the license of intellectual property rights and the communication of know-how.556 In case-law and in the literature the obligation to assist is often described as a basic obligation of the agreement and therefore a requirement for the valid formation of a franchise agreement.557 Accordingly, the Cour de Cassation has explicitly indicated that the lack of assistance implies the invalidity of the contract due to lack of causa.558 Surprisingly, however, other judicial decisions and legal writing do not refer to the obligation to assist at all, but only to the obligations regarding

556

557

558

Cass. com. 4 November 1986, D. 1998, somm, p. 23, obs. D. Ferrier; Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin; Cass. com 21 May 1997, JCP 1998, II,10057, annotated by L. Mauger-Vielpeau and D. 1998, jur., annotated by B. Fages; CA Paris 10 March 1989, Gaz. Pal. 1989, 2, p. 544 ff., annotated by Ch. Jamin; CA Paris 27 April 1990, D. 1990, somm., p. 370, obs. D. Ferrier; TGI Lyon 24 April 1989 and TGI Paris 20 November 1989, D. 1990, somm., 370, obs. D. Ferrier; CA Paris 23 January and 25 February 1992, D. 1992, somm. p. 392, obs. D. Ferrier; CA Douai 6 October 1992, D. 1995, somm., p. 75, obs. D. Ferrier. In the literature see Jamin, annotation to the decision of the Paris Cour d’appel of 10 March 1989, Gaz. Pal. 1989, 2, p. 548; Huet, 2002, p. 559; Bessis, 1991, p. 37 ff.; Guyon, 1996, p. 892; Malaurie & Aynès & Gautier, 2005, p. 473; Gunther, 2000, p. 273 ff.; Fages, annotation to the decision of the Cour de Cassation of 21 May 1997, D. 1998, jur., p. 150 ff.; Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998, II,10057; Ferrier, comments to the decision of the Paris Cour d’appel of 14 February 1991, D. 1992, somm. p. 392, annotation to the decision of the Cour de Cassation of 11 June 1996, D. 1997, somm. p. 57 and comments to the decision of the Douai Cour d´appel of 6 October 1992, D. 1995, somm., p. 75; Le Tourneau, 2003, p. 2; Leloup, 2004, p. 12. Cass. Com. 4 November 1986, D. 1998, somm,, p. 23, obs. D. Ferrier; Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin; Cass. civ. 11 June 1996, D. 1997, somm. p. 57, obs. D. Ferrier; CA Paris 4 March 1991, D. 1991, inf. rap., p. 103; CA Versailles 27 May 1993, D. 1995, somm., p. 78, obs. D. Ferrier; CA Paris 11 February 2000, 1997/23653 (pub.bull), http://www.legifrance.gouv.fr. Authors who argue that assistance is a fundamental obligation include Malaurie & Aynès & Gautier, 2005, p. 473; Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998, II, 10057; Le Tourneau, 2003, p. 37. Cass. civ. 11 June 1996, D. 1997, somm. p. 57, obs. D. Ferrier: “Est nul pour absence de cause le contrat de franchise dont les éléments caractéristiques, à savoir la communication d’un savoir-faire original et expérimenté à la conclusion du contrat, puis lors de l’exécution, l’assistance technique et commerciale préalable et la collaboration avec les franchisés, font défaut.”

156

Chapter III. Description and Comparison

intellectual property rights and know-how as the basic obligations in franchising contracts.559 Unlike the reported case-law regarding the obligations to provide intellectual property rights and know-how, French case-law regarding the franchisor’s obligation to assist does not deal with franchisee claims for lack of compliance of the assistance with certain quality requirements upon conclusion of the contract, but with the non-performance by franchisors of the obligation to assist as it was agreed upon in the contract.560 More in particular, most disputes in French commercial practice arise due to a difference in interpretation of the contents of the contractual term that imposes the obligation to assist.561

5.2.2

Assistance as agreed in the contract

Franchisees in France have called on courts to interpret the contents of the contractual term on assistance included in the franchise contract. Therefore, French courts have not been required to determine whether the obligation to assist has to comply with certain quality requirements that would allow the franchisee to operate the business adequately. The contents of the obligation to assist are to be determined by the parties in their agreement. As emerges from the case-law and the literature, the contents of the obligation to assist vary depending on whether the franchisor provides the assistance at the beginning of the relationship or during performance. The obligation for the franchisor to provide initial support to the franchisee may 559

560

561

CA Paris 10 March 1989, Gaz. Pal., 1989, 2, p. 544; CA Colmar 9 June 1982, D. 1982, p. 553, annotated by J.-J. Burst; CA Paris 29 September 1992, D. 1995, somm, p. 78, obs. D. Ferrier. Among scholars see Burst, 1988, p. 40; Huet, 2002, p. 559 and Guyon, 1996, p. 891: “elle [le franchise] consiste essentiellement en l´utilisation par le franchisé du savoir-faire du franchiseur et de certains éléments de ralliement de la clientèle.” Cass. com. 3 October 1989, D. 1990, somm. p. 371, obs. D. Ferrier; Cass. com. 21 May 1997, JCP 1998, II,10057, annotated by L. Mauger-Vielpeau and D. 1998, jur., annotated by B. Fages; Cass. com. 18 June 2002, 99-20788; Cass. civ. 17 May 2005, 04-12176 (inédit), http://www.legifrance.gouv.fr; CA Douai 6 February 2003, 00-001673 (publié), http://www.legifrance.gouv.fr. The fact that claims concerning assistance differ from claims regarding intellectual property rights and know-how was pointed out by Ferrier in his comments to the decision of the Paris Cour d’appel of 23 January 1992, D. 1992, somm., p. 392. See Cass. com. 18 June 2002, 99-20788 (inédit titré), http://www.legifrance. gouv.fr, in which the Cour de Cassation refers to a general obligation to assist: “l’obligation générale d’assistance”.

Section 5. Franchisor’s obligation to give Assistance

157

consist of helping and advising the franchisee regarding the location and the decoration of the outlets,562 of training courses on how to start up the business,563 of assistance concerning initial advertising and the introduction of products in the market,564 of advice on the quantity of stock which the franchisee must purchase565 or on the initial amount of investments to be made.566 Ongoing assistance is mainly regarded as a means for the franchisor to indicate to the franchisee how to put into practice the franchisor’s knowhow567 or as a means to supervise that franchisees operate the business method adequately.568 Nevertheless, two aspects of the obligation to assist have been regulated in case-law and legal doctrine: first, assistance is to be provided at the beginning of the relationship to help the franchisee start operating the business569 and must continue to be provided throughout the duration of the contract.570 Secondly, the assistance provided must not be such that it leads 562

563 564 565 566

567

568

569

570

Cass. com. 21 May 1997, JCP 1998, II,10057, annotated by L. Mauger-Vielpeau and D. 1998, jur., annotated by B. Fages. In the literature, see Bessis, 1991, p. 37; Gunther, 2000, p. 273; Ferrier, comments to decision of the Douai Cour d´appel of 6 October 1992, D. 1995, somm., p. 75. Bessis, 1991, p. 37. Gunther, 2000, p. 273. Bessis, 1991, p. 37. See Ferrier, comments to decision of the Douai Cour d´appel of 6 October 1992, D. 1995, somm., p. 75. CA Paris 14 February 1991, D. 1993, somm. p. 392, obs. D. Ferrier; CA Paris 11 June 1992, D. 1992, somm., p 392, obs. D. Ferrier. Cass. com. 21 May 1997, D. 1998, 150 obs. B. Fages and JCP 1998, II, 10057, obs. L. Mauger-Vielpeau; Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin; Cass. com. 19 May 1992, JCP E, 1993, II, 387, annotated by L. Leveneur; CA Paris 10 March 1989, Gaz. Pal. 1989, 2, 544, annotated by Jamin; CA Paris 14 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier; CA Paris 11 June 1992, D. 1992, somm., p. 391, obs. D. Ferrier. TGI Lyon 24 April 1989 and TGI Paris 20 November 1989, D. 1990, somm., p. 370, obs. D. Ferrier. CA Paris 14 February 1991, D. 1992, somm. p. 392, obs. D. Ferrier; 4 March 1991, D. 1991, inf. rap., p. 103 and 22 September 1992, D. 1995, somm, p. 78, obs. D. Ferrier. In legal writing see Jamin, annotation to the decision of the Paris Cour d’appel of 10 March 1989, Gaz. Pal. 1989, 2, p. 548: “la notion même de franchise, qui postule transmission d’un savoir-faire et assistance technique permanente”; Malaurie & Aynès & Gautier, 2005, p. 473; Bessis, 1991, p. 37; Ferrier, comments to the decision of the Cour de Cassation of 11 June 1996, D. 1997, somm., p. 57: “le contrat de franchise repose sur la mise à disposition d’une marque déposée, la communication d’un savoir faire original et la fourniture d’une assistance continue au profit du

158

Chapter III. Description and Comparison

to interference with the business independence of the franchisee.571 A relevant decision is the judgment of the Paris Cour d’appel of 10 March 1989 concerning the operation of a business for the sale of pastry products. The court considered that the exaggerated number of visits to the franchisee’s outlet, the continuous organisation of training courses and the non-stop launching of promotional activities on the franchisor’s initiative resulted in interference with the autonomy of the franchisee, which was incompatible with the nature of a franchise contract.572 This approach ensures that the franchisee’s independence is safeguarded, but this could also work against the franchisee in other cases. For instance, the Paris Cour d’appel in a judgment of 19 January 1990 held that a franchisor was not obliged to advise his franchisee on the convenience of limiting his purchase orders, even though the franchisor was aware that the franchisee was facing financial difficulties, because this was considered by the court as interference with the responsibilitiy of the franchisee to manage his own business.573 The opinion of French authors accords with the case-law where the need to preserve the independence of franchisees is concerned.574 However, some scholars have emphasised the difficulty of striking the right balance between assistance and independence.575 According to Jamin, the point where assistance provided is still compatible with the franchisee’s independence cannot be determined in the abstract, but only on a case-by-case basis.576

571

572 573 574 575

576

franchisé”. Also Ferrier, comments to decision of the Paris Cour d’appel of 27 April 1990, D. 1990, somm., p. 370: “L’assistance doit être permanente et non simplement occasionnelle comme l’a souligné la cour de Paris”. In legal writing see Bessis, 1991, p. 37; Guyon, 1996, p. 894; Gunther, 2000, p. 273 ff. and Leloup, 2004, p. 280. Bessis, 1991, p. 38; Gunther indicates that there may be exceptional circumstances in which the franchisor has to provide assistance, upon request by the franchisee, which may interfere with the franchisee’s independence; for example, should the franchisee be seriously ill, the franchisor may appoint a member of his staff to supervise the franchisee’s shop, in Gunther, 2000, p. 274. CA Paris 10 March 1989, Gaz Pal, 1989, 2, p. 544 ff. CA Paris 19 January 1990, D. 1990, somm., p. 379, obs. D. Ferrier. Bessis, 1991, p. 54; Ferrier, 2002, p. 382 and Leloup, 2004, p. 220. See Jamin, annotation to the decision of the Paris Cour d´appel of 10 March 1989, Gaz. Pal. 1989, 2, p. 549 and Ferrier, comments to decision of the Paris Cour d’appel of 27 April 1990, D. 1990, somm, p. 370: “l’exécution de cette obligation est source de difficultés en raison soit de l’insuffisance de l’assistance, soit de son excès.” See Jamin, annotation to the decision of the Paris Cour d´appel of 10 March 1989, Gaz. Pal. 1989, 2, p. 549: “… tout est une question de mesure … les magistrats doivent gérer, au cas par cas, l’ambiguïté de la notion de franchise qui devrait idéalement permettre l’assistance dans le respect de l’indépendance.”

Section 5. Franchisor’s obligation to give Assistance

5.2.3

159

Judicial interpretation as to the contents of the obligation to assist

The cases that have reached the French courts have required them to interpret in each case whether the specific assistance that franchisees claimed was not provided by the franchisor had to be considered as part of the obligation to assist as agreed in the contract. In particular, the decisions reported mostly concern claims that the franchisor failed to comply with his obligation to provide advice on site selection or with his obligation to provide assistance to franchisees who are having problems operating the business.577 The interpretations given by different French courts are not consistent. In some judgments, the court in question gives a literal interpretation of the contract, whereas in others the court applies an extensive interpretation, as will be explained below.

5.2.3.1 Restrictive interpretation 5.2.3.1.1 No implied obligations In some judgments, courts have indicated that the obligation to advise on site selection and to assist the franchisee when he encounters problems operating the system can only be held to apply if agreed upon by the parties.578 In a decision by the Paris Cour d´appel of 19 January 1990, the franchisor was not held to have an obligation to actively assist the franchisee, despite the fact that the franchisor was aware of the financial difficulties of the franchisee, because the contract indicated that the franchisor only had to provide assistance when the franchisee explicitly asked for help.579 Recently, in a decision of 17 May 2005, the Cour de Cassation has confirmed this restrictive approach. In this decision the Cour quashed a decision of a 577

578

579

See for instance, Cass. com. 3 October 1989, D. 1990, somm. p. 371, obs. D. Ferrier; Cass. com. 21 May 1997, D. 1998, 150 obs. B. Fages and JCP 1998, II, 10057, obs. L. Mauger-Vielpeau and Cass. civ. 17 May 2005, 04-12176 (inédit), http://www.legifrance.gouv.fr. Cass. com. 3 October 1989, D. 1990, somm. p. 371, obs. D. Ferrier: “un franchisé ne saurait faire grief au franchiseur, auquel il ne reproche aucune faute dans l’exécution même du contrat de franchise, d’avoir mal choisi l’emplacement du magasin …” see also CA Paris 27 April 1990, D. 1990 somm., 370, in which the court refused to grant termination because the franchisee had not specified which contractual clauses had been disregarded by the franchisor and CA Douai 6 February 2003, 00/001673. CA Paris 19 January 1990, D. 1990, somm., p. 379, obs. D. Ferrier.

160

Chapter III. Description and Comparison

lower court because it concluded that the franchisor had not complied with his obligation to advise, in this case to recommend that the franchisee should have followed a new plan which would have improved his economic situation, without it having previously clarified which concrete contractual terms imposed such an obligation on the franchisor.580

5.2.3.1.2 Additional assistance may lead to extra payment According to the restrictive interpretation applied by French courts, if the assistance required by the franchisee is not explicitly agreed upon in the agreement, the franchisor may charge the franchisee for it.581 The Cour de Cassation in a decision of 18 June 2002 established that the franchisee had to pay for the complementary services that he required from the franchisor and that were not included in the obligation to assist as it was agreed upon in the contract.582 The contract in question included an obligation to assist for the franchisor which consisted of the communication of experience of the franchisor in the operation of the outlet, the communication of tariffs for sale and the general organisation of the outlet. The request of the franchisee for particular assistance (concerning accountancy, the assessment of inventories, etc.) was considered not to be included in the obligation to assist as agreed in the contract. Similar reasoning was applied by the Douai Cour d´appel in a judgment of 6 February 2003.583 In this decision, the court verified that the parties had agreed upon an obligation to assist according to which the franchisor had undertaken the obligation to put at the disposal of the franchisee the model for commercial policy and the structural organisation of the outlet, the recommended budget for investments and the provisional operation accounts and to offer advise on the selection and training of staff. The support required by the franchisee, who in fact wanted his franchisor to act as a permanent commercial advisor, was considered not to be included in the obligation to assist as agreed upon. It cannot be concluded from these decisions whether the franchisor is obliged to answer requests for assistance from franchisees if the particular type of assistance requested is not explicitly agreed upon in the contract.

580 581 582 583

Cass. civ. 17 May 2005, 04-12176 (inédit), http://www.legifrance.gouv.fr. Bessis, 1991, p. 37; Leloup, 2004, p. 281. Cass. com. 18 June 2002, 99-20788, http://www.legifrance.gouv.fr. CA Douai 6 February 2003, 00-001673 (publié) http://www.legifrance.gouv.fr.

Section 5. Franchisor’s obligation to give Assistance

161

5.2.3.2 Extensive interpretation: implied obligations The position taken by French courts is, however, not consistent. In other rulings, courts have interpreted the obligations to advise on site selection and to volunteer support to franchisees facing difficulties operating the business as implied obligations. Indeed, in some decisions it was established that the franchisor had a duty to advise on site selection even when this had not been explicitly agreed in the contract, because the franchisee had to be made aware of criteria which would allow him to assess whether the place of business under consideration would be appropriate.584 This approach was confirmed by the Cour de Cassation in a ruling of 21 May 1997.585 The case concerned the operation of a car wash which opened at night causing nuisance to neighbours. The neighbours sued the franchisee for damages and the franchisee brought a parallel claim against the franchisor, because the latter had not advised him on the appropriateness of opening such a business in such an area. The franchisor adduced that his obligation to assist was limited by agreement to inform on the profitability of the site and to guarantee that the outlet was in conformity with the requirements of the network. However the Cour de Cassation indicated that, in accordance with the judgment of the Cour d´appel, the contractual obligation included a duty for the franchisor to warn the franchisee of the possible nuisance which would be caused to neighbours. The franchisor was found liable for the lack of success of the franchisee’s business. The same is true concerning the existence of an obligation for the franchisor to intervene when the franchisee faces difficulties operating the business. In contrast to the judgments referred to above, some rulings state that the franchisor must provide help in these cases even if this had not been agreed upon. According to the reasoning applied in these judgments, the efforts of the franchisor must go in the direction of modifying the elements of the franchise method which are not adapted to the franchisee’s situation,586 terminating the contract if these elements cannot be adapted or sanctioning the lack of performance by the franchisee.587 584 585

586

See for example CA Douai, 6 October 1992, D. 1995, somm. p. 75, obs. D. Ferrier. Cass. com. 21 May 1997, JCP 1998, II, 10057, annotated by L. Mauger-Vielpeau, confirming the interpretation by the lower court. CA Paris 10 March 1989, Gaz. Pal. 1989, 2, 544, annotated by Ch. Jamin; CA Paris 11 June 1992, D. 1992, somm., p. 391, obs. D. Ferrier; CA Paris 3 February 1994, D. 1995, somm., p. 76, obs. D. Ferrier: “le franchiseur, après avoir laissé son franchisé s’engager financièrement pour réaliser une installation jugée après coup inadéquate, n’étant intervenu dans l´exercice de son devoir de conseil qu´au bout de trois mois en demandant des mesures qui ont été suivies dans la mesure ou elles pouvaient l´être,

162

5.2.4

Chapter III. Description and Comparison

Scholars’ interpretation of the contents of the obligation to assist

Scholars are far more outspoken than the courts in emphasising the importance of the franchisor’s obligation to assist. Scholars are unanimously agreed that the obligation to assist is indispensable in franchising agreements.588 Most scholars link this essential character of the obligation to the function of assistance as a means to transfer know-how.589 According to Le Tourneau, the obligation to assist must be considered implied if the parties do not explicitly agree on it.590 Mauger-Vielpeau has indicated that the obligation to advise on site selection is an essential obligation of the franchisor which cannot be excluded by agreement.591 The

587

588 589

590 591

mais qui étaient insuffisantes eu égard aux engagements souscrits par le franchise pour lui permettre de redresser sa situation dans un délai raisonnable.” Cass. com. 19 May 1992, JCP E, 1993, II, 387, annotated by L. Leveneur; CA Paris 14 February 1991, D. 1993, somm., p. 392, obs. D. Ferrier. See n. 7 of this Section, above. Legal doctrine typically refers to ongoing assistance as the main means to communicate up-dated know-how and to help franchisees to adapt to changes. See Leloup, comments to the decision of the Paris Cour d’appel of 28 April 1978, Cah. dr. entrep. no. 42, October 1980, p. 10: “la communication du savoir-faire se fait essentiellement par l’exemple et par des supports remis au franchisé.” Also Leloup, 1982, p. 19; Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998, II, 10057: „… l’obligation de conseil et d´assistance du franchisé en cours d´exploitation est souvent qualifiée de prolongement du savoir-faire initial … Le savoir-faire est l´élément décisif, dans lequel se fond l´obligation d´assistance et de conseil.” Ferrier, comments to the decision of the Paris Cour d´appel 27 April 1990, D. 1990, somm., p. 370: “le contrat de franchise fait peser sur le franchiseur l’obligation d’assister le franchisé dans la mise en œuvre de son savoir-faire.” Also Ferrier, comments to decision of the Paris Cour d’appel of 14 February 1991, D. 1993, somm. p. 392; Bessis, 1991, p. 37 and 77: “l’assistance technique est un prolongement de ce savoir faire et permettra son adaptation quotidienne aux besoins du franchisé.” Vidts, 2000, p. 76 : “le devoir d’assistance du par le franchiseur au franchisé n’est qu’un aspect de l’obligation du franchiseur de transmettre son savoir-faire.” Guyon, 1996, p. 894: “le franchiseur doit communiquer au franchisé son savoir-faire … Cette communication a un caractère permanent: el prend la forme d´une assistance technique qui dure autant le contrat.” Le Tourneau, 2003, p. 37. See Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998, II, 10057: “Le franchiseur ne peut donc pas exclure son obligation de conseiller le franchisé sur le lieu d´implantation de son entreprise au moyen d´une

Section 5. Franchisor’s obligation to give Assistance

163

same argument is put forward by Jamin regarding the obligation of the franchisor to help his franchisees in case of difficulties experienced by the franchisees in operating the business.592 Ferrier criticises the restrictive approach of the French courts in their interpretation of the contents of the obligation to assist. He considers that this approach is unduly harsh for franchisees, who are less aware of the requirements for the successful operation of the franchised business than the franchisor. According to Ferrier, therefore, the obligation to assist should in any case be of the quality required to allow the franchisee to comply with the requirements of the franchised business.593

5.2.5

Remedies

5.2.5.1 Nullity In accordance with the description of assistance in some judicial decisions and in the literature, assistance is a condition for the valid conclusion of a franchise agreement. Accordingly, if the contract does not include the obligation to assist, the contract could be invalidated under French law for lacking one of the requirements for validity. There is as yet no case-law available on this particular issue.

5.2.5.2 Remedies for non-performance Franchisees in proceedings before French courts regarding the obligation to assist do not, unlike in the case of most claims concerning the obligations on intellectual property rights and know-how, pursue the invalidity of the franchise contract due to lack of compliance of the assistance with the requirements as to contents. The claims brought by franchisees instead are for termination of the contract for lack of compliance by the franchisor with his obligation to assist as agreed in the contract. French courts have generally granted termination of the contract (Article 1184 of the Civil Code) when the franchisor fails to comply with

592

593

clause qui serait réputée non écrite car elle porterait sur une obligation essentielle du franchiseur.” See Jamin, in his comments to the decision of the Cour de Cassation of 30 January 1996, JCP 1998, no. 19, p. 188 and Ferrier, 2001, p. 107. Ferrier, comments to the decision of the Paris Cour d´appel of 19 January 1990, D. 1990, somm., p. 370.

164

Chapter III. Description and Comparison

hisobligation to assist as agreed in the contract.594 According to French authors, the lack of performance of the obligation to assist justifies the application of the remedy of termination.595

5.2.5.3 Defences for the franchisor In the French case-law concerning the obligation to assist, several defences for the franchisor may be identified. First, considering that the franchisor imposes the terms of the agreement, the restrictive interpretation applied by some French courts favours the interests of franchisors, because the obligation can only be enforced if it has been expressly agreed upon. Secondly, the obligation to assist is an obligation of means,596 which means that the franchisee has to prove that the franchisor has not observed the required standard of care. If the franchisee’s business is unsuccessful because of a lack of diligence on the part of the franchisee when following the system established by the franchisor, this excludes the liability of the franchisor.597 Thirdly, franchisees’ claims have been rejected where they have not previously alerted the franchisor to the inadequacy of the assistance provided.598 In the fourth place, the franchisee must be specific regarding the nonperformance of the franchisor and prove the inadequacy of the assistance

594

595

596

597

598

Cass. com. 4 November 1986, D. 1998, somm., p. 23, obs. D. Ferrier: “lorsqu’un franchiseur n’exécute pas son obligation d’assistance ou de transfert de son savoir-faire, le contrat doit être résolu à ses torts.” TGI Lyon 24 April 1989 and TGI Paris 20 November 1989, D. 1990, somm. p. 370, obs. D. Ferrier: “la carence du franchiseur dans la formation du franchise et dans les conseils et aides attendus pour la période de démarrage justifie la résiliation du contrat.” See also CA Paris 23 January 1992, D. 1992, somm., p. 393. Ferrier, comments to decisions of the TGI of Lyon of 24 April 1989 and TGI of Paris of 20 November 1989, D. 1990, somm. p. 370: “l’insuffisance de l’assistance conduira à la résiliation ou à la résolution du contrat.”; Mauger-Vielpeau, annotation to the decision of the Cour de Cassation of 21 May 1997, JCP 1998, II,10057. CA Paris 23 January and 25 February 1992, D. 1992, somm., p. 392, obs. D. Ferrier. See also Ferrier, 2001, p 108. CA Paris 14 February 1991, D. 1992, somm. p. 392, obs. D. Ferrier: “Un franchise qui n’exécute pas son obligation d’appliquer le savoir-faire du franchiseur ne saurait reprocher à ce dernier une assistance insuffisante.” See comments by Ferrier to the ruling of the Paris Cour d’appel of 23 January 1992, D. 1992, somm., p. 392. CA Paris 19 January 1990, D. 1990, somm., p. 370, obs. D. Ferrier, Lettre. distrib.1990-7, p. 4; Leloup, 2004, p. 62.

Section 5. Franchisor’s obligation to give Assistance

165

and the type of assistance which has not been provided.599 Finally, the franchisee is considered a professional who has to assume certain risks. French courts have concluded in some cases that the franchisee should be aware of the circumstances of the business and cannot expect the franchisor to help and advise him on every detail of the business.600

5.3

Spain

5.3.1

Introduction

Together with the obligation to license the distinctive signs and the obligation to communicate know-how, the franchisor’s obligation to provide assistance is one of the three obligations that a franchise contract must necessarily include according to the statutory definition of franchising contained in RD 2485/1998: “the commercial activity of franchising includes at least … (3) the continuing provision by the franchisor to the franchisee of assistance, which can be commercial, technical or both, for the duration of the

599

600

Cass. civ. 17 May 2005, 04-12176 (inédit), http://www.legifrance.gouv.fr: the Cour d’appel had held that the franchisor had not fulfilled his obligation to advise because he had failed to provide a new plan which would have improved the economic situation of the franchisee. The Cour de Cassation quashed this decision because the Cour d’appel had not indicated which terms of the contract imposed this obligation to advise which were not performed; CA Paris 21 October 1986, D. 1988, somm, p. 22, obs. D. Ferrier; CA Paris 24 April 1989, RTD. civ. 1989, 747, obs. J. Mestre; TGI Lyon 24 April 1989 and TGI Paris 1 November 1990, D. 1990, somm., p. 369, obs. D. Ferrier: “L’insuffisance de l’assistance doit être prouvée par le franchisé qui y parviendra à condition de ne pas évoquer un manquement général mais de relever les manquements constatés et le préjudice qui en est résulté.” CA Paris 27 April 1990, D. 1990, somm., p. 370, obs. D. Ferrier: “les fautes du franchiseur ne peuvent pas relever d’une allégation générale de manquement d’ensemble aux obligation de collaboration et d’assistance, mais doivent présenter le caractère de manquements précis aux différent aspects du concours prévu entre les parties.” See also CA Paris 4 March 1991, D. 1991, inf. rap., p. 103. CA Paris 19 January 1990, D. 1990, somm. p. 370, obs. D. Ferrier, Lettre distrib. 1990-7, p. 4; CA Paris 27 April 1990, D. 1990 somm., p. 370: the court did not uphold the franchisee’s complaint that the franchisor had not warned him concerning the amount of goods to buy despite the fact that the franchisee was facing financial difficulties, as it had been obvious that the franchisee had to reduce the amount of products purchased, as any other independent businessman would have done; CA Douai 6 February 2003, 00/001673.

166

Chapter III. Description and Comparison

agreement”.601 It follows that under Spanish law the obligation to assist is a requirement for the validity of a franchise contract. In its landmark decisions the Tribunal Supremo has referred to the obligation to assist as a characteristic element of franchising contracts, which differentiates these contracts from contracts of supply or distribution.602 Some judgments refer to assistance as an inherent obligation or as a validity requirement.603 Curiously, the definitions provided by the Tribunal Supremo do not refer to the obligation to assist. Courts typically refer to the more general obligation for the franchisor to provide services to the franchisee, which however could be said to include assistance.604 Only in recent decisions have the Audiencias Provinciales provided definitions where the obligation to assist is explicitly mentioned.605 Most scholars emphasise that the obligation to assist is a fundamental obligation in franchising agreements.606 601

602

603

604

605

606

Article 2 of RD 2485/1998, as amended by Article 1 of RD 419/2006: “La actividad comercial en régimen de franquicia, … comprende por lo menos: … (3) la presentación continua por el franquiciador al franquiciado de asistencia comercial y técnica durante la vigencia del acuerdo.” STS 27 September 1996, RJ 1996\6646; 4 March 1997, RJ 1997\1642; 30 April 1998, RJ 1998\3456 and 21 October 2005, Id Cendoj 28079110012005100801: “Su [contrato de franquicia] plasmación jurisprudencial surge de la Sentencia del Tribunal de Justicia de las Comunidades Europeas – de 28 enero 1986 – caso «Pronupcia», según la cual, los datos que definen su naturaleza jurídica, y su diferencia con los contratos, y de suministro o de distribución de mercancías, son los siguientes: a) Que el franquiciador debe transmitir su «know-how», o asistencia o metodología de trabajo, aplicando sus métodos comerciales …” In its decision of 10 April 2000, the Zaragoza Audiencia Provincial, AC 2000\1287 held that assistance is inherent to franchising; the Barcelona Audiencia Provincial in a decision of 31 March 2001, JUR 2001\215218 considered the obligation to assist as part of the accessory services that, together with the transfer of the business system and payment by the franchisee, form the object of the contract; the same court in a decision of 26 June 2006, Id Cendoj 08019370152006100136, referred to assistance as one of the pillars of a franchise contract; SAP Pamplona 11 February 2006, Id Cendoj 31201370032006100154: “… siendo consustancial al contrato de franquicia la obligación del franquiciador de prestar asistencia commercial o técnica …” SAP La Rioja 13 July 1992, AC 1992\1072; SAP Barcelona 16 December 1996, AC 1997\1650. SAP Zaragoza 10 April 2000, AC 2000\1287 and SAP Barcelona 31 March 2001, JUR 2001\215218. Uría, 2002, p. 739; Broseta Pont, 2003, p. 13; Aguiló Piña, 1986, p. 4810; Echebarría, 1995, p. 310; Villagómez Rodil, 1997, p. 126; Hernando Giménez,

Section 5. Franchisor’s obligation to give Assistance

167

The Spanish case-law available on the obligation to assist mainly concerns claims by franchisees where it is argued that the franchisor failed to comply with the obligation to assist as agreed in the contract. There are no judgments available in which the quality of the contents of the obligation to assist at the time when the contract is concluded is contested. Unlike the other basic obligations in franchising concerning intellectual property rights and know-how, Spanish courts have not established whether assistance has to comply with certain validity requirements that guarantee that the assistance is adequate to allow the franchisee to operate the business. The decision of 4 March 1998 is the only judgment available by the Tribunal Supremo concerning a claim for non-performance of the obligation to assist. The court in this decision emphasised the importance of the obligation to assist in franchising agreements as a means to allow the franchisee to achieve the expected good economic results.607 There have been considerably more cases concerning assistance heard by the Audiencias Provinciales. Pursuant to some of these, assistance is to be considered as a means to communicate know-how.608

5.3.2

Assistance as agreed

As indicated above, the RD 2485/1998 mentions the obligation to provide assistance and establishes that it has an ongoing character,609 but gives no indication as to the particular contents of the obligation to assist. Spanish courts have not pronounced on this so far either. The contents of the obligation to assist are to be determined by the parties on a case-by-case basis. It follows from Spanish case-law regarding the franchisor’s obligation to assist, that a typical obligation to assist consists of

607

608

609

2000, pag. 272; De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 377; Alonso Soto, 2001, p. 196; Sánchez Calero, 2003a, p. 185 and 2003b, p. 427. STS 4 March 1997, RJ 1997\1642: this case concerned a franchise for the operation of a bakery. The franchisee terminated the contract because the franchisor had not provided him with the agreed assistance. The franchisee was able to prove that he had asked the franchisee several times to provide the assistance agreed, but to no avail. He argued that this gave him the right to terminate and that the franchisor was not entitled to invoke Articles 1124 and 1101 of the Civil Code because he had not performed his obligations. SAP Valencia 21 May 1993, AC 1993\1024; SAP Valencia 28 April 2000, AC 2000\1193; SAP Zaragoza 25 July 2000, JUR 2000\273349; SAP Barcelona 31 March 2001, JUR 2001\215218; SAP Sevilla 28 January 2002, JUR 2002\47775. Echebarría, 1995, p. 310; Hernando Giménez, 2000, p. 278.

168

Chapter III. Description and Comparison

giving training courses.610 Legal doctrine indicates that the obligation to assist may regard many aspects of the franchising relationship (technical, commercial, administrative) and may thus include a considerable number of particular obligations.611 The specific obligations vary depending on the degree of development and perfection of the network and on the type of activity.612

5.3.3

The courts’ interpretation of the contents of the obligation to assist

Some franchisee claims have required Spanish courts to interpret the contents of the obligation to provide assistance. Courts have had to interpret whether the particular obligation to assist that according to the claim of the franchisee was not performed had to be considered as included in the generically worded contractual obligation to assist. 613 Spanish courts have given a restrictive interpretation of the contents of the generic obligation to assist. In some cases, if “any” assistance had been provided, the franchisor was considered to have performed.614 In other cases, 610

611

612 613

614

SAP Vizcaya 27 January 1993, AC 1993\34, revised in cassation by the Tribunal Supremo in its decision of 4 March 1997, RJ 1997\1642; SAP Valencia 21 May 1993, AC 1993\1024; SAP Zaragoza 25 July 2000, JUR 2000\273349. Echebarría refers to the contents of the obligation to assist as determined in BER 4087/88: the franchisor has to assist the franchisee in the management of the technical and commercial resources, provide training on how to operate the method (Articles 1.3.b. final sentence, and 3.2. e and f), determine the marketing conditions, determine opening hours, where the franchisor takes the initiative to advertise, harmonise the advertising efforts throughout the network, carry out advertising, and assist the franchisee in promotional activities in accordance with the policy and strategy of the franchise system, see Echebarría, 1995, p. 310 ff.; See also Hernando Giménez, 2000, p. 276. Echebarría, 1995, p. 310; Hernando Giménez, 2000, pp. 273 and 275. SAP Vizcaya 27 January 1993, AC 1993\34; SAP Valencia 21 May 1993, AC 1993/1024; SAP Zaragoza 10 April 2000, AC 2000\1287; SAP Barcelona 10 May 2000, JUR 2000/211264; SAP Zaragoza 25 July 2000, JUR 2000\273349; SAP Teruel 24 October 2001, AC 2001\1931; SAP Barcelona 23 December 2003, AC 2004\433; SAP Barcelona 24 March 2004, JUR 2004\122633. SAP Barcelona 10 May 2000, JUR 2000\211264: this case concerned the operation of a business that provided a certain therapy to help people to stop smoking. The franchisee claimed that no training had been provided. The court indicated that the contract was not clear concerning the assistance which was to be provided, but that it was clear that the therapy consisted of the electric stimulation

Section 5. Franchisor’s obligation to give Assistance

169

courts have held that the particular obligation which according to the franchisee had not been performed was not due, because it was not explicitly agreed upon in the contract.615

5.3.4

Scholars’ interpretation of the contents of the obligation to assist

Spanish legal scholars emphasise the importance of assisting the franchisee in the operation of the business so as to guarantee that the franchisee makes adequate use of the method of the franchisor.616 Scholars have therefore expressed their concern as to the quality of assistance. According to many scholars, the importance of assistance is exclusively linked to its role as a means to communicate know-how.617 Hernando Giménez however emphasises that the obligation to assist has a broader scope, because it also includes providing help to the franchisee in the adequate use of the distinctive signs.618

615

616 617

618

of the ears, face and hands. It had been proven that the franchisor had provided certain courses and on this basis the court held that the assistance had been sufficient; SAP Teruel 24 October 2001, AC 2001\1931: here, the franchisee sued the franchisor for non-performance of his obligations, including lack of assistance. The Audiencia Provincial concluded that it had been proven that the franchisor had provided “some” assistance and that the franchisee must be presumed to have agreed with the assistance so provided as there was no evidence that he had asked for training courses or information which was not provided. SAP Sevilla, 28 January 2002, JUR 2002\47775: in this case, the franchisee claimed that the assistance given was not sufficient. The Audiencia Provincial analysed the literal contents of the contract and indicated that it did not contain an obligation to provide an exploitation account to indicate the costs and income that would be adequate for the optimal operation of the business, but that the franchisor only undertook an obligation to assist the franchisee in evaluating the conditions of the local market and to help him process the provisional results. The court considered that the franchisor had done enough to comply with his contractual obligation by making available staff and help centre facilities to deal with requests from franchisees. Aguiló Piña, 1986, p. 4810; Hernando Giménez, 2000, p. 241 and 278. Villagómez Rodil, 1997, p. 125; Jiménez Sánchez, 2003, p. 284; Echebarría, 1995, p. 306. Hernando Giménez, 2000, p. 241. This approach is supported by some decisions where the obligation to provide know-how and to provide assistance were dealt with as separate obligations. See SAP Barcelona, 10 May 2000, JUR 2000\ 211264. There have moreover been some cases where only the obligation to assist

170

Chapter III. Description and Comparison

Some authors defend the analogous application of the provisions regarding contracts for lease (Articles 1542 ff. of the Civil Code) to determine the particular contents of the obligation to assist.619 If applicable, these provisions would impose upon the franchisor an obligation to grant assistance to the franchisee that is adequate to help the franchisee to operate the business. This approach is concerned with the quality of the assistance provided, similar to the position taken by legal doctrine regarding the need to guarantee the adequacy of the intellectual property rights and know-how required to allow the franchisee to operate the business. The obligation to assist is described by some authors as an obligation of means: the franchisor performs properly if he applies the diligence of a good businessman.620 He is not expected to guarantee that his assistance will lead to the successful operation of the business.621

5.3.5

Remedies

5.3.5.1 Nullity In accordance with RD 2485/1998, if assistance is not agreed upon a valid franchise contract cannot be said to exist. There has been case-law of the Audiencias Provinciales in which the courts have held that the contract was not to be classified as a franchise agreement because of the lack of explicit agreement by the parties regarding the obligation to assist.622

5.3.5.2 Remedies for non-performance All judicial decisions on assistance so far have concerned claims for nonperformance by the franchisor of the obligation to assist. Courts tend to

619

620

621 622

was mentioned, e.g. SAP Vizcaya, 27 January 1993, AC 1993\34, and were no link was made with the obligation to provide know-how. Article 1544 C.c: “en el arrendamiento de obras o servicios, una de las partes se oblige a ejecutar una obra o a prestar a la otra un servicio por precio cierto.” Aguiló Piña, 1986, p. 4810; Hernando Giménez, 2000, p. 278. Echebarría, 1995, p. 344 and 347 and Hernando Giménez, 2000, p. 344. See on the diligence of the good businessman n. 446 in Section 3 of this Chapter, above. Echebarría, 1995, p. 347; Hernando Giménez, 2000, pp. 273 and 323. SAP Málaga 22 May 2006, Id Cendoj 29067370052006100320 and 5 July 2006, Id Cendoj 29067370052006100448.

Section 5. Franchisor’s obligation to give Assistance

171

decide whether the franchisor has performed or not on the basis of what was agreed upon in the contract.623 In accordance with what was explained above in relation to the nonperformance of the obligations concerning intellectual property rights and know-how, the non-performance of the obligation to assist also entitles the franchisee to claim the remedies for non-performance. In cases where it was proven that the franchisor had not fulfilled the agreed obligations on assistance, Spanish courts have granted termination of the contract. This was the case in the decision of the Tribunal Supremo of 4 March 1997 and in several decisions of the Audiencias Provinciales.624

5.3.5.3 Specific remedies If, as has been argued by some authors, the rules on contracts of lease are analogously applicable to the provision of assistance in franchising, the remedies of Article 1556 of the Civil Code would apply. The franchisee could then claim the termination of the contract and damages, or only damages, if he would wish to continue the relationship. However, as yet this remains a theoretical possibility as courts have so far not applied these rules analogously.

623

624

SAP Vizcaya 27 January 1993, AC 1993\34, revised in cassation before the Tribunal Supremo in its decision of 4 March 1997, RJ 1997\1642; SAP Valencia 21 May 1993, AC 1993\1024; SAP Zaragoza 25 July 2000, JUR 2000\273349. SAP Vizcaya 27 January 1993, AC 1993\34, confirmed by STS 4 March 1997, RJ 1997\1642: the courts all granted termination because the franchisor had not complied with his contractual obligations to provide training on the use of the bakery’s oven and to periodically advise the franchisee on how to operate the method; SAP Valencia 21 May 1993, AC 1993\1024: the court granted termination for the non-performance of the franchisee of his contractual obligations, among which a clause which stipulated that he was obliged to give commercial instructions and to provide training courses; SAP Zaragoza 25 July 2000, JUR 2000\273349: the court granted termination after it had been proven that the franchisor had provided no training and that no visits were made to the outlet of the franchisee despite the fact that the contract included a clause which obliged the franchisor to give advise on the selection of staff and to periodically visit the outlet.

172

Chapter III. Description and Comparison

5.3.5.4 Defences for the franchisor The franchisee has to prove that the franchisor did not act with the required diligence.625 Spanish courts take into consideration the behaviour of franchisees as a factor to assess whether the franchisor has performed. As a result, the liability of the franchisor is excluded in many cases, because the franchisee did not previously inform him that he had not provided the assistance required and an additional period for performance was thus not granted.626

5.4

Comparison

5.4.1

Introduction

The PEL CAFDC impose the obligation on the franchisor to help his franchisees in the operation of the franchisor´s business. There is no such statutory duty under French law, but French courts and legal doctrine unanimously consider the obligation of the franchisor to assist the franchisee as a main obligation in franchising agreements. In Spain, the RD 2485/1998 includes it as one of the three indispensable obligations in franchising agreements. Spanish courts and literature follow the same approach. 625

626

SAP Barcelona 21 March 2006, Id Cendoj 0801937004200600601.In the literature see Echebarría, 1995, p. 344; Hernando Giménez, 2000, p. 344. SAP Valencia 21 May 1993, AC 1993\1024: the court granted termination of the contract, but first verified whether the franchisee had previously notified the franchisor regarding the lack of sufficient assistance; SAP Teruel 24 October 2001, AC 2001\1931: the franchisee sued the franchisor for non-performance of his obligations, including lack of assistance. The Audiencia Provincial concluded that it had been proven that the franchisor gave “some” assistance and that the franchisee had been presumed to agree with this, as there was no evidence that he had asked for training courses or information which was not provided; SAP Sevilla 28 January 2002, JUR 2002\47775: the franchisee’s claim of non-performance by the franchisor was rejected, because the franchisee had never indicated that he had not received assistance on time and that this led to the unsuccessful operation of the business; Similar reasoning may be found in the judgments of the Audiencia Provincial of Barcelona of 23 December 2003, AC 2004\433, 24 March 2004, JUR 2004\122633 and 21 March 2006, Id Cendoj 0801937004200600601. Along the same lines are the decisions of the SAP Albacete 10 October 2006, Id Cendoj 02003370022006100326. and SAP Madrid 26 July 2006, Id Cendoj 28079370132006100293.

Section 5. Franchisor’s obligation to give Assistance

173

Pursuant to the Principles, assistance is a complementary obligation to the obligations to provide intellectual property rights and know-how. In the Principles, the obligation to assist may be excluded by agreement. Accordingly, a contract may be classified under the Principles as a franchising agreement even when it does not contain the obligation to assist. Differently, in France and Spain it is described as one of the three fundamental obligations of the franchisor, together with the obligations to provide intellectual property rights and know-how. Both in France and Spain, assistance is described as a condition for the validity of franchising agreements. A contract cannot be classified as a franchising agreement if it does not include an obligation to assist for the franchisor. Under the three systems, assistance is to be provided at the beginning of the relationship, but also for the duration of the contract.

5.4.2

Contents of the obligation to assist

5.4.2.1 Requirements as to contents The Principles are concerned with the contents of the franchisor’s obligation to assist. The assistance which is to be provided must be of the quality that is needed in order to allow the franchisee to operate the business correctly, and more in particular it has to consist of training courses, guidance and advice. Differently, French and Spanish rulings are not so much concerned with the question whether the obligation to assist should comply with certain requirements as to contents. This is due to the fact that franchisees have not questioned the quality of assistance in the claims which they have brought to court, as is typically the case concerning the obligations regarding intellectual property rights and know-how under both national systems. There is no reference either in these two national systems to the question of whether the franchisor should be obliged to respond to reasonable requests for assistance by particular franchisees, which is an obligation under the Principles. The cases which have reached both French and Spanish courts regard disputes concerning the non-performance of the franchisor with his obligation to assist as agreed in the contract. Some of these cases have required courts to interpret whether the assistance which according to the franchisee was not given might be considered to be included in the generic obligation to assist as agreed in the contract. On this point, the role played by French courts differs from that played by Spanish courts. Although French courts at times have interpreted the obligation to assist restrictively, at other times they have applied an extensive interpretation of the contents of the contractual obligation to assist. Therefore, according to

174

Chapter III. Description and Comparison

some French decisions, the obligations regarding advice on site selection and the obligation to help the franchisee when the franchisor knows that the franchisee is facing difficulties are implied obligations: franchisors must comply with them even if they are not explicitly agreed in the contract. This trend is supported by some scholars. This policy of French courts and the literature approaches that used in the Principles. Under both regimes there is concern as to the quality of the contents of the assistance provided. Unlike French courts, Spanish courts have systematically applied a restrictive interpretation of the contents of the contract: the performance of a specific obligation to assist can only be enforced if it is explicitly agreed upon. By contrast, some Spanish authors have indicated that assistance should be adequate to allow the franchisee to operate the business.

5.4.2.2 No form requirements Neither the Principles, nor French or Spanish law impose form requirements regarding the obligation to assist. In French case-law and legal writing one finds what it is typically agreed upon in commercial practice.

5.4.2.3 Franchisee’s independence as a limitation Both under the Principles and under French law, the scope of the obligation to provide assistance is limited: the assistance provided must not imply interference with the independence of the franchisee. According to the Comments to the rule on assistance in the Principles, the franchisor must not provide more assistance than is needed in order to avoid interfering with the franchisee’s independence. In some French decisions the franchise contract has been requalified as a labour agreement where the court concluded that the franchisee was not an independent party. Some French authors highlight that, in practice, the balancing of assistance and independence is not an easy test and can only be determined on a case-by-case basis. The independence of the franchisee seems not to be a relevant issue for Spanish courts. Only some Spanish authors emphasise the need to respect the business independence of the franchisee.

5.4.3

Additional costs for assistance

The Principles consider that the assistance which is to be provided by the franchisor in order to guarantee that his franchisees can operate the business adequately does not lead to additional costs for the franchisee. These costs

Section 5. Franchisor’s obligation to give Assistance

175

are considered to be included in the payment made by the franchisee to be able to operate the business method. The franchisor can only charge the franchisee extra when the franchisee requires particular assistance, provided that the price is reasonable. This is also the approach taken by French courts: the franchisor can ask for extra payment from the franchisee if the assistance which the franchisee requires has not been agreed upon. There is no indication in Spanish case-law regarding this issue.

5.4.4

Remedies

The non-compliance of the franchisor with the obligation to assist as described in the rule on assistance in the PEL CAFDC entitles the franchisee to claim the application of the remedies for non-performance in the PECL: specific performance or termination, with the right to damages in both cases. All claims of franchisees regarding assistance brought before national courts in France and Spain are claims for non-performance by the franchisor of his obligation to assist. In Spain there are a few decisions in which the contract is reclassified for the lack of agreement regarding the obligation to assist. There are no claims in which the nullity of the contract was pursued on the ground of the lack of adequacy of the contents of the obligation to assist at the time the contract is concluded (which is typically the case regarding the obligations to provide intellectual property rights and knowhow). The remedies for non-performance under these two national systems apply. French courts have generally granted termination of the contract where they concluded that the claim for non-performance was justified because the type of assistance required by the franchisee was included in the contents of the clause on assistance. Non-compliance by the franchisor with the obligations to give advice on site selection and to help the franchisee when the latter faces difficulties in operating the business has also led courts to declare that the contract terminates, even when these obligations were not explicitly agreed upon. Spanish courts also grant termination if the franchisee proves that the franchisor has not complied with the obligation on assistance that he explicitly undertook in the agreement. Spanish courts have not acknowledged the existence of implied obligations to assist. Finally, Spanish courts have proven very reluctant to honour the claims of franchisees for termination if they do not prove that they have previously informed the franchisor regarding the defective performance and have thereby granted an additional period for performance.

176

5.4.5

Chapter III. Description and Comparison

Conclusion

The fact that the obligation to assist is described under French and Spanish law as a requisite for the validity of the franchise contract implies that the regime under these two national systems is stricter on the franchisor, as the party who imposes the terms of the contract, than the regime under the Principles. According to the Principles, the obligation to assist may be excluded by agreement. Under French or Spanish law a contract cannot be classified as a franchising agreement if the obligation to assist is not agreed upon. However, the national regimes are only stricter on the franchisor concerning the need to include this obligation in the franchise agreement. If Article 3:203 of the Principles applies, then the regime is stricter on the franchisor under the Principles than under French and Spanish law. The Principles impose an obligation on the franchisor to provide the assistance that is necessary to allow the franchisee to operate the business adequately. Differently, French and Spanish rulings are not so much concerned with the question whether the obligation to assist should comply with certain requirements as to contents. So far courts have only had to determine wehther the franchisor has complied with his obligation to assist as it was agreed upon in the contract. Therefore, the application of the Principles would require French and Spanish judges to carry out a more rigorous analysis of the contents of the obligation to assist. French courts are not unfamiliar with this approach. Some French decisions reveal that some courts are concerned with the quality of the obligation to assist and have acknowledged the existence of implied obligations to assist. This is so far not the case in Spanish case-law, where courts have restricted themselves to carrying out a literal interpretation of the contents of the contract. In addition, the Principles require the franchisor to answer reasonable requests for additional assistance of franchisees. Such an obligation has not been imposed under French or Spanish law. Both under the Principles and under French and Spanish law, the available remedies are the remedies for non-performance: specific performance or termination of the contract, with the right to proven damages in both cases.

Section 6. Franchisee’s obligation to pay 6.1

PEL CAFDC: Article 3:301

6.1.1

Introduction

The PEL CAFDC describe the franchise contract as an onerous agreement: the franchisee has to remunerate the franchisor in exchange for the right to use the franchisor’s business elements that allow the operation of the franchise business.627 Article 3:301 explicitly provides the obligation of the franchisee to pay: (1) The franchisee must pay to the franchisor fees, royalties or other periodical payments agreed upon in the contract. (2) If fees, royalties or any other periodical payments are to be determined unilaterally by the franchisor, Article 6:105 PECL applies.

This rule on payment acknowledges the right of the franchisor to counterperformance. The provision also acknowledges that the franchisor has the discretion to unilaterally determine the price to be paid by the franchisee during performance. This is conceived in the Principles as a main obligation in franchising agreements and is therefore also included in the definition of franchising in Article 3:101. This means that under the Principles, a franchise contract is not considered to exist if it does not include an obligation to pay for the franchisee.

6.1.2

Payment as agreed in the contract

Pursuant to Article 3:301 (1) of the Principles, the franchisee is obliged to comply with his obligation to pay as it is agreed upon in the contract. The rule refers to “fees, royalties and other periodical payments” because, as the Comments to the rule indicate, the parties to a franchise contract typically divide the payment due in, on the one hand, a fee that is to be paid when

627

See the definition of franchising in Article 3:101 of the PEL CAFDC.

178

Chapter III. Description and Comparison

the relationship starts and, on the other hand, periodical payments or royalties, which are to be paid throughout the duration of the contractual relationship.628 However, the rule does not attempt to be exhaustive as to the determination of the form of payment. Any form, no matter whether direct or indirect, may be contractually agreed upon by the parties.629 The Principles contain no indication as to how the performance of the franchisor is to be priced. In accordance with the definition of franchising in the Principles, payment is to be considered as being given in exchange for the right granted by the franchisor to use the business elements of the franchisor’s business.630 The remuneration is thus intended as counterperformance in exchange for the performance by the franchisor. However, the Comments to Article 3:301 do clarify that the initial fee essentially covers the franchisor’s initial training and recruitment costs, while royalties are to be calculated on the basis of the franchisee’s quarterly gross sales and are to be paid in exchange for the continuous exploitation of the business and ongoing assistance provided by the franchisor.631

6.1.3

Unilateral determination of the price

The Principles acknowledge that the price in franchising may be left to the unilateral determination by the franchisor.632 Indeed, the long-term character of franchise contracts according to the Principles is the reason that in some cases the periodical payments are neither determined at the time the contract is concluded, nor determinable because it is not possible to establish an objective mechanism beforehand. The often long duration of franchising also means that circumstances might change (e.g. inflation or an increase in the production costs of the franchisor) which may justify an increase by the franchisor of the price which is to be paid by the franchisee.633 However, the Principles monitor the use which the franchisor makes of such discretionary power to determine the price unilaterally in order to avoid the imposition of unreasonable prices that play to the detriment of the interests of franchisees.634 Article 3:301 determines that, in accordance with 628 629 630 631 632 633 634

See Article 3:301 of the PEL CAFDC, Comment A. See Article 3:101 of the PEL CAFDC, Comment A. See the definition of franchising in Article 3:101 of the PEL CAFDC. See Article 3:301 of the PEL CAFDC, Comment A. See Article 3:301 of the PEL CAFDC, Comment B. See Article 3:301 of the PEL CAFDC, Comment E. According to the Comments to Article 3:301 of the PEL CAFDC this would for example be the case for a franchisee who cannot end the contract when the fran-

Section 6. Franchisee’s obligation to pay

179

Article 6:105 of the PECL, an unreasonable determination of the periodical payments leads to the revision of the price by a court. 635 The Principles do not indicate when a price may be said to be unreasonable. The “reasonableness test” of Article 1:302 of the PECL applies:636 “In determining whether a price is reasonable, comparable contracts made in analogous situations should be considered. Also the nature and the purpose of the contract, the status of the parties, and the practices and usages in the trade or profession concerned should be taken into account”.637

6.1.4

Additional costs

Pursuant to the Principles, the costs regarding particular assistance requested by an individual franchisee and the costs for participating at a local level in the campaigns launched by the franchisor are considered additional costs and are therefore not covered by the periodical payments made by the franchisee.638 These expenses are also unilaterally determined by the franchisor and may lead to the unreasonable grossing up of the financial responsibilities of the franchisee towards the franchisor. Therefore, the Principles only allow them if the price charged is reasonable. The Principles give no further indication of when additional costs unilaterally determined by the franchisor are to be considered unreasonable or what the consequences of the unilateral imposition of an unreasonable extra price should be. Consequently, the general rules in the PECL apply. The same scheme that was described above regarding the unreasonable determination of periodical payments applies: Article 1:302 of the PECL determines when the price is reasonable and Article 6:105 of the PECL determines what the consequences are if the price is unreasonable, namely that it is for the court to impose a reasonable price.

635

636 637 638

chisor unreasonably increases the amount to be paid as a royalty, because he has recently made substantial investments which make it inadvisable to leave the business at that moment. Article 3:301 of the PEL CAFDC applies to franchising what Article 6:105 of the PECL establishes concerning the price or any other contractual term in any contract. See Article 3:301 of the PEL CAFDC, Comment E. See Article 1:302 of the PECL, Comment B. See Article 3:203 of the PEL CAFDC, Comment F and Article 3:207, Comment F.

180

6.1.5

Chapter III. Description and Comparison

Remedies

If the franchisee does not perform his obligation concerning payment under the contract, the franchisor may resort to any of the remedies for nonperformance set out in Chapter 9 of the PECL. The franchisee is also granted a remedy under Article 3:301. He may ask a court to intervene in order to set a price that is reasonable if the franchisor has abused his discretionary power to set the price.

6.2

France

6.2.1

Introduction

According to French legal doctrine, the obligation to pay is a characteristic obligation in franchising agreements. Accordingly, the definitions provided by the literature include the obligation to pay as the main counterperformance of the franchisee.639 By contrast, the definitions provided in the case-law do not generally refer to the obligation to pay.640 There are very few published decisions concerning claims by franchisors arising out of the non-performance by franchisees of their obligation to pay.641 Decisions that are available do not concern the form and contents of this obligation. For this reason, information on how the obligation to pay is dealt with in the French legal system has to be obtained from legal writing. Most French claims regarding the obligation to pay have been brought by franchisees pursuing the invalidity of the contract due to the unilateral determination by the franchisor of the price of the products that the franchisee has to buy exclusively from the franchisor. The parties in this case do not agree on a price regarding the framework agreement, i.e. direct remuneration, but regarding the sales agreements framed in the framework agreement, i.e. indirect remuneration.

639

640

641

Virassamy, 1986, p. 81; Huet, 2002, p. 560; Malaurie & Aynès & Gautier, 2005, p. 473. CA Colmar 9 June 1982 and CA Paris 10 March 1989, Gaz. Pal. 1989, 2 sem, p. 544 ff. One exception is the definition given by the Cour de Cassation on 29 November 1973, “un contrat par lequel une entreprise concède à des entreprises indépendantes, en contrepartie d’une redevance …” CA Paris 27 May 1993, D. 1995, somm., p. 77, obs. D. Ferrier.

Section 6. Franchisee’s obligation to pay

6.2.2

181

Form and contents of the obligation to pay

Under French law, the parties to a franchising agreement are free to agree on the form and contents of the franchisee’s obligation to pay. Legal scholars describe the obligation to pay in accordance with what the parties typically agree upon. As to the form of the obligation, French authors indicate that payment in franchising typically consists of an entrance fee (droit d’entrée) and of royalty payments (redevance périodique) that are to be paid for the time that the contract is effective.642 Some authors clarify that the parties can also agree on only one of these payments,643 whilst others point out the existence of other types of payment: an indirect payment644 or a payment for advertising (redevance de publicité).645 As to the contents, scholars indicate that the payment is to be understood to be in exchange for the right to use the elements of the successful business method provided by the franchisor.646 The initial payment is generally a fixed amount to pay for the right to enter the network, which mainly means the right to use the trademark and the know-how647 and initial assistance.648 As to the royalty payments, all authors agree that these are generally proportional to the benefits achieved by the franchisee.649 Royalty payments are due for the services provided by the franchisor during the performance of the contract, which mainly consist of the provision of ongoing

642

643 644 645 646

647

648

649

Bessis, 1991, p. 87; Matray, 1992, p. 79 ff.; Le Tourneau, 1994, p. 80; Clément, 1996, p. 148 ff.; Ferrier, 2001, p. 108; Huet, 2002, p. 560; Malaurie & Aynès & Gautier, 2005, p. 473. Bessis, 1991, p. 88; Ferrier, 2001, p. 108. Clément, 1996, p. 148; Matray, 1992, p. 80; Ferrier, 2002, p. 384. Le Tourneau, 1994, p. 80; Clément, 1996, p. 48. Ferrier, 2002, p. 383; Virassamy, 1986, p. 83: “Il [le franchisé] attend donc en retour que ce dernier [le franchiseur] lui fournisse une méthode sérieuse et efficace qui justifie ce droit d’entrée et les redevances périodiques qu’il est contraint de lui payer.” Matray, 1992, p. 79; Clément, 1996, p. 148; Bessis, 1991, p. 87; Ferrier, 2000, p. 292, 2001, p. 108 and 2002, p. 383. Training courses on how to use the know-how or technical assistance, Matray, 1992, p. 79; Clément, 1996, p. 148; Bessis, 1991, p. 87. Around 2 and 10% according to several authors: Bessis, 1991, p. 87; Matray, 1992, p. 79; Clément, 1996, p. 148; Ferrier, 2000, p. 292, 2001, p. 108 and 2002, p. 383; Le Tourneau, 1994, p. 80: “En principe, elle [redevance périodique] est proportionnelle au chiffre d’affaires total du franchisé, hors taxes ou TTC, avec un taux variant de réseau à réseau … relativement rarement elle est forfaitaire.”

182

Chapter III. Description and Comparison

assistance and of updating the method.650 Some authors also include in the services provided by the franchisor the ongoing use of the franchisor’s intellectual property rights.651 Regarding the payment for advertising, legal authors indicate that in most franchising agreements the costs of national and international advertising on the franchisor’s initiative is divided between the franchisor and the franchisees, whilst the costs of local advertising are at the expense of the franchisee.652

6.2.3

Determined price

Problems in French commercial practice in connection with a lack of determination of the price in franchising contracts have mostly arisen where the price of the goods that the franchisee must purchase exclusively from the franchisor was not fixed. The way in which the law deals with such cases is relevant for the obligation to pay in cases where the parties have agreed upon such indirect remuneration in exchange for the right to operate the business.

6.2.3.1 Indirect remuneration 6.2.3.1.1 Before the decisions of the Assemblée Plénière de la Cour de Cassation of first of December of 1995: Nullity of the contract because of a lack of determination of the price In early cases, the Cour de Cassation considered that lack of determination of the price of the goods which the franchisee had to buy exclusively from the franchisor was a ground for granting the nullity of the contract in accordance with Article 1159 of the Civil Code.653 This provision regulates sales contracts and states that in these contracts the price must be determined. Legal doctrine subsequently criticised this approach because franchising could not be considered as a mere succession of sales contracts, but had to be

650

651 652 653

These services are among others permanent information, national publicity, permanent training, monitoring the image of the network. See Bessis, 1991, p. 87; Matray, 1992, p. 79; Clément, 1996, p. 148. Bessis, 1991, p. 87; Ferrier, 2000, p. 292, 2001, p. 108 and 2002, p. 383. Gunther, 2000, p. 278; Clément, 1996, p. 148; Matray, 1992, p. 81. Article 1591 of the Civil Code: “Le prix de la vente doit être déterminé et désigné par les parties.”

Section 6. Franchisee’s obligation to pay

183

regarded as a framework agreement made up of sub-agreements, one of which is the sales agreement.654 The Cour de Cassation continued granting the invalidity of franchising contracts on the ground of the lack of determination of the price, although it changed the legal basis on which it did so. Rather than Article 1159 of the Civil Code regarding sale contracts, the Cour de Cassation started applying general contract law, namely Article 1129 of the Civil Code. This provision provides that the price (object monétaire)655 must either be fixed at the time the contract is concluded or at least be determinable according to objective criteria.656 However, there were also some decisions in which the Cour de Cassation took a more lenient approach in which the unilateral imposition of the price did not lead to the nullity of the contract because the discretion of the franchisor to impose the price was limited by competition.657 Most authors opposed the approach of the Cour de Cassation as to the application of Article 1129 of the Civil Code to the determination of the price in franchising contracts. According to some scholars, the lack of determination of the price of the goods at the time the contract is concluded had to be regarded as a normal characteristic of this type of agreements that are intended to be valid for a long time, during which the price may have to be 654

655 656

657

See Aynès, 1993, p. 2; Michel Jéol, conclusions to the decisions of the Assemblée Plénière de la Cour de Cassation 1 december 1995, D.1996, jur. p. 13; Lasbordes, 2000, p. 194. Carbonnier, 2004, p. 2011. Cass. com. 24 June 1986, RTD civ. 1987, p. 95; Cass. com. 12 January 1988, 8612838 (pub.bull), http://www.legifrance.gouv.fr. The franchisee claimed that the price was unilaterally determined by the franchisor in a catalogue which was published every six months. The Cour d´appel refused to declare the contract null and void because the price was accepted by all the franchisees and the franchisee was informed of the price at the beginning of every season. The Cour de Cassation however quashed this decision and held that the Cour d´appel should have examined whether the determination of the price was linked to serious, precise and objective elements which guaranteed that the price was not left to the sole discretion of the franchisor; in the same vein Cass. com. 5 November 1991, 90-11694 (pub. bull), http://www.legifrance.gouv.fr. Cass. com. 30 June 1992, D. 1992, jur., p. 391, obs. D. Ferrier: the court approved the unilateral determination of the price, because it was not fixed arbitrarily, but established by means of a yearly tariff whose existence was known to the franchisee at the time the contract was concluded. The prices were fixed objectively and not as the result of the franchisor´s dominant position or of unlimited freedom resulting from the position of the franchisor’s products in the market. See Huet, 1997, p. 319.

184

Chapter III. Description and Comparison

adapted to changing circumstances.658 Most authors underlined the inadequacy of imposing the sanction of the nullity of the whole franchise contract in these situations, as the lack of determination of the price regards only one of the contrats d’application.659 French doctrine demanded a change in the approach taken under the French system to make it more similar to other systems in Europe where more flexibility was observed, which was felt to be more in accordance with the real needs arising in franchise relationships.660

658

659

660

See Aynès, 1993, p. 26. This author rejected the approach of the Cour de Cassation: “Il est inutile d´imposer aux parties que le prix soit déterminable dans le contrat de distribution; il est injuste d´en faire dépendre la validité du contrat.” Michel Jéol, conclusions to the decisions of the Assemblée Plénière de la Cour de Cassation 1 december 1995, D. 1996, jur. p. 13: “tenter de déterminer dans la convention cadre le prix d’un produit ou d’un service futur, c’est évidemment prendre le risque de se tromper et de nuire à la bonne exécution du contrat en même temps qu’au fonctionnement normal du marché.” Aynès, 1993, p. 26 and 27; Behar-Touchais, 1994, p. 485. According to this author, the nullity of the contract as a whole frequently benefits franchisees who also wish to free themselves from the application of other restrictive obligations under the contract. Ghestin, comments to the decisions of the Assamblée Pléniere de la Cour de Cassation of 1 december 1995, JCP 1996, II, 22565: “le développement excessif d’une nullité absolue fondée sur l’article 1129 du Code civil avait conduit à des solutions tout à fait inopportunes … la rétroactivité de la nullité conduisait à des comptes de restitutions pratiquement impossibles. En outre l’application de l’article 1129 donnait à la nullité pour indétermination du prix un domaine excessif et imprévisible.” Béhar & Virassamy, 1999, p. 89: “reviendrait à empêcher le distributeur d´agir effectivement en justice de peur de voir annuler l´ensemble du contrat.” Dreifuss-Netter, 1990, p. 369. This author indicates that the nullity of the contract would lead to the closure of the franchisee’s outlet and that such an outcome “ne serait conforme ni à l´intérêt général, ni à celui du distributeur victime de l´abus.” Ferrier, 1997, p. 59; Lasbordes, 2000, p. 271. See Ferrier, 1991, p. 237; Behar-Touchais, 1994, p. 485; Vogel, 1995, p. 153; Michel Jéol, conclusions to the decisions of the Assamblée Plénière de la Cour de Cassation of 1 december 1995, D. 1996, jur. p. 14.

Section 6. Franchisee’s obligation to pay

185

6.2.3.1.2 After the decisions of the Assemblée Plénière de la Cour de Cassation of the first of December of 1995: Remedies for non-performance of the obligation to impose the price in good faith The four decisions of the Assémblée Plénière of the Cour de Cassation of the first of December of 1995 brought about a volte-face in the policy of the Cour de Cassation as to the determination of the price in franchising.661 In one of the four cases, a franchisee claimed that the contract was invalid because it contained a clause establishing that the price of the products was to be determined as the price effective at the time when the franchisee ordered the supplies. The Cour d´appel had followed the previous doctrine of the Cour de Cassation and granted the annulment of the franchise contract for lack of determination of the price of the goods at the time the contract was concluded. The Cour de Cassation however quashed this decision and held that such a clause did not result in the invalidity of the contract and that only the abuse on the determination of the price could lead to the termination of the franchise contract or to damages. 662 In two other decisions, the Cour de Cassation indicated that the lack of determination in a distribution framework agreement of the price in subsequent sub-contracts did not imply the invalidity of the framework agreement. Only the abusive determination of the price could lead to termination of the framework agreement or to damages.663 This change in approach does not therefore mean that the franchisor can impose prices arbitrarily. On the basis of Articles 1134 and 1135 of the Civil Code, courts in case of the abusive determination of the price may establish that the contract is to be terminated (Article 1184 of the Civil Code) or that damages must be paid to the franchisee (Article 1147 of the Civil 661

662

663

Cass. com. 1 December 1995, quatre arrêts, D. 1996, jur., concl. M. Michel Jéol, annotated by L. Aynès; D. 1997, somm., p. 59, concl. M. Michel Jéol, obs. D. Ferrier; JCP 1996, II, 22565, concl. M. Michel Jéol, annotated by Ghestin: arrêt 393, Cofratel c. Bechtel ; arrêt 394, Le Montparnasse c. GST-Alcatel Bretagne; arrêt 395, Cie Atlantique de téléphone c. SUMACO and arrêt 396, Vassali c. Gagnair. Cass. com. 1 December 1995, arrêt 396, Vassali c. Gagnair, n. 661, above: “la clause d’un contrat de franchisage faisant référence au tarif du fournisseur en vigueur au jour des commandes n’affecte pas la validité du contrat, l’abus dans la fixation du prix ne donnant lieu qu’ à résiliation ou indemnisation.” Cass. com. 1 December 1995, arrêt 393, Cofratel c. Bechtel France and Cass. com. 1 December 1995, arrêt 395, Cie Atlantique de téléphone c. SUMACO, n. 661, above: “lorsque la convention prévoit la conclusion de contrats ultérieurs, l’indétermination du prix de ces contrats dans la convention initiale n´affecte pas, sauf dispositions légales particulières, la validité de celle-ci, l´abus dans la fixation du prix ne donnant lieu qu´à résiliation ou indemnisation.”

186

Chapter III. Description and Comparison

Code).664 Judicial control has shifted from focusing on the requirements for validity of the contract to focusing on the performance of the contract in good faith.665 The solution provided by the Plenary Assembly of the Cour de Cassation was confirmed in later decisions by the Cour de Cassation, for example, the judgments of 26 March 1996,666 9 July 1996,667 21 January 1997,668 23 February 1999669 and 6 May 2002.670

664

665

666

667 668 669 670

Although some authors, See Carbonnier, 2004, p. 2017 and Huet, 1997, p. 319, indicate that the lenient approach taken by the Cour de Cassation also has its drawbacks, given that it opens the door for abusive use by suppliers of the prerogative to unilaterally set the price, or to a revision of prices allegedly justified by inflation. Some authors, Lasbordes, 2000, p. 635 and Dreifuss-Netter, 1990, p. 369 ff. regret that the legislator has not opted for partial nullity as generally established for abusive clauses. Lasbordes, 2000, p. 273: “la loi ne fait pas de la fixation objective du prix un élément de validité du contrat.” And p. 634: l´abandon de la nullité s´explique par l´inapplicabilité de l´article 1129 du Code Civil à la détermination du prix des marchandises, achetées par le distributeur en application du contrat-cadre de distribution. Dès lors que le contrôle judiciaire se déplace de la formation à l´exécution du contrat, il est normal que la sanction change de nature.” Cass. com. 26 March 1996, Cont. conc. Cons. 1996, 136, obs. L. Leveneur: the contract concluded between the franchisor, La Sweaterie (a company involved in the prêt-a-porter business) and one of its franchisees included an obligation of exclusive purchasing. The franchisee pursued the declaration of nullity of the entire contract for lack of determination of the price of purchase. The Versailles Cour d´appel did indeed declare the contract null and void for this reason, as lack of determination of the price made the price depend solely on the discretion of the franchisor which went against Article 1129 of the Civil Code. However, the Cour de Cassation subsequently held that when a framework agreement indicates that the parties will conclude later agreements (contrats d´application), the lack of determination of the price in those agreements, unless statutorily regulated otherwise, does not affect the validity of the framework agreement. The abuse can only give rise to a claim for termination or damages on the basis of Articles 1134 and 1135 of the Civil Code. Cass. com. 9 July 1996, JCP 1996, II, 22721. Cass. com. 21 January 1997, D. 1997, p. 414. annotated by Ch. Jamin. Cass. com. 23 February 1999, Cont. conc. cons. 1999, 68, obs. L. Leveneur. Cass. com. 6 May 2002, 99-20130 (inédit), http://www.legifrance.gouv.fr.

Section 6. Franchisee’s obligation to pay

187

6.2.3.2 Direct remuneration The lack of determination of the price in the framework agreement in cases where the price is not to be determined in subsequent agreements, i.e. direct remuneration, is a question that has only been raised by a few French authors. These scholars argue that in accordance with Article 1129 of the Civil Code671 the price which is to be paid by the franchisee has to be certain at the time the contract is concluded or at least has to be determinable on the basis of objective criteria.672 The decision of the Cour de Cassation of 12 December 1989 has so far been the only judgment on the issue. This case concerned a franchise contract that contained a clause stating that the franchisor had the prerogative each year to fix the amount of the monthly payments payable by the franchisee. The franchisee claimed the annulment of the contract on grounds of the fact that no price had been determined. The Cour d´appel decided that the contract was valid because the parties had agreed on a criterion to determine the payments.673 The Cour de Cassation however quashed this decision and annulled the contract because the price was deemed not to have been objectively determined in accordance with criteria that were not solely at the discretion of the franchisor, i.e. contray to what is provided under Article 1129 of the Civil Code, therefore.674 However, in one of its decisions of December 1995, regarding a distribution agreement, the Assémblée Plénière of the Cour de Cassation indicated that Article 1129 of the Civil Code did not apply to the determination of the price in onerous agreements.675 This would mean that the lack of determination of the price of the framework agreement in a franchise contract would not lead to the nullity of the contract; only when the price is abusive, termination of the contract or damages may be claimed. However, some authors criticise this radical change of approach by the Cour de Cassation.676 671

672 673 674

675

676

Article 1129 of the Civil Code: “1. Il faut que l'obligation ait pour objet une chose au moins déterminée quant à son espèce. 2. La qualité de la chose peut être incertaine, pourvu qu'elle puisse être déterminée.” Ferrier, 2001, p. 108; Matray, 1992, p. 81. CA Riom 15 June 1988. Cass. com. 12 December 1989, Bull. civ. IV, no. 318; D. 1990, p. 369, obs. D. Ferrier. See also Bouloc, 1990, p. 458. Cass. com. 1 December 1995, arrêt 394, Le Montparnasse c. GST-Alcatel Bretagne, n. 661, above: “Mais attendu que l’article 1129 du Code Civil n’etant pas applicable à la determination du prix …” See Huet, 1997, pp. 312, 314 and 321. See also Carbonnier, 2004, p. 2012. Carbonnier indicates that the policy taken in this judgment should be taken with a grain of salt. See Carbonnier, 2004, p. 2012. Huet is much more drastic in his criticism: “Depuis quand la Cour de cassation est-elle investie du pouvoir d’abroger –

188

Chapter III. Description and Comparison

According to Huet, Article 1129 continues to be applicable to the determination of the price of onerous agreements, although it is not excluded that a more lenient approach could be followed with regard to the requirement of the determination of the price in contracts such as franchising.677 Ghestin explains that the Cour de Cassation meant to apply this exception to the application of Article 1129 to contracts in which the price is determined in subsequent agreements.678 These opinions imply that the determination of direct remunerations in franchising is subject to Article 1129 of the Civil Code.

6.2.4

Control of abusive pricing

The determination of whether a price is abusive is a task which is left to the courts. French courts have not yet come up with criteria to determine the existence of abuse. There is however one decision in which the Cour de Cassation has indicated when a price is not abusive. In its decision of 21 January 1997,679 the Cour de Cassation decided that there is no abuse if the franchisor allows the franchisee to freely negotiate the price according to market laws and the franchisee is not at any disadvantage caused by a dominant or arbitrary position taken up by the franchisor.680 Ghestin distinguishes three types of approaches to the determination of whether there is an abusive price: an objective, a subjective and a mixed approach.681 According to the objective approach, the abuse is to be assessed in relation to the price in the market. An abusive price would then be a price that is excessive compared to the price according to the usages and commercial practice in the franchising industry.682 The subjective approach consists of assessing the existence of abuse in accordance with the terms of

677 678

679 680

681

682

même partiellement- des dispositions de loi, et qui plus est de textes du Code civil?” In Huet, 1997, p. 322. See Huet, 1997, p. 325. Ghestin, annotation to the decision of the Assemblée Plénière de la Cour de Cassation of 1 December 1995, JCP 1996, II, 22565, p. 29. Cass. com. 21 January 1997, D. 1997, jur., p. 414, annotated by Ch. Jamin. Cass. com. 21 January 1997, D. 1997, jur., p. 414, annotated by Ch. Jamin: “(le franchiseur) a laissé au franchisé la liberté de négocier les prix selon la loi du marché sans souffrir d’une position dominante et arbitraire du franchiseur, ce dont il resulte que (le franchiseur) n’a pas commis d‘abus dans l’application de la clause d’approvisionement exclusif.” Ghestin, annotation to the decision of the Assemblée Plénière de la Cour de Cassation of 1 December 1995, JCP 1996, II, 22565, p. 33. Also Lasbordes, 2000, p. 616.

Section 6. Franchisee’s obligation to pay

189

the franchise contract in question. Here, the concrete circumstances of the parties are the relevant criteria.683 Ghestin favours a mixed approach as the subjective and the objective approach are complementary: “sera tenu compte de la situation respective des parties et notamment de la nécessité pour le fournisseur de disposer, au moment de la fixation du prix, de la marge bénéficiaire indispensable à l’équilibre de son entreprise et, réciproquement de celle de ne pas mettre le distributeur dans une situation telle qu’il ne soit plus en mesure d’affronter la concurrence.”684 Aynès calls attention to the fact that judicial control concerning abusive unilateral determination of the price does not have the objective of imposing a “fair price” in private contracts.685

6.2.4

Remedies

Lack of performance of the obligation to pay may justify the termination of the contract as established by the Paris Cour d’appel in a decision of 27 May 1993: “il y a lieu de prononcer la résiliation du contrat aux torts exclusifs du franchisé, qui a unilatéralement suspendu le paiement de redevances mises à sa charge sans respecter les conditions du contrat.” 686 The franchisee on his part may also claim non-performance by the franchisor of his obligation to set the price of the products that the franchisee has to buy exclusively from the franchisor in good faith. The franchisee is entitled to claim termination of the franchise contract or damages if he is able to prove that the franchisor has abused his discretion to unilaterally fix the price.687 It is unclear whether this approach, defined by the Cour de Cassation, also applies to the lack of determination of the price when the parties have agreed upon a direct form of remuneration. Some authors defend that the lack of determination of the price in the framework agreement (when the price is not determined in subsequent agreements) leads to the nullity of the contract on the basis of Article 1129 of the Civil Code. 683

684

685

686 687

Ghestin, annotation to the decision of the Assemblée plénière de la Cour de Cassation of 1 December 1995, JCP 1996, II, 22565, p. 33; Behar-Touchais & Virassamy, 1999, p.128. Ghestin, annotation to the decision of the Assemblée plénière de la Cour de Cassation of 1 December 1995, JCP 1996, II, 22565, p. 33. Aynès, annotation to the decision of the Cour de Cassation of 1 December 1995, D. 1996, jur., p. 20: “L’objet du contrôle judiciaire n’est pas d’avantage d’imposer le retour à un «juste prix» ou à un prix «objectif».” CA Paris 27 May 1993, D. 1995, somm, p. 77, obs. D. Ferrier. Huet argues that the burden on proof should be on the franchisor. See Huet, 1997, p. 325.

190

Chapter III. Description and Comparison

6.3

Spain

6.3.1

Introduction

According to Article 2 of RD 2485/1998, a franchise agreement is an agreement whereby the franchisor grants to the franchisee the right to operate a franchise business in exchange for remuneration, which can be direct, indirect or both. The obligation to pay is therefore the main counter-performance in exchange for the performance of the franchisor. The existence of an obligation to pay for the franchisee is a recurring feature in most definitions of franchising given by Spanish courts.688 Spanish authors also refer to the obligation to pay as the main counter-performance in exchange for performance by the franchisor and include the obligation to pay in their definitions of franchising.689 According to the rules in the Spanish Civil Code regulating the obligation to pay, which form part of the Chapter on sales contracts, the price, as the object of the contract, has to be determined at the time the contract is concluded or must at least be determinable at a later stage without any further agreement by the parties being necessary (Article 1445 of the Civil Code). Accordingly, the valid conclusion of a franchise contract does not only require agreement regarding the obligation to pay, but also agreement on the actual price or criteria that allow the price to be determined. There are several reported Spanish decisions concerning lack of payment. Three of the four landmark decisions of the Tribunal Supremo concerned claims of franchisors arising out of the non-performance of the payment obligation by the franchisee. 690

6.3.2

Form and contents of the obligation to pay

RD 2485/1998 indicates that remuneration may be direct, indirect or both. It is silent on the form and contents of the obligation to pay. Spanish au688

689

690

STS 27 September 1996, RJ 1996\6646; 4 March 1997, RJ 1997\1642 and 30 April 1998, RJ 1998\3456. See also SAP Madrid 27 September 2005, La Ley Juris, 2178345/2005 and 30 June 2006, Id Cendoj 28079370122006100413. Uría, 2002, pp. 738 and 740; Broseta Pont, 2003, p. 131; Cano Rico, 2002, p. 763; Sánchez Calero, 2003b, pp. 426; Jiménez Sánchez, 2003, p. 284; Rodríguez, 1986, p. 877; Ortuño Baeza, 1997, pp. 1506 and 1513. Decisions of the Tribunal Supremo of 27 June 1996, RJ 1996\6646, 4 March 1997, RJ 1997\1642 and 30 April 1998, RJ 1998\3456 and decisions of the Audiencias Provinciales of Zaragoza 10 April 2000, AC 2000\1287; Valencia 17 January 2001, AC 2001\1269 and Barcelona 31 March 2001, JUR 2001\215218.

Section 6. Franchisee’s obligation to pay

191

thors describe the characteristic features of this obligation on the basis of what parties commonly agree in their contracts.691 According to Spanish legal writing, in Spanish commercial practice the parties to a franchising contract typically agree upon dividing the payment into two parts, namely an entrance fee (cánon de entrada) and periodical payments (cánones periódicos) or royalties (regalías) that are to be paid throughout the contract’s duration.692 The entrance fee is a fixed amount. The subsequent payments may consist of fixed amounts (periodical payments) or amounts to be determined in accordance with the volume of sales realised by the franchisee (royalties).693 The franchisee may also be obliged to pay a fee for the national and international advertising campaigns carried out by the franchisor to promote the franchise business (cánon de publicidad). Such contributions are normally a percentage of the periodical payments.694 Lack of correspondence between the price that the franchisee has to pay and the real value of the performance of the franchisor is not a relevant issue under Spanish law.695 Some authors nevertheless describe the elements that the franchisee is supposed to be paying for. The entrance fee is intended to pay for the license of the right to use the business elements in the franchise package (paquete de franquicia).696 The regular payments are the counterperformance for the performance of the franchisor in maintaining the value of the franchise business elements.697 Whether the price that the franchisee pays is equivalent to the value of the performance by the franchisor has only become relevant in cases in 691

692

693

694

695

696 697

Sánchez Calero, 2003, p. 247; Broseta Pont, 2003, p. 131; Rodríguez, 1986, p. 877; Hernando Giménez, 2000, p. 284. In the literature Uría, 2002, p. 740; Villagómez Rodil, 1997, p. 127; Jiménez Sánchez, 2003, p. 284; Broseta Pont, 2003, p. 131; Rodríguez, 1986, p. 877. See also case-law: SAP Barcelona 31 March 2001, JUR 2001\215218 and SAP Madrid 27 September 2005, La Ley Juris, 2178345/2005. SAP Valencia 17 January 2001, AC 2001\1269; SAP Barcelona 9 September 2002, AC 2002\1728. See also Uría, 2002, p. 740; Jiménez Sánchez, 2003, p. 284; Broseta Pont, 2003, p. 131; Rodríguez, 1986, p. 877; De la Cuesta Rute & Valpuesta Gastaminza, 2001, p. 372 ; Alfaro, 1995, p. 3154, Echebarría, 1995, p. 308; Hernando Giménez, 2000, p. 284 ; Ortuño Baeza, 1997, p. 1538; Tintoré & Peña & Naranjo, 2001, p. 52. Gallego Sánchez, 1991, p. 51; Ortuño Baeza, 1997, p. 1538; Tintoré & Peña & Naranjo, 2001, p. 52; Hernando Giménez, 2000, p. 288. The doctrine of fair price (doctrina del justo precio) is of no relevance under Spanish law. See Sánchez Calero, 2003, p. 247; Broseta Pont, 2003, p. 131; Rodríguez, 1986, p. 877. Alfaro, 1995, p. 3154; Hernando Giménez, 2000, p. 286. Alfaro, 1995, p. 3154; Hernando Giménez, 2000, p. 288.

192

Chapter III. Description and Comparison

which the courts have ordered the franchisor to return to the franchisee part of the payment made. This was the case in the decision of the Barcelona Audiencia Provincial of 9 September 2002. The franchisee exercised his contractual right to terminate the contract within 6 months of its conclusion. He requested the franchisor to pay back the entrance fee. The court concluded that the entrance fee had been intended to pay for the transfer of the trademark and know-how and for the provision of assistance during the first two years of the relationship. As the relationship had only lasted for 6 months, the franchisor had to pay back the fee to the amount corresponding to the one-and-a-half years’ performance that was not going to be provided.698

6.3.3

Determined price

Under Spanish law, unilateral determination of the price by one of the parties is not allowed (Article 1449 of the Civil Code). The law requires that the price is fixed at the time of the conclusion of the contract or at least determinable in accordance with fixed criteria, without the conclusion of a new agreement being necessary (Article 1555 of the Civil Code). A franchise contract where the price is not determined or is not determinable in the way described may be declared null due to the absence of a requirement for validity, namely a fixed price. This is provided in Article 1449 of the Civil Code which regulates sales contracts, but applies by way of analogy to franchising and to any contract where the price is an essential element. However, there is no Spanish case-law in which a franchise contract has been declared void on the ground of the lack of determination of the price.

6.3.4

Remedies

The three landmark decisions of the Tribunal Supremo concerned claims by franchisors pursuing the termination of the contract for non-performance by the franchisee of the obligation to pay. In the decision of 27 September 1996, the Tribunal Supremo concluded that the lack of payment was a ground which led to the frustration of the contractual expectations of the franchisor and subsequently to the termination of the relationship. In the other two judgments of 4 March 1997 and 30 April 1998 respectively the Tribunal Supremo did not uphold the claims of the franchisors for termina698

SAP Barcelona 9 September 2002, AC 2002\1728. See for a similar case SAP Oviedo 7 March 2006, Id Cendoj 33044370052006100091.

Section 6. Franchisee’s obligation to pay

193

tion because the franchisors had been in default first.699 Under a bilateral contract with reciprocal obligations, one party cannot claim application against the other party of the remedies under Article 1124 of the Civil Code, namely specific performance or termination, if that party has not previously performed his own obligations.700

6.4

Comparison

6.4.1

Introduction

The franchisee’s obligation to pay is a main obligation in franchising contracts under all three systems, i.e. the PEL CAFDC, French law and Spanish law. A contractual relationship governed by any of these three legal regimes cannot be classified as a franchise agreement if the parties have not agreed upon the obligation that the franchisee is to pay the franchisor. The Principles refer to this obligation as a characteristic element in franchising agreements which is laid down accordingly in Article 3:301 and included as a characteristic obligation in the rule on scope of application in Article 3:101. In Spain, the franchisee’s obligation to pay is included in the statutory definition of franchising contained in RD 2485/98, and is also mentioned in the definitions given by courts and legal scholars. In France the franchisee’s obligation to pay is generally included in the definitions of franchising provided by legal scholars, but, surprisingly, not in the definitions given by the courts. However, although it is not included in the definitions of the French courts, the obligation to pay is still described in French case-law as the franchisor’s cause to contract. The three regimes do not differ in respect of the fact that payment is to be made in exchange for the right to use the franchisor’s business method.

699 700

STS 4 March 1997, RJ 1997\1642 and STS 30 April 1998, RJ 1998\3456. The same reasoning was applied in the decision of the SAP Zaragoza of 25 July 2000, JUR 2000\273349 where the franchisor sued the franchisee for nonperformance of the obligation to pay royalties. The franchisee argued that there were prior non-performances on the part of the franchisor, among which of his obligation to assist. The Audiencia Provincial concluded that this was indeed the case and accordingly held that the franchisor could not have any recourse to the remedies under Article 1124 of the Civil Code.

194

6.4.2

Chapter III. Description and Comparison

Contents

Parties to a franchising contract are free, both under the Principles and under French and Spanish law, to determine the form and contents of the franchisee’s obligation to pay. The Principles explicitly acknowledge in the wording of the rule on payment the overriding character of the autonomy of the parties to determine the contents of the obligation to pay. Indeed, the rule establishes that the franchisee must comply with his obligation to pay as it was agreed in the contract. The clauses of the contract are also the predominant source of law governing the obligation to pay in franchising under the French and the Spanish regimes. The role of national courts has been to verify whether franchisees have complied with their payment obligation as it was agreed in the contract. Legal doctrine merely plays a descriptive role. Scholars have referred to the elements for which the franchisee is supposed to be paying, but these are mere indications of what is typically agreed in commercial practice. Under the three systems the obligation to pay could consist of direct or indirect remuneration. However, both in the Comments to the rule on payment in the Principles and in legal writing in France and Spain, it is described as generally consisting of an entrance payment and of periodical payments throughout the duration of the contract. The initial payment is normally a fixed amount (entrance fee) whereas the periodical payments are to be determined by applying a determined percentage to the benefits obtained by the franchisee.

6.4.3

Unilateral determination of the price by the franchisor

The parties’ autonomy to set the price in franchising contracts is limited under French and Spanish law in accordance with the national contract law rules which require the parties to agree upon a price which is certain at the time the contract is concluded or which at least can be subsequently determined on the basis of objective criteria. Under both systems, if the price is not certain, the contract may be declared invalid because one of the validity requirements is absent. Differently, the Principles do neither require the price to be certain, nor do they require that the parties set objective criteria for the subsequent determination of the price. Pursuant to the Principles, the characteristic features of the franchise relationship justify that the fees can be unilaterally determined by the franchisor during the course of the relationship. However, the unilateral variation of the price is only allowed under the Principles provided the price imposed is reasonable. If the price is unreasonable, it is to be substituted for a reasonable price. This permissive approach taken by the Principles in allowing the unilateral determination of the periodical payments by the franchisor is nowadays

Section 6. Franchisee’s obligation to pay

195

also to be found in French case-law. In early cases, the unilateral determination of the price of sale of the goods and services in franchise contracts in which the franchisee had to exclusively purchase from the franchisor led to the invalidity of the whole franchise agreement. According to the current approach taken by the courts, it is only when the franchisor abuses his discretion to determine the price of the sales contracts in the framework of a franchise relationship that the franchisee is entitled to claim termination of the framework contract or damages. There is one decision of the Cour de Cassation in which this policy seems also to apply to the lack of determination of the price when the parties have agreed on a direct remuneration. However, the literature has argued that this approach only applies to cases in which the price of the framework agreement is to be determined in the contrats d’application framed in franchising agreements. Both the Principles and French law are concerned with the possibility that the franchisor uses his prerogative to impose prices unilaterally in an unreasonable way, to the detriment of the interests of the franchisee. However, whereas the Principles are concerned with the price of the framework agreement, French courts and legal doctrine have only dealt with the price of the sales contracts within the framework franchise agreement. The protection granted to the franchisee is in both cases partial. The Principles only regard situations of lack of determination of the price when the parties agree on a direct payment, but disregard situations in which parties agree on indirect remuneration, for example, by requiring the franchisee to buy exclusively from the franchisor. In French law it is unclear to what extent the rule established by French courts on monitoring abuse regarding price setting in sales contracts also applies to the price of other contracts framed in the franchise framework agreement. Furthermore, there is no indication under French law as to the regime applicable to the unilateral determination of direct payments. In contrast to the importance of this issue in France, it has not been the object of debate within Spanish case-law or Spanish literature. In principle, in accordance with the Spanish Civil Code, the unilateral determination of the price is not allowed.

6.4.4

Remedies

Non-performance of the obligation to pay as agreed in the contract entitles the franchisor according to the PEL CAFDC to claim the remedies for nonperformance under the PECL. In France there is only one decision of a Cour d’appel regarding a franchisor’s claim for the non-performance by the franchisee of his payment obligation. The court granted termination of the contract. In Spain there have been more decisions on this issue. Spanish courts have granted the termination of the contract when non-performance

196

Chapter III. Description and Comparison

was proven, except for the cases where the court concluded that the franchisor had previously not performed his own obligations. As the rule on payment in the Principles also imposes an obligation on the franchisor to fix reasonable prices, the franchisee is also granted remedies when the franchisor does not perform this obligation. Hence, if the Principles apply, the franchisee could ask the court to intervene in order to set a reasonable price if the franchisor has imposed an unreasonable price. This obligation also exists under French law, although it only regards indirect payments. An abusive fixation of the price of the sales contract framed in a franchise contract entitles the franchisee under French law to claim termination of the framework agreement or damages. In Spain, the unilateral determination of the periodical payments by the franchisor would lead to the invalidity of the franchise contract. The lack of determination of the price of sales contracts framed in a franchise framework agreement would also lead to the nullity of the sales contract for lack of a certain price.

6.4.5

Conclusion

Pursuant to all three regimes, the parties are free to agree on how and how much the franchisee has to pay and the main role of the courts is to evaluate whether the franchisee has performed his obligation as agreed in the contract. However, if the Principles apply, French and Spanish courts would have to allow the unilateral imposition by the franchisor of the periodical payments during the course of the agreement, even though in these legal systems the unilateral imposition of the price is a ground to declare the nullity of a contract for the absence of a validity requirement, namely the existence of a certain price. In France, the case-law has also evolved towards a less strict approach which tolerates the unilateral imposition of the prices of sales contracts within franchise relationships, but it is not clear whether this policy also applies to the price agreed upon for the framework agreement itself. At first sight, this tolerant position seems to go against the interest of the party who has to accept the unilateral imposition of the prices by the other party. Nevertheless, allowing the unilateral imposition of prices does not mean tolerating the arbitrary imposition of prices. The Principles articulate a mechanism to control the discretion of the franchisor by obliging him to impose a reasonable price. It is for the national court to interpret whether the price is reasonable. When it is unreasonable the court may substitute the unreasonable price for a reasonable price. This control mechanism is known to French courts because there is consolidated case-law on monitoring abuse regarding price setting in sales contracts framed in franchising relationships. This is certainly not the case in Spanish case-law.

Section 7. Franchisee’s obligation to follow Business Method and Instructions 7.1

PEL CAFDC: Article 3:303

7.1.1

Introduction

Pursuant to the PEL CAFDC, when the franchisee enters a franchise network, he commits to an obligation to maintain and promote the reputation of the franchise network.701 According to the Principles, the franchisee fulfils this obligation if he follows the business method and instructions of the franchisor and if he abstains from acting in a manner that endangers the reputation of the network. These two particular obligations are contained in Article 3:303. This provision is formulated as follows: (1) The franchisee must make reasonable efforts to operate the franchise business according to the business method of the franchisor. (2) The franchisee must follow the franchisor’s reasonable instructions in relation with the business method and the maintenance of the reputation of the network. (3) The franchisee must take reasonable care not to harm the franchise network. (4) The parties may not derogate from this provision.

These obligations aim to ensure the adequate use and in this manner the welfare of the franchisor’s method and also to guarantee the uniform operation of the business by all franchisees.702 This safeguards the interests of franchisors, but also of franchisees whose success also depends on maintaining the good reputation of the network.703 The significance of these particular obligations justifies, according to the Principles, that they are mandatory. Accordingly, the obligation to follow the business method of the franchisor is included in the definition of franchising provided in Article 3:101 on scope of application.

701 702 703

See Article 3:207 of the PEL CAFDC, Comment B. See Article 3:301 of the PEL CAFDC, Comment A. See Article 3:301 of the PEL CAFDC, Comment B.

198

7.1.2

Chapter III. Description and Comparison

Following the business method and instructions

The first obligation set out in Article 3:303 of the Principles is an obligation to do. The franchisee has to operate his business in accordance with the method established by the franchisor (paragraph (1)), which means using the business elements related to the franchise business (intellectual property rights, know-how and assistance) in the manner established by the franchisor.704 The contents of this obligation will therefore depend on the quality standards required by the franchisor’s method. The franchisee is moreover obliged to follow subsequent instructions given by the franchisor (paragraph (2)). Instructions are indications as to the functioning of the method which are given by the franchisor during performance.705 They concern the operation of the business method and the maintenance of the reputation of the network. The franchisee is required to apply reasonable efforts in fulfilling the obligation to follow the business method. This amounts to the diligence that a reasonably skilled franchisee would exercise under the same circumstances, in accordance with the test of “reasonableness” provided by the PECL in Article 1:302.706 Regarding the obligation to follow subsequent instructions, the provision imposes a more concrete limit. First, the instructions must concern the business method and the maintenance of the reputation of the network707 and second, they must be reasonable. The Principles clarify that there are three conditions which are to be fulfilled in order to conclude that instructions are reasonable: they have to be necessary to guarantee the maintenance of the quality standards required by the franchisor, they must not change the franchisor’s business method and they must not pose an obstacle to the legal status of the franchisee as an independent entrepreneur.708

704

705 706 707 708

See Article 3:301 of the PEL CAFDC, Comment A: “the franchisee does not only have a right to receive intellectual property rights (Article 3:201 Principles), know-how (Article 3:202 Principles) and assistance (Article 3:203 Principles) from the franchisor. It is also under an obligation to actually use intellectual property rights, know-how and assistance.” See Article 3:303 of the PEL CAFDC, Comment B. See Article 3:303 of the PEL CAFDC, Comment D. See Article 3:303 (2) of the PEL CAFDC. See Article 3:303 of the PEL CAFDC, Comment E.

Section 7. Franchisee’s obligation to follow Business Method and Instructions

7.1.3

199

Reasonable care not to harm the franchise network

The franchisee also has an obligation not to do. It is not sufficient that the franchisee operates the business according to the business method and instructions given by the franchisor. He is also explicitly obliged to refrain from acting in a manner that may endanger the image of the franchise system.709 The franchisee is obliged to take reasonable care in fulfilling this duty. This is the diligence that a reasonably skilled franchisee would observe in the same circumstances, in accordance with Article 1:302 of the PECL.710

7.1.4

Remedies

In case of non-performance by the franchisee of his duties in respect of the reputation of the franchise business, the franchisor may, in principle, resort to any of the remedies set out in Chapter 9 of the PECL.

7.2

France

7.2.1

Introduction

A franchise relationship consists of the repeated operation of a successful business concept (la reiteration d’une réussite commerciale), as is consistently pointed out by French courts711 and French legal doctrine.712 The repetition of the business concept is described in French legal writing not only as a right of the franchisee, but also as one of his main obligations, together with 709 710 711

712

See Article 3:303 of the PEL CAFDC, Comments B and E. See Article 3:303 of the PEL CAFDC, Comment F. See Cass. com. 3 October 1989, D. 1990, somm., p. 370, obs. D. Ferrier; CA Paris 16 April 1991, D. 1992, somm., p. 392, obs. D. Ferrier; CA Paris 16 June 1993, D. 1995, somm. p. 79. In legal writing see the comments of Ferrier to several decisions where the franchisee argued that the contract was null due to the lack of or inadequacy of know-how: CA Paris 18 June 1992; CA Paris 22 September 1992; CA Paris 22 September 1992; CA Paris 29 September 1992; CA Paris 26 November 1992; CA Paris 27 May 1993, D. 1995, somm., p. 77, obs. D. Ferrier; CA Versailles 27 May 1993, D. 1995, somm, p. 78, obs. D. Ferrier; Cass. com. 29 April 1997, D. 1998, somm., p. 338. Amiel-Cosme, 1995, p. 22; Gunther, 2000, p. 277; Ferrier, 2002, p. 104; Leloup, 2004, p. 322.

200

Chapter III. Description and Comparison

the obligation to pay. These obligations constitute the main counter-performances in exchange for performance by the franchisor.713 There are only a few references in the case-law to this obligation. Lack of compliance with this obligation has been invoked as a defence for franchisors in proceedings originally brought by franchisees for non-performance on the part of franchisors.714 There is therefore almost no information as to the position taken by the courts regarding this obligation. More information however can be found in legal writing.

7.2.2

Obligation to follow the business method as agreed in the contract

As to the contents of the obligation to follow the business of the franchisor, French literature describes what is typically agreed in practice. Legal authors refer to many and very different possible contents of this obligation for the franchisee.715 Generically, this obligation consists of repeating the business method, namely by using the franchisor’s trademark and know-how and by following the assistance given by the franchisor.716 Typically, the particular contents of this generic obligation are spelled out in the contract.717 Regarding the use of intellectual property rights, the franchisee, as a mere licensee, may only use these within the limits stated in the license con-

713

714

715

716

717

Huet, 2002, p. 559; Virassamy, 1986, p. 81; Clément, 1996, p. 147; Malaurie & Aynès & Gautier, 2005, p. 473; Ferrier, 2001, p. 108 ff and comments to decision of the Cour d´appel Paris of 14 February 1991, D. 1992, somm., p. 393. Apart from the case decided by the Cour de Cassation on 6 May 2002, 99-20130 (inédit), http://www.legifrance.gouv.fr, the other two cases available on the issue were not initially brought by franchisors: Cour de Cassation of 4 December 1990, JCP 1991, II, 21725, n. 39, p. 305, annotated by G. Virassamy and CA Paris 14 February 1991, D. 1992, somm. p. 392, obs. D. Ferrier. In French legal writing, Leloup stresses that the franchisee’s obligation to act with due diligence in following the business method of the franchisor is a precondition for being able to claim mistaken consent, in Leloup, 2004, p. 193. Bessis, 1991, p. 81; Clément, 1996, p. 147; Behar-Touchais & Virassamy, 1999, nos. 888 ff; Ferrier, 2002, pp. 384 ff; Le Tourneau, 2003, p. 37; Leloup, 2004, pp. 218 ff. Huet, 2002, p. 559; Bessis, 1991, pp. 81 ff; Gunther, 2000, p. 277; Leloup, 2004, pp. 218 ff. Le Tourneau, 2003, p. 37.

Section 7. Franchisee’s obligation to follow Business Method and Instructions

201

tract.718 Obviously, the franchisee also has to comply with the national rules on intellectual property.719 The use of know-how is also typically established in detail in the contract or in the operational manual. Franchisees who do not comply with this obligation to apply the know-how transferred by the franchisor cannot claim that they have not been provided with the elements which would have allowed them to successfully operate the business. This was the case in a claim decided by the Paris Cour d’appel on 14 February 1991. The franchisee requested the termination of the contract because the franchisor had not provided the assistance which would have allowed him to successfully operate the business. The franchisor counter-claimed that the franchisee had not followed the method. The court concluded that the franchisee had indeed refused to follow the advice and attend the training courses given by the franchisor and that he had not cooperated in the operation of the business. The liability of the franchisor was accordingly excluded.720 Repeating the method also requires the franchisee to adapt to any modifications introduced by the franchisor during the time the contract is in effect.721 Many scholars emphasise that the obligation to follow the business method comprises the obligation to submit local advertising campaigns to the franchisor for approval, for the benefit of the network and the trademark.722

7.2.3

Obligation not to damage the reputation of the network

Some authors emphasise the existence of a general obligation not to act in a way which may damage the reputation of the network. This obligation is

718 719 720 721 722

Burst, 1988, p. 40; Le Tourneau, 2003, p. 36. Le Tourneau, 2003, p. 35. See 3.2.2 in this Chapter, above. CA Paris 14 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier. Ferrier, 2002, p. 384. The ECJ in Pronuptia expressly validated this clause for competition purposes: “since advertising helps to define the image of the network’s name or symbol in the eyes of the public, a provision requiring the franchisee to obtain the franchisor’s approval for all advertising is also essential for the maintenance of the network’s identity, so long as that provision concerns only the nature of the advertising.” Clément, 1996, p. 149; Bessis, 1991, p. 38: “le franchisé devra dans l´intérêt de la marque et afin de sauvegarder l´identité et la réputation du réseau soumettre ses projets publicitaires au franchiseur”; Gunther, 2000, p. 278.

202

Chapter III. Description and Comparison

imposed by European competition rules,723 namely the obligations not to compete and not to use the know-how for other purposes than the operation of the franchise business, not to sell or not to use within the framework of the franchise business other goods than the ones indicated by the franchisor, and not to disclose the characteristics of the know-how, which also applies to the franchisor’s staff.724 For Leloup the existence of this obligation may be inferred from the general obligation to act loyally, which is a specific manifestation in franchising of the duty to act in good faith.725

7.2.4

Limits to the obligation to follow the business method

French courts and literature have established two main restrictions in respect of the franchisee’s obligation to follow the business method. First, the franchisee is obliged to follow the rules insofar as this is necessary to guarantee the uniformity of the network.726 Secondly, the franchisee is obliged to follow the operational rules determined by the franchisor, provided that this does not interfere with the franchisee’s independence.727 When the control exercised by the franchisor goes beyond this limit, the court may reclassify 723

724

725

726

727

Bessis refers to the Pronuptia ruling by the ECJ, in Bessis, 1991, p. 81; Ferrier refers to the BER 2790/99 and the Guidelines on Vertical Restraints. CA Paris 14 February 1991, D. 1992, somm., p. 393, obs. D. Ferrier and CA Paris 26 November 1992, D. 1995, somm., p. 78, obs. D. Ferrier ; CA Bordeaux 7 June 1983, JCP 1983, II, 20087, annotated by H. Seillan. Leloup, 2004, pp. 221 ff: “… il n´est pas acceptable qu´un franchisé puisse avoir une activité qui soit contraire aux intérêts du franchiseur et du réseau.” “Même s´il n´est pas exprimé formellement au contrat, le devoir de loyauté des cocontractants doit être entendu comme une suite que l´équité et l´usage donnent aux obligations de chaque parties (art. 1135 c.civ): la vie et la prospérité du réseau sont le but que les contractants entendent atteindre: il ne saurait être question pour eux de poursuivre ce but et simultanément de le contrarier.” Cass. com. 17 January 2006, Bull. civ. 2006 IV, N 9, p. 8; CA Paris 14 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier. In French literature see Huet, 2002, p. 555 and 561; Level, 1971, p. 173: “Un tel système de distribution implique une discipline commune pour la promotion et l´exploitation de l´image de marque qui est l’essentiel du franchising. Les sujétions imposées par le contrat doivent être exclusivement motivées par cette fin.” See also Level, annotation to the decision of the Cour de Cassation of 21 October 1970, JCP 1971, 10131, p. 172 ff; Guyon, 1996, p. 894; Collart & Delebecque, 2002, p. 905; Ferrier, 2001, p. 108 ff. Huet, 2002, p. 562; Bessis, 1991, p. 54. Although Gunther indicates that the franchisee has to comply with “any” instructions suggested by the franchisor, in Gunther, 2000, p. 277.

Section 7. Franchisee’s obligation to follow Business Method and Instructions

203

the franchise contract as a labour contract.728 In other decisions, the unjustified interference in the freedom of activity of the franchisee has led courts to consider the franchisor as a dirigeant de fait of the franchisee’s company and thus as also responsible for the damage suffered by the franchisee.729 Some authors have underlined the existence of a third limit: the restrictions imposed on the franchisee must not be abusive. The clauses which impose on the franchisee the obligation to follow the rules of the franchise business have been termed “clauses de pouvoirs” by Lasbordes.730 According to this author, all clauses which allow the franchisor to control the activity of the franchisee are presumed to be exercised to the detriment of the franchisee. Especially, the unilateral modification by the franchisor of the rules which are to be followed by the franchisee in order for the latter to adapt to developments in the commercial policy of the franchisor (e.g. to increase the volume of the purchased goods or to modernise the franchise premises) may lead to an unexpected increase in the financial burden to be assumed by the franchisee which may render the achievement of the expected profits impossible.731 According to Jamin, the decisions delivered by the Assemblée plénière de la Cour de Cassation make it possible to extend the monitoring of abusive practices to other practices than only the unilateral imposition of the price, e.g. the possibility to monitor abuse in the imposition of clauses which require the franchisee to obtain a certain amount of benefits (la clause d´objectifs) and clauses which impose on the franchisee an obligation to follow the rules set by the franchisor.732 According to Jamin, the developments in French case-law likely make it possible for the party who is burdened by the changes made by the other party (i.e. the franchisee in franchise contracts) to refuse to follow these changes.733

728

729

730 731 732 733

Cass. com. 3 May 1995, D. 1997, somm., p. 57, obs. D. Ferrier; Cass.com. 9 November 1993, D. 1995, somm., p. 79, obs. D. Ferrier; CA Lyon 31 March 2005, http://www.legifrance.gouv.fr; CA Toulouse 26 October 2006, 673, http://www. legifrance.gouv.fr. Also Ferrier, 2002, p. 387. Cass. com., 9 November 1993, JCP 1994, II, 22304, annotated by Virassamy or CA Orléans 8 March 2001, RJDA 5/2001, no. 589. Lasbordes, 2000, p. 280. Lasbordes, 2000, p. 283. Jamin, 1996, p. 343. Jamin, 1996, p. 348.

204

7.2.5

Chapter III. Description and Comparison

Remedies

There are only three cases in which the obligation to follow the business method has been discussed. The lack of compliance by the franchisee with his obligation to follow the method was considered sufficient justification for termination of the contract in a decision by the Cour de Cassation of 6 May 2002. The case was brought by a franchisor who complained of non-performance by the franchisee of obligations related to the operation of a restaurant belonging to the chain of the franchisor, which resulted in damage to the image of the network. The contract included the obligation for the franchisee to maintain the reputation of the distinctive signs whose use were granted and to guarantee the good image of the restaurant, both inside and outside the premises. It was also agreed that in case of non-performance of one of the obligations agreed in the contract and also in case of any behaviour which might have a negative impact on the well-known character of the trademark and the distinctive sign of the franchisor, the contract could be terminated by the franchisor. The Cour de Cassation, upholding the decision by the lower court, concluded that the behaviour of the franchisee (promoting a product which was not of the trademark of the franchisor, failing to observe the standards of hygiene and failing to guarantee that the products were kept at the necessary temperature) had to be considered as fundamental nonperformance justifying termination of the contract on grounds of nonperformance of an essential obligation.734 In other rulings, the lack of performance of the franchisee of his obligations to follow the method of the franchisor were considered by the courts in question as grounds for rejecting claims by franchisees for non-performance by the franchisor.735

734 735

Cass. com. 6 May 2002, 99-20130 (inédit), http://www.legifrance.gouv.fr. Cass. com. 18 May 1999, 97-17433 (inédit), http://www.legifrance.gouv.fr; CA Paris 14 February 1991, D. 1992, somm. p. 392, obs. D. Ferrier. In the decision of the Cour de Cassation of 4 December 1990, JCP 1991, II, 21725, no. 39, p. 305, annotated by G. Virassamy, the franchisor was not exempted from liability because the court concluded that the franchisee was not responsible for not obtaining the promised results as he had diligently followed the method.

Section 7. Franchisee’s obligation to follow Business Method and Instructions

7.3

Spain

7.3.1

Introduction

205

The obligation to follow the modus operandi of the franchisor is not included as one of the characteristic obligations in franchising in RD 2485/1998. However, it is described by Spanish scholars as a main obligation of the franchisee, together with the obligation to pay.736 This has also been acknowledged in a decision of the Audiencia Provincial of Barcelona.737 The obligation to follow the method of the franchisor is therefore described as a condition for the validity of franchising agreements. The existence of this legal obligation is imposed by European competition laws.738 Hernando Giménez argues that in the absence of a contractual term which imposes such an obligation, its existence is to be implied from the application of the general principle of good faith contained in Article 57 of the Commercial Code and Article 1258 of the Civil Code.739 There is only one decision in which the Tribunal Supremo refers to this obligation, which is the decision of 4 March 1997, in which the court held that it is a typical obligation for the franchisee to provide a service which is of a quality corresponding to the good reputation of the franchisor.740

7.3.2

Contents of the obligation to follow the business method

Franchise contracts typically contain a detailed list of obligations which the franchisee must observe regarding the operation of the business. Regarding the use of intellectual property rights, the franchisee, as a licensee, is obliged to comply with his legal obligations in respect of these rights as imposed under the laws on intellectual property.741 European competition law is also described as imposing obligations on the franchisee to cooperate in the maintenance of the economic contents of the intellectual property rights (Article 3 (2)(c) BER 4087/88) and to allow quality controls (Article 3 (1)(a) and (b), and Article 3 (2)(h) BER 4087/88).742 736

737 738

739 740 741 742

Alfaro, 1995, p. 3154; Echebarría, 1995, pp. 307 and 310; Hernando Giménez, 2000, p. 293; Paz-Ares & Alfaro, 2001, p. 19; Ortuño Baeza, 1997, p. 1538. SAP Barcelona 20 June 2006, Id Cendoj 08019370152006100283. Article 3(2)(a) and (f) of BER 4087/88. See Echebarría, 1995, p. 307 and Hernando Giménez, 2000, p. 108. Hernando Giménez, 2000, p. 300. STS 4 March 1997, RJ 1997\1642. See Ley de Marcas and Ley de Patentes, in 3.3.2 of this Chapter, above. Echebarría, 1995, p. 306.

206

Chapter III. Description and Comparison

The contents of the legal obligation to apply the know-how of the franchisor are, according to Echebarría, imposed by competition law.743 Competition law also requires the franchisee to cooperate in the maintenance of the economic content of the know-how (Article 3 (2)(b) BER 4087/88).744 This is known as the claúsula de retorno, according to which the franchisee can improve the know-how as a result of the operation of the method and that he has to communicate such improvements to the franchisor.745 Hernando Giménez argues that the rules on lease contracts in the Civil Code could also be applied in order to determine the contents of the generic obligation of the franchisee as to how to use the business elements provided by the franchisor: Article 1555 (2) provides an obligation to use the leased good with due diligence; Article 1561 imposes an obligation to return the business elements in the same condition in which they were received; Article 1559 provides an obligation for the party who leases the good to inform the licensor of any claims or infringements by third parties in respect of the good leased and, finally, Article 1563 indicates that the lessee is responsible for any detriment that he or his employees (Article 1564) cause to the good.746

7.3.3

Obligations not to damage the reputation of the network

Under Spanish commercial franchising practice, the protection of intellectual property rights from misuse is guaranteed by the license agreement included in the franchise contract and by the mandatory rules on intellectual property.747 Protection of the know-how is typically granted by the obligations of confidentiality included in the agreement.748 The obligation not to disclose the business secrets of the franchisor has been described as an implied obligation by Hernando Giménez.749 Spanish rules on competition offer generic protection to the franchisor and consequently to all the members of the network against misuse of knowhow by the franchisee. Pursuant to Article 5 of the Act on Unfair Competi743

744 745 746 747 748 749

Echebarría, 1995, p. 307: Article 3.2.a. and f. of Regulation 4087/88; Hernando Giménez, 2000, p. 302. Echebarría, 1995, p. 307. Gallego Sánchez, 1991, p. 144; Hernando Giménez, 2000, p. 301. Hernando Giménez, 2000, p. 303. See 3.3.2 of this Chapter, above. Hernando Giménez, 2000, p. 248. Hernando Giménez, 2000, p. 247 concludes this from the principle on good faith (Article 57 of the Commercial Code and Article 1258 of the Civil Code).

Section 7. Franchisee’s obligation to follow Business Method and Instructions

207

tion (Ley de Competencia Desleal, LCD),750 any behaviour which is objectively opposed to the requirements of good faith is unloyal; in particular, Article 13.1 indicates that it is not loyal without the authorisation of the party who holds the title to the know-how to behave or operate the business in a way that would reveal the commercial secrets of a company. Alfaro offers a more generic explanation for the obligation not to misuse the business method of the franchisor. This author indicates that the obligation of loyalty which applies in franchising, and which is inferred from the analogous application of Articles 10 and 11 of the Agency Contracts Act, requires the parties not to behave in an opportunistic manner. This means that the franchisee must not pursue a particular benefit when this would lead to damage to the reputation of the network.751

7.3.4

Limits to the obligation to follow the business method

Some authors have underlined that the franchisee’s interest in maintaining autonomy may be said to conflict with the franchisor’s interest in maintaining the common identity of the network.752 The prerogative of the franchisor to direct the activity of the franchisee is only deemed justified to the extent that it is aimed at guaranteeing that the franchisee does not endanger the uniform operation of the business.753

7.3.5

Remedies

On the basis of Article 1124 of the Civil Code, the franchisor is entitled to claim specific performance or termination of the contract if the franchisee has failed to observe due diligence in following the business method transferred by the franchisor. Non-performance could lead to termination of the contract only where the act or ommission on the part of the franchisee frustrates the expectations of the franchisor. Hernando Giménez indicates that, in commercial practice, the contract typically includes a list of cases which are deemed to lead to termination of the contract.754 750 751 752 753

754

Ley 3/1991 of 10 January 1991 (BOE 11/01/1991, no. 10). Alfaro, 1995, p. 3154. Echebarría, 1995, p. 308; Hernando Giménez, 2000, p. 279, 281 and 293. Ibid. In the case-law see SAP Barcelona 13 March 2006, Id Cendoj 08019370052006100101. Hernando Giménez, 2000, p. 349: in practice the franchisor specifies in the contract the type of non-performances which leads to the automatic termination of the contract.

208

Chapter III. Description and Comparison

7.4

Comparison

7.4.1

Introduction

The PEL CAFDC contain a rule that imposes on the franchisee the obligation to follow the business method and instructions of the franchisor and the obligation not to act in any way that may endanger the reputation of the network. Under the French and the Spanish legal regimes, legal scholars describe the obligation of the franchisee to follow the business method of the franchisor as one of the two main obligations of the franchisee, jointly with the obligation to pay the fee. There is very little case-law regarding this obligation. There are only three decisions, and all of them are French. Most information on the legal approach concerning this obligation is to be gathered from legal writing. Under the three compared legal regimes, the obligation to follow the method is conceived as a characteristic obligation of franchising relationships. A contractual relationship cannot be classified as a franchising relationship in any of the three regimes if it does not contain an obligation for the franchisee to follow the business formula of the franchisor. The rationale behind compelling the franchisee to follow the formula of the franchisor is the same under the Principles, under French and under Spanish law, namely to guarantee that all members operate the method uniformly and in this manner prevent that franchisees make wrongful use of the valuable business method transferred by the franchisor.

7.4.2

Contents of the obligation to follow the business method

Pursuant to the Principles, the obligation to follow the formula of the franchisor consists for the franchisee of 1) operating his business in accordance with the franchisor’s method, i.e. to use the intellectual property rights, know-how and assistance in the manner indicated by the franchisor, 2) following the instructions of the franchisor regarding the business method and the maintenance and promotion of the reputation of the network and 3) not harming the franchise network. The Principles do not specify the contents of these obligations any further. The parties are to establish in their agreement the rules that are to be followed by the franchisee. The franchisee would in addition have to comply with the respective mandatory national laws on intellectual property. The scheme of obligations is the same under French and Spanish law. There is a generic obligation to maintain the good reputation of the business, which includes obligations to do, i.e. following the method of the franchisor, and obligations not to do, i.e. abstaining from acting in a manner that

Section 7. Franchisee’s obligation to follow Business Method and Instructions

209

endangers the reputation of the franchisor’s business. These obligations are typically spelled out in franchise contracts. Scholars both in France and Spain generally provide in their descriptions a list of particular obligations generally agreed in contractual practice. However, scholars have also determined the legal sources which justify the existence and contents of these obligations. In both systems legal authors refer to the national laws on intellectual property and to the European competition law rules as the sources of the obligations to do. In Spain, some authors add the application by way of analogy of the rules on lease contracts. Regarding the obligations not to do, scholars refer to competition law and to the generic obligation to act loyally. Literature in France and Spain does not differentiate, as the Principles do, between the obligation to follow the business method and to follow instructions. Scholars in France and Spain emphasise the ongoing character of this obligation for the franchisee: he is not only obliged to follow the business method as it is initially transferred by the franchisor but he also has to adapt to the modifications of the method introduced by the franchisor during performance. However, the obligation to follow changes in the method must not be equated with the obligation to follow instructions because according to the Principles, reasonable instructions do not imply changes in the business method.

7.4.3

Limits to the obligation

According to the Principles, in complying with his obligation to follow the business method and to refrain from damaging the network, the franchisee must make reasonable efforts, that is, the efforts that any reasonably skilled franchisee would make under the same circumstances. Differently, regarding the obligation to follow instructions, the Principles in the wording of the rule do not require reasonable efforts from the franchisee, but specify the level of due diligence required of him to comply with reasonable instructions. Hence, the franchisee is obliged to respect the franchisor’s instructions insofar as these are necessary to guarantee the welfare of the business method and the reputation of the network, do not change the franchisor’s method and do not pose an obstacle to the franchisee’s business autonomy. French courts and part of the literature have also established some limits to the obligation for the franchisee to follow the business method of the franchisor. First, it should not interfere with the business autonomy of franchisees. Secondly, all constraints imposed must be indispensable to guarantee the reputation of the network, and thirdly, the restraining clauses must not unreasonably burden the franchisee. Some French authors argue in favour of the application to this case of the case-law regarding the abusive unilateral determination of the price of the goods. According to this approach, the franchisee does not have to follow the indications of the fran-

210

Chapter III. Description and Comparison

chisor when the latter abuses his discretion. The French regime imposes practically the same limits as the Principles, but in France these limits have a broader scope of application, because they are not restricted to what the Principles call instructions. In Spain, the obligation to follow the method of the franchisor is described by some authors as an obligation of means. Some authors have underlined that there is a conflicting situation between the need to follow the method of the franchisor and the need to respect the independence of the franchisee. However, no decisions of Spanish courts are available on this issue. Nevertheless, there are examples of judgments in which the courts have held that the lack of independence of the franchisee was justified due to the nature of franchise contracts, as relationships in which the franchisee depends on the franchisor.

7.4.4

Remedies

Non-compliance with the obligation regarding the business method and instructions as stated in the principles on franchising entitles the franchisor to claim the application of the remedies for non-performance in the PECL. This is also the case under French and Spanish law. In France, the Cour de Cassation has tolerated the inclusion of contractual clauses which state that any behaviour opposed to the reputation of the network justifies the termination of the relationship by the franchisor. In other decisions, lack of performance of this obligation is a ground to reject claims of franchisees for non-performance by their franchisors. In addition, the franchisor is entitled to claim the application of the remedies granted by the national rules on intellectual property rights if the franchisee infringes these mandatory rules.

7.4.5

Conclusion

All three systems compared acknowledge the existence and importance of an obligation for the franchisee to guarantee the reputation of the business method of the franchisor. In the three systems this obligation is comprised of obligations to do, which consists of following the business method as established by the franchisor and of obligations not to do, which consists of abstaining from acting in a manner which endangers the reputation of the method. The particular contents of these obligations are typically to be spelled out in the franchise agreement. However, only the Principles and French law pay attention to the risks that may materialise if franchisees are compelled to follow without any limitation all the restraints imposed upon them by franchisors. Accordingly,

Section 7. Franchisee’s obligation to follow Business Method and Instructions

211

these two regimes state the existence of certain criteria that serve as limits to the discretion of franchisors to impose his method on the franchisee. In this sense, the protection granted to the franchisee by French law is more complete than that granted by the Principles, and certainly more than that granted under the Spanish regime.

Chapter IV. General Conclusions 1.

Introduction

All three legal regimes studied in this comparative analysis, that is, the PEL CAFDC, French law and Spanish law, contain substantive rules to regulate the contents of franchising agreements. The PEL CAFDC provide a set of written rules which contain the main rights and obligations of the parties in franchising. They also provide for a pre-contractual duty to disclose for the franchisor. In France, there is no franchising-specific legislation on the contents of the relationship but there are two other sources of law “regulating” the contents of franchising, namely case-law and legal doctrine. In addition, under French law there is a codified pre-contractual obligation to disclose for the franchisor. Spain does have legislation on franchising, which contains a definition of franchise contracts and a duty of pre-contractual disclosure for the franchisor, but it is not concerned with the contents of the internal relationship between the parties. As is the case in France, this information is to be found in Spanish case-law and legal writing. In order to compare the PEL CAFDC to the French and the Spanish regimes, I have considered the Principles as a system of legal rules which could be selected to govern franchising contracts if the parties were to agree on this, in exactly the same way as if the parties would opt for French or Spanish law. The comparative analysis has revealed the similarities and differences between the legal regime under the Principles and under French and Spanish law regarding franchising with regard to a selected body of rules contained in the Principles. The rules that formed the basis for comparison are the rule on scope of application, in which a definition of franchising contracts is provided, the rule on pre-contractual disclosure, and the rules which set out the characteristic obligations of the parties in franchising relationships and which are included in the rule on scope of application in the PEL CAFDC. These are more specifically the provisions which impose on the franchisor the obligation to license intellectual property rights and to provide knowhow and the rules which impose on the franchisee the obligation to pay and to follow the business method and instructions. The franchisor’s obligation to assist was also selected for comparison, even though it is not described as

214

Chapter IV. General Conclusions

a characteristic element in franchising under the PEL CAFDC, because it is considered a main obligation under French and Spanish law. The research has revealed that the characteristic obligations in franchising contracts under the Principles are also the characteristic obligations in franchising under the French and the Spanish systems. This made it possible to give a systematic description of each rule under the Principles, and subsequently of the same rule under French and Spanish law. The comparison between the Principles and the French and Spanish regimes focuses on determining the existence of the various obligations and the similarities and differences betweem them in respect of requirements as to contents and form and on the system of remedies.

2.

Differences and similarities between the compared systems

2.1

A general difference: the sources of the law

A main general difference between the Principles and French and Spanish law concerns the sources of law that give rise to the various rules. The Principles are a proposal for codified law, as if it were a legislator’s proposal. By contrast, in France and Spain the rules governing the internal relationship in franchising are to be gleaned from the respective national case-law on franchising and from scholarly writing. This general difference is emphasised in these conclusions because it influences the type of information regarding the contents of the law on franchising in the compared systems in two main ways: in the first place, the Principles do not provide any information as to the practical effects of the provisions which they contain, because they have not yet been applied. By contrast, judicial practice is essential for understanding the legal framework in which franchising contracts are embedded both in France and in Spain: the factual circumstances of a case in combination with the rule in question determine the outcome of that case. The balancing of the parties’ interests may imply that legal reasoning does not lead to the same results as the practical outcome of court decisions. This practical approach is missing in the Principles, as is of course the case for any legislative proposal which has yet to be applied in practice. Therefore, the comparison on this point is limited to French and Spanish law. In the second place, whilst the Principles provide information on the basic framework of obligations for both parties in a systematic manner, courts do not pay equal attention to all questions of law in franchising, simply

2. Differences and similarities between the compared systems

215

because not all disputes are brought before the courts. As most cases brought before both French and Spanish courts regard claims of franchisees for nonfulfilment by the franchisor of his contractual obligations, the role of courts has mainly consisted of clarifying the contents and boundaries of the legal obligations of franchisors and there is less information as to the legal obligations of franchisees. Legal writing, similar to the Principles, provides a methodic description as to the obligations of both parties. However, although systematic, scholars pay much more attention to the obligations of the franchisor than to those of the franchisee, because the franchisor’s duties are unanimously described as the core obligations in a franchise relationship and because most of the franchisee’s obligations are certainly dictated by the franchisor, as the party who imposes the terms of the contract. What little information on the obligations of franchisees there is suggests that in the commercial practice of franchising, the franchisees are the parties that commonly rely on the legal system in order to solve the problems that arise in their relationship with franchisors. In the end, this is basically the same approach as that taken in the Principles, in which the emphasis is also on the obligations of the franchisor.

2.2

Differences and similarities as to the main obligations of the parties

2.2.1

Scope rule

When two parties wish to conclude a franchise relationship which is governed by either French or Spanish law, they have to bear in mind that there are certain obligations which necessarily have to be agreed upon because they are considered by the French and Spanish national courts as requirements for the valid conclusion of a franchise agreement. These conditions are the same in France and in Spain, namely the obligation for the franchisor to provide intellectual property rights, to communicate know-how and to provide assistance and the obligation for the franchisee to pay and to follow the business method. Except for the obligation to assist, these obligations are also described as characteristic of franchising agreements in the PEL CAFDC (scope obligations) and must accordingly be agreed upon for a contract to be classified as a franchise agreement. In a franchise relationship that is subject to the regime imposed by the Principles, the parties may exclude the franchisor’s obligation to assist. By contrast, a contract cannot be classified as a franchising relationship in France and Spain if the obligation to assist has not been agreed upon.

216

2.2.2

Chapter IV. General Conclusions

Obligations of the franchisor

Pre-contractual information Statutes, both in France and Spain, impose on franchisors involved in contracts that are subject to one of these two systems an obligation to provide their franchisees with information before entering into the agreement. The same obligation is included in the Principles. In all three systems, the aim of these provisions is to guarantee that the franchisee receives the relevant information to enter into the agreement in full knowledge of the relevant facts. The rule in the Principles also resembles the relevant rules under French and Spanish law as to the contents of the obligation. All three rules set out a list of issues that are to be disclosed and all three rules emphasise that the information must be accurate. None of them includes the provision on sales forecasts as an item to be disclosed. However, both the Principles and French and Spanish case-law require that the franchisor bases his forecasts where given on serious studies. The rule on disclosure in the Principles however differs from the French and the Spanish rules in respect of the requirement of form. The French and the Spanish rules require the information to be provided in writing and this is not the case under the Principles. The rule in the Principles does impose a time-limit but this differs from that in the French and the Spanish disclosure rules by not referring to a certain period of days (at least 20 days before the contract is concluded under the French and Spanish rules) but by indicating that the information has to be provided within a reasonable time before the contract is concluded. It is therefore for national courts to decide what a reasonable period is considering the circumstances of the case. As to the system of remedies, under all three regimes the franchisee is entitled to the remedies for mistake if defective consent is proven. However, the system is different in the Principles when compared to French law and Spanish law with regard to the possibility granted to the franchisee in the Principles to pursue the specific remedy of damages if the franchisor does not comply with his obligation to provide pre-contractual information even if mistake is not proven. This option is not available under French or Spanish law. There are also differences between the Principles and the French and the Spanish regimes in respect of the available remedies for mistake. Under the Principles invalidity is one of the available remedies but it cannot be pursued if the franchisor proposes the adaptation of the contract by indicating that he is willing to perform or actually does perform the contract as the franchisee understood it. This solution does not exist under French or Spanish law. Where judicial practice is concerned, only French courts have applied the rule on disclosure and provide an effective sanction in situations of

2. Differences and similarities between the compared systems

217

defective consent. Spanish courts have applied the rule on disclosure so far only in two cases but have not granted any remedies to the franchisees. Both in French and Spanish case-law, the criteria that recur the most in determining whether the franchisor is liable for failure to comply with his obligation to disclose are those concerned with establishing whether mistake was excusable. There are quite a few rulings in which French courts deny granting remedies to the franchisee because the defect was not to be excused. Similarly, in the Spanish cases regarding pre-contractual disclosure, no remedies were granted because courts indicated that the franchisee was a professional who should have acted more cautiously in order to prevent giving defective consent.

Intellectual property rights All three systems impose on the franchisor a mandatory obligation to provide their franchisees with the intellectual property rights that are necessary to allow the franchisee to operate the franchise business. This means, on the one hand, that the agreement must include this obligation if the parties wish for their relationship to be classified as a franchising contract and, on the other hand, that the intellectual property rights are to be of the quality that is necessary to allow the franchisee to adequately operate the business. The Principles are however different from French and Spanish law as to the remedies for failure by the franchisor to provide the adequate intellectual property rights at the time the contract is concluded. If the Principles apply, the remedies for non-performance apply. In France and Spain, noncompliance with these “initial” conditions implies that the intellectual property rights are not fit for purpose and are consequently deemed to be absent. This is a ground for invalidity of the contract due to the absence of a validity requirement. In practice, French courts have generally declared contracts null and void for lack of causa when the intellectual property rights do not fulfil the required conditions, both as to form and contents. In Spain, case-law only regards claims for lack of registration of the intellectual property rights. In some of these decisions Spanish courts invalidated the contract on these grounds. However, there are examples of judgments rendered in the two national systems in which courts have taken a pragmatic approach which does not focus on verifying compliance with the particular obligations, but on determining whether the franchisee has been able to use the intellectual property rights and has thus used the image of the franchisor. If this is the case, no remedies are granted.

218

Chapter IV. General Conclusions

Know-how As is the case regarding intellectual property rights, franchisors are subject under all three compared regimes to a mandatory obligation to communicate their know-how to their franchisees and such know-how has to fulfil certain requirements to make it fit for purpose. In all three systems, the basic requirements are deemed to be those included in European competition law: the know-how must have been previously tested, secret, substantial and identified. However, courts and scholars have given concrete content and have completed these abstract requirements in order to adapt them to private law cases. The rationale behind these rules is guaranteeing that the franchisee receives all the information which he needs on how the business is to be operated so as to be able to follow the successful business method. The remedies available in the Principles for failure of the franchisor to communicate know-how of the required quality at the time the contract is concluded differ from those provided for by French and Spanish law. In France and Spain, the sanction may be the nullity of the contract whilst under the Principles it can only be regarded as a case of non-performance. The three regimes do however provide for the same remedies, i.e. the remedies for non-performance, when the franchisor’s failure to provide the adequate know-how regards the quality requirements that are to be fulfilled during performance. In practice, similar to what is the case in respect of intellectual property rights, courts both in France and Spain have often taken a flexible approach by not verifying the adequacy of the know-how through an analysis of compliance with each of the particular requirements, but by applying a more pragmatic criterion: in France, this criterion is whether the franchisee has been placed in an advantageous position vis-à-vis competitors and, in Spain it is whether the know-how serves to differentiate the business of the franchisee from that of competitors. In addition, in French case-law many defences that have led to the exclusion of liability of the franchisor can be identified (e.g. when the franchisee’s claim is issued despite the fact that the franchisee has been using the know-how for a long-time or when he does not warn the franchisor of the inadequacy of his know-how, or when the franchisee, as a professional, should have been aware of the inadequacy of the know-how).

Assistance The franchisor’s obligation to assist his franchisees is, unlike the franchisor’s obligations to license intellectual property rights and to communicate know-

2. Differences and similarities between the compared systems

219

how, regulated very differently under the PEL CADC when compared to the French and the Spanish systems. Assistance is a non-mandatory obligation under the Principles; the parties may exclude it by agreement. This is not the case under French and Spanish law: the franchisor’s obligation to assist is to be agreed upon for the contract to be classified as a franchising agreement. A second main difference is that whereas the PEL CAFDC are concerned with the quality of the assistance that is to be provided, neither French nor Spanish courts have established the requirements as to the contents of the obligation to assist. The proceedings brought to courts by franchisees in France and in Spain exclusively regard claims for nonperformance of the obligation to assist as agreed in the contract. In some cases the courts are required to interpret whether the obligation which according to the franchisee has not been performed, must be considered to be included in a generically formulated contractual obligation to assist. The policy applied by French and Spanish courts differs. French courts typically carry out a thorough interpretation which in some cases leads to a restrictive interpretation and in others to an extensive interpretation of the contractual term on assistance. As a result, the obligations to advise on site selection and to help the franchisee when he is facing difficulties in operating the business have been classified as implied obligations. Differently, Spanish courts systematically take a restrictive approach: compliance with a particular obligation to assist can only be required if such particular duty was explicitly agreed upon in the franchise contract. In addition, in many Spanish rulings courts have refused to grant the remedies requested by the franchisee, because it was not established that the franchisee had allowed an additional period for performance. The literature in both countries follows a similar approach to the one in the PEL CAFDC: scholars have expressed their concern as to the need to provide assistance of the quality required to allow the franchisee to operate the business successfully. As to the remedies, the franchisee may invoke the remedies for nonperformance in all three systems.

2.2.3

Obligations of the franchisee

Payment The franchisee’s obligation to pay is regulated in a very similar way in the PEL CAFDC, French and Spanish law: it is a mandatory obligation, parties are free to establish the form and contents of the obligation to pay and the remedies for non-performance apply if the franchisee does not comply with his obligation as agreed upon in the contract.

220

Chapter IV. General Conclusions

Differences in approach arise as to the remedy that applies if the periodical payments are unilaterally determined by the franchisor in the course of the relationship and they turn out to be unreasonable. If the Principles apply, courts are granted the power to substitute the abusive price for a price that is reasonable. In accordance with both French and Spanish general doctrines, the price, as the object of the contract, must be certain and if it is not determined, this must lead to the nullity of the contract. Neither French nor Spanish courts have the power to revise the price. The approach taken by the courts in France, however, more closely resembles the approach under the Principles where the unilateral determination of the price in the sales contracts concluded between a franchisor and a franchisee in the framework of a franchise relationship is concerned, i.e. indirect remuneration. This is nowadays accepted practice in France. Only if the price is abusive, there are grounds to claim termination of the contract or damages for non-performance by the franchisor of his obligation to perform in good faith. This remedy, however, differs from the one granted under the PEL CAFDC, in which the court has the power to substitute the unreasoanble price. It is uncertain whether this policy could also be applied to the lack of determination of the price in cases where the price regards the framework agreement, i.e. direct remuneration, and not the sub-agreements. This issue has not been raised under Spanish law. In theory, the available remedy is the nullity of the contract for lack of determination of the price.

Business method and instructions The franchisee’s obligation to follow the business method is considered a characteristic obligation in franchising under all three compared systems, together with the obligation to pay. Accordingly, irrespective of whether a franchising relationship is governed by the Principles, French or Spanish law, the franchisee is obliged to follow the franchisor’s business method (intellectual property rights, know-how and assistance) and not to act in a way that could endanger the reputation of the network. None of the systems impose requirements as to the form and contents of these obligations. The particular obligations for the franchisee are to be spelled out in the franchise agreement. In French law, similar to the PEL CAFDC but unlike Spanish law, the restraints imposed on the franchisee need to be justified as a means to guarantee uniformity and they may not jeopardise the independence of the franchisee. Spanish courts have so far been tolerant towards situations in which the independence of the franchisee is endangered. As to the remedies, the general contract law remedies for nonperformance apply in all three systems. In France, the lack of compliance

3. Underpinning policies: autonomy-friendliness? Legal certainty?

221

with this obligation has been considered a defence to exclude the liability of the franchisor.

3.

Underpinning policies: autonomy-friendliness? Legal certainty?

Identifying the differences and similarities in the form and contents of the rules on franchising between the Principles and French and Spanish law was the primary aim of this comparative research. However, the relevant findings make it possible to outline some more general considerations as to the policies that underpin the solutions in each of the systems compared. In particular, I mean to evaluate which of the systems most respects the autonomy of the parties, i.e. in franchising: the franchisors’ autonomy to impose on franchisees the terms of the agreement (3.1), and which of the systems provides the parties with the most legal certainty (3.2).

3.1

Franchisors’ autonomy-friendliness

The relevant findings on the basis of which it is possible to evaluate whether the regimes are more or less franchisor autonomy-friendly are organised in four groups: characteristic obligations, requirements as to the form and contents of the obligations, remedies and legal outcome in judicial decisions after balancing the interests of the parties.

3.1.1

Characteristic obligations in franchising

The rule on scope of application in the Principles contains the obligations that are to be agreed upon for a contract to be classified as a franchising agreement. These are the rules on intellectual property rights and on knowhow for the franchisor and the obligations for the franchisee to pay and to follow the business method. The comparative analysis has shown that these are also the characteristic obligations according to French and Spanish law. The regime in the Principles is therefore not stricter on the franchisor than the regimes in France and Spain. Moreover, the systems in these two national jurisdictions could be said to be more restrictive towards the franchisor’s autonomy when compared to the Principles because the obligation to assist is mandatory under French and Spanish law and not under the Principles.

222

3.1.2

Chapter IV. General Conclusions

Requirements as to the form and contents of the obligations

All three systems impose a mandatory obligation on the franchisor to inform pre-contractually and all three contains the list of items that is to be disclosed. The disclosure rule in PEL CAFDC, however, contains a more generic formulation as to the contents of the information that is to be provided by the franchisor. This leaves more room for interpretation. In addition, the Principles do not impose form requirements. On these two points, the Principles may be considered to be more franchisor autonomy-friendly when compared to French and Spanish law. As to the contractual obligations, the Principles aim to guarantee not only that the basic obligations of the franchisor are included in the agreement, but also that the contents of the obligations are adequate to fulfil the expectations of the franchisee. Accordingly, the Principles impose mandatory requirements as to the form and contents of the obligations of the franchisor. In France and Spain, there are only mandatory written rules on precontractual disclosure. The rules as to the substance of the relationship are dispersed in the case-law and scholarly writing and there is no clarity as to whether they are mandatory or not. Therefore, the regime in the Principles at first sight appears to more radically interfere with the franchisor’s autonomy, when compared to French and Spanish law. However, the comparative analysis has revealed that actually this is not the case. The inadequacy of the intellectual property rights and know-how is the claim typically brought by franchisees both before French and Spanish courts. Courts have determined that the obligations on intellectual property rights and know-how must comply with certain requirements in order to allow the franchisee to operate the business. If a court determines that these elements were not of the quality required at the time when the contract was concluded, it will declare the franchise contract invalid because one of the conditions for the valid conclusion of a franchise contract was missing from the beginning. These are therefore mandatory requirements. The three systems are therefore concerned with the quality of the performance by the franchisor and on this point can be said to restrict the franchisor’s autonomy in a similar way. The approach regarding the obligation to assist is however different under French and Spanish law than under the Principles. The courts have not been requested to determine the requirements as to the quality of assistance, but have been asked to verify whether the franchisor had complied with the duty to assist as agreed in the contract. On this question, the policy of French and Spanish courts differs. French courts have in some of their rulings applied an extensive interpretation of the contents of the term ‘assistance’ which has led them to establish that some obligations to assist are implied. This is proof of the concern of French courts as to the quality of the obligation to assist. This is certainly not the case for Spanish courts, which

3. Underpinning policies: autonomy-friendliness? Legal certainty?

223

have systematically taken a very restrictive approach as to the interpretation of the contents of the obligation to assist. In the end, the regime as regards the obligation to assist under the Principles more closely resembles the regime established by French courts and is stricter for the franchisor than that applied by Spanish courts. As regards the obligations of the franchisee under the Principles, these are not subject to form and substance requirements because it is for the franchisor to protect his interests in the agreement. This is also the approach under French and Spanish law.

3.1.3

Remedies

The Principles and French and Spanish rules differ as to the available remedies for failure of the franchisor to inform pre-contractually and to provide business elements which are adequate at the time the contract is concluded to allow the franchisee to operate the business. The system of remedies in the Principles favours preserving the validity of the relationship and this approach does not accord with the policy applied by French and Spanish courts. Regarding the remedies for non-performance of the obligation of precontractual disclosure, the Principles offer to the franchisor the possibility to prevent the annulment of the contract by proposing to the franchisee to adapt the contract. Differently, under French and Spanish law, the only remedy for defective consent is the invalidity of the agreement. The Principles are however stricter on the franchisor than French or Spanish law are, because the franchisee is entitled to damages even though there is no mistake. Regarding the remedies for non-performance of the obligations concerning intellectual property rights and know-how, under French and Spanish law, the test of fitness for purpose is generally carried out at the time the contract is concluded. If this test is not passed, the contract is to be annulled because one of the requirements for validity is missing. The system works differently under the Principles because compliance with the requirements as to the contents can only be tested during performance and the validity of the contract is not at risk. Finally, concerning abusive unilateral determination of the price in franchising: whereas the Principles grant to the courts the power to revise the price, this is not the case under French or Spanish law. Under French or Spanish law, the contract is to be annulled when the price is unilaterally fixed. On this latter point, as was already indicated, the position of French courts has evolved towards a more moderate approach, but only as regards the determination of the price of the sales contract framed in franchising contracts. It is not clear whether this policy could be applied to the price of the framework agreement.

224

Chapter IV. General Conclusions

It follows that, as far as the remedies are concerned, the approach of national courts is more interventionist, and thus less franchisor-friendly, than that taken under the Principles, because the remedies of nullity and annulment are very radical solutions. In franchising, the consequences may be even more severe for the franchisor considering that the invalidity of the contract implies the invalidity of post-contractual clauses which are typically agreed upon by the parties to protect the franchisor’s business once the relationship terminates.

3.1.4

Legal outcome in case-law after balancing the interests of the parties

The limits to the franchisor’s autonomy imposed by the drafters of the Principles are based on the need to strike a balance between the interests of both parties. Actually, the approach in France and Spain is rather similar. Proceedings in these two national jurisdictions are brought mainly by franchisees, who seem therefore to be the parties who most require the intervention of the legal system to solve the legal problems with their franchisors. Courts have accordingly determined the obligations that are fundamental to comply with the basic expectations of franchisees and the quality of these obligations. However, courts have also taken into account the interests of franchisors. Regarding the pre-contractual obligation to inform, courts only grant remedies if mistake is excusable. Regarding the obligations as to the substance of the relationship, courts have taken a pragmatic approach on the basis of which they do not decide on the adequacy of the intellectual property rights and know-how by verifying compliance with each particular condition, but rather by analysing whether the franchisee has been able to use the franchisor’s image or whether he has been placed in an advantageous position in the market vis-à-vis competitors. In addition, many defences which have led to exclude the liability of the franchisors can be identified in case-law, mainly linked to the status of franchisees as professionals. This approach favours the interests of franchisors. However, if judicial practice is examined, it may be concluded that the situation has evolved differently in France than in Spain. French courts effectively take an interventionist approach in which the quality of the performance by the franchisor is assessed so as to guarantee that the franchisee is provided with the adequate means to successfully operate the franchisor’s method. Differently, in Spain there is a disharmony between the rule declared by the courts and the rule actually enforced by the courts after balancing the interests of the parties. In this sense, the role of Spanish courts can be said to be detrimental to the interests of franchisees, as will now be illustrated.

3. Underpinning policies: autonomy-friendliness? Legal certainty?

225

Spanish courts have not upheld claims by franchisees regarding the lack of performance of their franchisors with the obligation to disclose because franchisees are consistently considered professionals who could have prevented the mistake. Regarding the obligations concerning intellectual property rights and know-how, the Spanish elaboration of the requirements as to contents is less sophisticated than that worked out by French courts because there is much less case-law in Spain and because there have been no more than three relevant cases decided by the Tribunal Supremo so far. The existence of quality requirements regarding intellectual property rights remains a question of doctrine. In the case-law, only the obligation to register has been discussed. Even though the rules on intellectual property rights require registration, some Spanish courts have surprisingly concluded that registration is not relevant if the franchisee can effectively use the intellectual property rights and on these grounds have refused to uphold claims by franchisees. Regarding know-how, Spanish courts seem to accept as good any type of knowledge. Similar to the situation regarding intellectual property rights, the know-how is adequately provided if it serves to differentiate the business of the franchisee from that of competitors. Regarding the obligation to assist, Spanish courts have systematically applied a restrictive interpretation according to which an obligation can only be imposed on the franchisor if the contract explicitly indicates that such an obligation is to be performed. Hence, although the obligation to assist is, as the courts themselves acknowledge, formulated in ambiguous terms and it is consequently not clear what its contents are, it is left to the discretion of the franchisor to determine the precise contents of his obligation. With this approach, Spanish courts give absolute priority to the principle of contractual autonomy. Spanish courts have developed a policy that at first sight seems to aim to protect the interests of franchisees by guaranteeing that the contents of the obligations of the franchisor are adequate. However, the criteria are de facto weighted in a way that eventually means that the franchisee is never actually granted the protection offered by the rules. Legal reasoning and the outcome of court decisions in Spain seem to go in opposite directions. For these reasons, Spanish law can be described as too franchisor autonomyfriendly.

3.2

Legal certainty

Obviously, a system of obligations which has to be assembled from a vast collection of case-law and scholarly writing provides less certainty for local actors as to the legal framework which establishes the contents of franchising than a system of written rules which systematically describes the main obligations of both parties. National courts have formulated rules which limit the autonomy of franchisors by establishing what the requirements for

226

Chapter IV. General Conclusions

validity of the franchise agreement are and by imposing substance requirements as to those essential elements. Courts have decided to limit contractual autonomy in order to protect the interests of franchisees. However, this has resulted in legal uncertainty caused by a lack of comprehensive regulation. This legal uncertainty is especially relevant in Spain where on most questions no judicial doctrine has been established by the Supreme Court and a common approach is to be distilled from decisions of lower courts, where no connection exists between the courts and the literature, and where legal scholars do not assist in interpreting the position taken by the courts. In this sense, the Principles can be said to provide the contracting parties in franchising with more legal certainty, when compared to French and Spanish law. On the other hand, in France and Spain courts and doctrine have determined how the rules work in solving practical cases whereas this information is missing for the PEL CAFDC. On this point, they are less certain than the regimes on franchising in France and Spain.

4.

The likely reactions of the parties if the Principles were to apply

On the basis of these findings, I venture to conclude what the likely response from franchisors and franchisees would be if the Principles were to become a system of rules which could be opted for to govern franchising agreements, e.g. in an optional instrument, instead of the respective national rules on franchising in France and Spain. I must emphasise that I only attempt to forecast the possible preferences of the parties on the basis of the results of the comparison carried out in this study. Obviously there may be other reasons for franchisors to opt for a European-wide regime, e.g. in the case of a multi-national franchisor who wants to franchise all over Europe without having to adapt his contract in every new country, but such considerations will be left aside here.

4.1

Franchisors

For franchisors it would make no difference whether the Principles or French or Spanish law apply as regards the existence and contents of the obligation to inform franchisees pre-contractually. However, in addition to regulating the pre-contractual obligation of disclosure, the Principles propose a comprehensive binding set of rules as to the

4. The likely reactions of the parties if the Principles were to apply

227

contents of franchising agreements. Such a franchise-specific set of rules does not exist under French or Spanish law. It is therefore obvious that franchisors would not be immediately persuaded to opt for the Principles, now that their mandatory rules would make franchisors lose their prerogative to formulate unilaterally the contents of their contracts with franchisees. However, this reasoning would only skim the surface. The comparative analysis has revealed that in the compared systems the same legal reasoning has been followed as to the establishment of the characteristic obligations in franchising and as to the need to guarantee that the performance of the franchisor is of the quality required to allow the franchisee to adequately operate the franchise business. Why then would a franchisor opt for the Principles instead of French and Spanish law? The following arguments may be considered to make the choice in favour of the Principles more attractive. In the first place, the Principles do not impose form requirements as to the obligation to disclose. Furthermore, the generic formulation of this obligation under the Principles allows the franchisor to determine the information which is relevant on a case-by-case basis. Secondly, the obligation to assist is not considered under the Principles as a characteristic obligation and can therefore be excluded in the agreement. Thirdly, the system of remedies in the Principles is more favourable from the point of view of preserving the validity of the contract. Non-compliance with the fitness for purpose test is liable to a sanction on the basis of the rules on non-performance and not on the basis of the rules on validity. Under the Principles, the validity of the contract is not at risk. In the fourth place, the Principles propose a basic framework of obligations which takes into account both parties’ interests. They also include clear mandatory obligations regarding payment and business method, which primarily intend to protect the interests of franchisors. This cannot be said to be the case in French and Spanish case-law, in which courts have focused on determining the contents of the obligations for franchisors; finally, the intention of the drafters of the Principles to save transaction costs by formulating clear obligations that the parties typically agree upon may also encourage franchisors to opt for the Principles. Saving time (legal certainty) and money (transaction costs) in seeking out the appropriate legal framework that applies to the relationship seems to be a good option for franchisors.

4.2

Franchisees

Franchisees typically would have little say in the choice of the law to regulate a contract that is unilaterally imposed by the franchisor. I will however briefly attempt to determine what their preferences may be.

228

Chapter IV. General Conclusions

The franchisee’s interests are, in theory, taken into consideration under all three systems. The obligations to provide intellectual property rights and know-how which allow the franchisee to adequately operate the method are described as fundamental, and all systems are concerned with the quality of the contents of these obligations, so as to guarantee that the franchisee receives the means which he needs to operate the business. As to the obligations of the franchisee, the three systems all impose the obligations to pay and to maintain the good reputation of the business method as core duties in franchising. Thus, equal burdens are imposed on the franchisee under all three regimes. However, there are considerations that make a choice in favour of the Principles an attractive option also for the franchisee: first, the franchisee is entitled under the Principles to damages for failure by the franchisor to provide pre-contractual information even when mistake is not proven. Secondly, if the contract includes the obligation for the franchisor to assist his franchisees, such assistance has to comply with the necessity test required in the Principles. This fitness for purpose test is not required in French and Spanish case-law. Thirdly, the system of remedies in the Principles seems to be more favourable than the systems in France and Spain, also for franchisees. They would not be obliged to pursue the invalidity of the contract if they gave defective consent, or if the intellectual property rights or knowhow turned out to be inadequate already at the time the contract was concluded, or if the price of the contract is not determined. The Principles further allow other possibilities. Finally, regarding the obligation to follow the business method, the Principles pay attention to the risks that may materialise if franchisees are compelled to follow without any limitation all restraints imposed upon them by franchisors and, accordingly, they impose certain criteria that serve as limits to the discretion of franchisors to impose the method on the franchisee. French franchisees are also granted this protection, but this is certainly not the case for Spanish franchisees.

4.3

Win-win situation

Some of the arguments described above that make opting for the Principles more attractive for one of the parties, are precisely the reason why the other party would not opt for the Principles. In other words, some of the advantages of applying the Principles for one party correspond to the disadvantages for the other party. A more decisive factor in determining whether opting for the Principles instead of for French or Spanish law would be a rational choice for the parties to make is whether opting for the Principles would lead to an advantageous situation for both parties. In my view the most convincing evidence that the application of the Principles would lead to a win-win situation for both parties in franchising is

4. The likely reactions of the parties if the Principles were to apply

229

connected with the applicable system of remedies. In the first place, the remedy of adaptation in cases of mistake allows the franchisor to prevent the invalidity of the contract. It encourages parties to find a common understanding on how the contract is to be adjusted so as to reflect what might have been agreed had the mistake not occurred. By contrast, under French and Spanish law, annulment is the only available option. In the second place, the application of the remedy of absolute nullity under the French and Spanish systems to solve situations in which the intellectual property rights or the know-how of the franchisor were proven not to be of the quality required at the time when the contract was concluded or situations in which the parties do not agree on a certain price upon conclusion of the contract is detrimental for both parties to the relationship. Nullity of the contract in such cases is an inadequate solution for two main reasons. Firstly, nullity can be invoked by the franchisor or declared by the court on its own discretion even when it is not in the interest of the aggrieved franchisee to bring the relationship to an end. Secondly, the application of the remedy of nullity to cases where the price is not determined at the time the contract is concluded is an obsolete solution which does not correspond to the needs of modern practice in the determination of the price in franchising contracts. In addition to the system of remedies, legal certainty could also be considered a strong argument which may encourage the parties in franchising to opt for the Principles.

5. Final remarks From the above, it would seem rational for parties involved in franchising, all other things being equal, to opt for the PEL CAFDC instead of French and Spanish law, provided that they are given such a choice. The Principles do not impose more burdens on the franchisor than French and Spanish law. Case-law and literature in these two national jurisdictions have provided legal rules for franchising which follow the same legal rationale as the rules in the PEL CAFDC, that is, to determine the franchisor’s obligations in franchising and to guarantee that the performance of the franchisor is of the quality required to allow the franchisee to adequately operate the franchise business. Eventually, differences will arise depending on how national courts weigh the interests of the parties in each case, as is the case in French and Spanish case-law. So far, French courts have followed this legal rationale that aims to protect the interests of franchisees. By contrast, Spanish courts weigh the interest of the parties in a way that eventually means that franchisees are never actually granted the protection offered by the rules in place.

Summary The Principles of European Law on Commercial Agency, Franchise and Distribution Contracts (PEL CAFDC or Principles), published in 2006, are an academic proposal for the European-wide regulation of the contents of these three types of agreements. The Principles were elaborated by the Study Group on a European Civil Code (SGECC), which is one of the groups of academics which for some time already have been involved in the comparative analysis and drafting of common principles of contract law for Europe. The present research focuses on an examination of the proposal of the SGECC for the harmonised regulation of the contents of franchise relationships, that is, of the main rights and obligations in the relationships between franchisors and franchisees. At present, all 27 Member States of the European Union have their own regime for franchising relationships, except for the European Regulation regarding competition law aspects of franchising, which is directly applicable in all Member States. There is therefore no harmonised European contract law as to the contents of franchise agreements. However, this legal framework might change in the light of the political process regarding the harmonisation of contract law in Europe that was initiated by the European Commission in 2001. A possible result of this process is that the Principles on franchising would become a system which could be opted for by the contracting parties to franchising contracts Europe-wide to regulate the contents of their relationship (Chapter I). This academic analysis starts from the hypothesis that such will indeed be the case. With that starting point in mind, the main obligations for the contracting parties imposed by the PEL CAFDC have been compared to the system of obligations for franchising under French and Spanish law (Chapter III). This comparison is preceded by a description of the main characteristics of the respective legal frameworks in which franchising is embedded in France and in Spain (Chapter II). The main aim of this comparative analysis was to identify both parallels and differences between on the one hand the regime for franchising in the PEL CAFDC and on the other hand the regimes on franchising under French and Spanish law. Another objective was to show, on the basis of the differences and similarities in the manner in which the three systems define the franchising agreement, whether the system under the PEL CAFDC allowed for less or more autonomy of the franchisor to determine the contents of the franchise contract than the systems established by French and

232

Summary

Spanish local actors respectively, and whether the PEL CAFDC provided less or more legal certainty. Finally, all these findings were used to help determine whether opting for the Principles, instead of for French or Spanish law, could be considered a rational choice for the parties, in the sense that they could better serve the parties’ interests than French and Spanish law would (Chapter IV).

Chapter I. General Introduction That the principles on franchising could become a system of rules which could be selected by the parties to franchising contracts to govern the contents of their relationships instead of their respective national legal regimes could be a possible outcome of the political process on the europeanisation of contract law. The European Commission has entrusted the SGECC – among other research groups– with the elaborating of a draft of a Common Frame of Reference (CFR) on contract law for Europe on the basis of their academic results. The CFR is intended to serve as a toolbox of best solutions in European contract law containing principles, definitions and model rules. The PEL CAFDC are part of this academic CFR. Even though the primary aim of the CFR is to improve the consumer acquis, it may also become, as indicated by the Commission, the basis for a code on contract law to be applied in the whole of the EU. If such an instrument is enacted, it – and thereby the PEL CAFDC – could be opted for by parties to govern their contracts instead of their respective national legislations. Part I of this study describes the academic and political dimension of the europeanisation of contract law in general and of franchising contracts in particular.

Chapter II. Main Characteristics of French and Spanish Law on Franchising The PEL CAFDC are a proposal for codified law, as if it were a legislator’s proposal. Therefore, the description of the system for franchising under the PEL CAFDC consisted of a description of the rules selected for comparison and of the respective explanatory comments to such rules. By contrast, in France and Spain, there is no specific legislation as to the contents of franchising agreements. Hence, the rules governing the internal relationship in franchising were to be gleaned from the national case-law on franchising

Chapter III. Description and Comparision

233

and from scholarly writing. However, both the French and the Spanish system contain disclosure rules which impose on franchisors the obligation to inform their franchisees before the contract is concluded, i.e. Article L. 330-3 of the French Commercial Code and Article 62 of the Spanish Retail Sales Act. In addition, the Spanish Royal Decree 2485/98, which develops the rule on disclosure, also contains a provision which states the basic framework of obligations in franchising but it is no more than a rule on scope of application. The legal framework in which franchising is embedded in these two national systems is further explained in this chapter.

Chapter III. Description and Comparision This Chapter contains a description of the selected framework of obligations, first under the PEL CAFDC and then under French and Spanish law, followed by a comparison on the basis of these descriptions. The rules which are compared are those on the scope of application, on the obligations of the franchisor to give pre-contractual information, to license intellectual property rights, to communicate know-how and to assist his franchisee and on the obligations of the franchisee to pay and to follow the business method of the franchisor.

Scope rule The three systems, PEL CAFDC, French and Spanish law, coincide in classifying the obligations to provide intellectual property rights and know-how on the part of the franchisor and the obligation to pay and to follow the business method on the part of the franchisee as the obligations which characterise a franchise relationship. The definition of franchising in the Principles presents a main differences compared to the definitions in France and in Spain: in these two national systems, contracts which do not contain the obligation for the franchisor to provide assistance are not regarded as franchise contracts.

Obligation of the franchisor to provide pre-contractual information All three systems impose on franchisors the obligation to give precontractual information to their franchisees. The aim of these provisions is

234

Summary

to guarantee that the franchisee receives the relevant information to enter into the agreement in full knowledge of the relevant facts. The rule on disclosure in the Principles also resembles the relevant rules under French and Spanish law as to the contents of the obligation. All three rules set out a list of issues that are to be disclosed and all three rules emphasize that the information must be accurate. None of them includes the provision on sales forecasts as an item to be disclosed. However, both the Principles and French and Spanish case-law require that the franchisor bases his forecasts where given on serious studies. The rule on disclosure in the Principles however differs from the French and the Spanish rules in respect of the time and form requirements. The French and the Spanish rules, unlike the Principles, contain a form requirement: the information is to be provided in writing. As regards the time requirement, the disclosure rules in France and Spain require the information to be provided at least 20 days before the contract is concluded. The rule in the Principles does impose a time-limit but this differs from that in the French and the Spanish disclosure rules by not referring to a certain period of days, but by indicating that the information has to be provided within a reasonable time before the contract is concluded. It is therefore for national courts to decide what a reasonable period is considering the circumstances of the case. As to the system of remedies, under all three regimes the franchisee is entitled to the remedies for mistake if defective consent is proven. However, the system is different in the Principles when compared to French and Spanish law with regard to the possibility granted to the franchisee to pursue the specific remedy of damages even if mistake is not proven. This option is not available under French or Spanish law. There are also differences between the Principles and the French and the Spanish regimes in respect of the available remedies for mistake. Under the Principles invalidity is one of the available remedies but the franchisor can prevent it by proposing the adaptation of the contract, thus indicating that he is willing to perform or actually does perform the contract as the franchisee understood it. This solution does not exist under French or Spanish law. Where judicial practice is concerned, only French courts have applied the rule on disclosure and provide an effective sanction in situations of defective consent. In most cases so far Spanish courts have not applied the rule on disclosure even though franchisees have invoked its application. Spanish courts have applied the general rules on defective consent. Both in French and Spanish case-law, the criteria that recur the most in determining whether the franchisor is liable for failure to comply with his obligation to disclose are those concerned with establishing whether mistake was excusable. There are quite a few rulings in which French courts deny granting remedies to the franchisee because the defect could not be excused. Similarly, in the Spanish cases regarding pre-contractual disclosure, no remedies

Chapter III. Description and Comparision

235

were granted because courts indicated that the franchisee was a professional who should have acted more cautiously in order to prevent giving defective consent.

Obligation of the franchisor to license intellectual property rights All three systems impose on the franchisor a mandatory obligation to provide their franchisees with the intellectual property rights that are necessary to allow the franchisee to operate the franchise business. This means, on the one hand, that the agreement must include this obligation if the parties wish for their relationship to be classified as a franchising contract and, on the other hand, that the intellectual property rights are to be of the quality that is necessary to allow the franchisee to adequately operate the business. The Principles are however different from French and Spanish law as to the remedies for failure by the franchisor to provide the adequate intellectual property rights at the time the contract is concluded. If the Principles apply, the remedies for non-performance apply. In France and Spain, noncompliance with these “initial” conditions implies that the intellectual property rights are not fit for purpose and are consequently deemed to be absent. This is a ground for invalidity of the franchise contract due to the absence of a validity requirement. In judicial practice French courts have declared franchise contracts null and void for lack of causa when the intellectual property rights do not fulfil the required conditions, both as to form and contents. In Spain, case-law only regards claims for lack of registration of the intellectual property rights. In some of these decisions Spanish courts annulled the contract on these grounds. However, there are examples of judgments rendered in the two national systems in which courts have taken a pragmatic approach which does not focus on verifying compliance with the particular obligations, but on determining whether the franchisee has been able to use the intellectual property rights and has thus used the image of the franchisor. If this is the case, no remedies are granted.

Obligation of the franchisor to communicate his know-how As is the case regarding intellectual property rights, franchisors are subject under all three compared regimes to a mandatory obligation to communicate their know-how to their franchisees and such know-how has to fulfil certain requirements to make it fit for purpose. In all three systems, the basic requirements are deemed to be those included in European competition law: the know-how must have been previously tested, secret, substantial and identified. However, courts and scholars

236

Summary

have given concrete content to and have completed these abstract requirements in order to adapt them to private law cases. The rationale behind these rules is guaranteeing that the franchisee receives all the information which he needs on how the business is to be operated so as to be able to follow the successful business method. The remedies available in the Principles for failure of the franchisor to communicate know-how of the required quality at the time the contract is concluded differ from those provided for by French and Spanish law. In France and Spain, the sanction may be the nullity of the contract whilst under the Principles it can only be regarded as a case of non-performance. The three regimes do however provide for the same remedies, i.e. the remedies for non-performance, when the franchisor’s failure to provide the adequate know-how regards the quality requirements that are to be fulfilled during performance. In practice, similar to what is the case in respect of intellectual property rights, courts both in France and Spain have often taken a flexible approach by not verifying the adequacy of the know-how through an analysis of compliance with each of the particular requirements, but by applying a more pragmatic criterion: in France, this criterion is whether the franchisee has been placed in an advantageous positions vis-à-vis competitors and in Spain it is whether the know-how serves to differentiate the business of the franchisee from that of competitors. In addition, in French case-law many defences that have led to the exclusion of liability of the franchisor can be identified (e.g. when the franchisee’s claim is issued despite the fact that the franchisee has been using the know-how for a long time or when he does not warn the franchisor of the inadequacy of his know-how, or when the franchisee, as a professional, should have been aware of the inadequacy of the know-how).

Obligation of the franchisor to assist The franchisor’s obligation to assist his franchisees is, unlike the franchisor’s obligations to license intellectual property rights and to communicate knowhow, regulated very differently under the PEL CADC when compared to the French and the Spanish systems. Assistance is a non-mandatory obligation under the Principles; the parties may exclude it by agreement. This is not the case under French and Spanish law: the franchisor’s obligation to assist is to be agreed upon for the contract to be classified as a franchising agreement. A second main difference is that whereas the PEL CAFDC are concerned with the quality of the assistance that is to be provided, neither French nor Spanish courts have established the requirements as to the contents of the obligation to assist. The proceedings brought to courts by fran-

Chapter III. Description and Comparision

237

chisees in France and in Spain exclusively regard claims for non-performance of the obligation to assist as agreed in the contract. In some cases the courts are required to interpret whether the obligation which according to the franchisee has not been performed, must be considered to be included in a generically formulated contractual obligation to assist. The policy applied by French and Spanish courts differs. French courts typically carry out a thorough interpretation which in some cases leads to a restrictive interpretation and in others to an extensive interpretation of the contractual term on assistance. As a result, the obligations to advise on site selection and to help the franchisee when he is facing difficulties in operating the business have been classified as implied obligations. Differently, Spanish courts systematically take a restrictive approach: compliance with a particular obligation to assist can only be required if such a particular duty was explicitly agreed upon in the franchise contract. In addition, in many Spanish rulings courts have refused to grant the remedies requested by the franchisee, because it was not established that the franchisee had allowed an additional period for performance. The literature in both countries follows a similar approach to the one in the PEL CAFDC: scholars indicate that assistance must be of the quality required to allow the franchisee to operate the business successfully. As to the remedies, the franchisee may invoke the remedies for nonperformance in all three systems.

Obligation of the franchisee to pay Pursuant to all three regimes, the parties are free to agree on how and how much the franchisee has to pay and the main role of the courts is to evaluate whether the franchisee has performed his obligation as agreed in the contract. However, if the Principles apply, French and Spanish courts would have to allow the unilateral imposition by the franchisor of the periodical payments during the course of the agreement, even though in these legal systems the unilateral imposition of the price is a ground for declaring the contract null due to the absence of a validity requirement, namely the existence of a certain price. In France, the case-law has also evolved towards a less strict approach which tolerates the unilateral imposition of the prices of sales contracts within franchise relationships, but it is not clear whether this policy also applies to the price agreed upon for the framework agreement itself. At first sight, this tolerant position seems to go against the interest of the party who has to accept the unilateral imposition of the prices by the other party. Nevertheless, allowing the unilateral imposition of prices does not mean tolerating the arbitrary imposition of prices. The Principles articulate

238

Summary

a mechanism to control the discretion of the franchisor by obliging him to impose a reasonable price. It is for the national court to interpret whether the price is reasonable. When it is unreasonable the court may substitute the unreasonable price for a reasonable price. This control mechanism is known to French courts because there is consolidated case-law on monitoring abuse regarding price setting in sales contracts framed in franchising relationships. This control mechanism is absent in Spanish case-law.

Obligation of the franchisee to follow the business method of the franchisor The franchisee’s obligation to follow the business method is considered a characteristic obligation in franchising under all three compared systems, together with the obligation to pay. Accordingly, irrespective of whether a franchising relationship is governed by the Principles, by French law or by Spanish law, the franchisee is obliged to follow the franchisor’s business method (intellectual property rights, know-how and assistance) and not to act in a way that could endanger the reputation of the network. None of the systems impose requirements as to the form and contents of these obligations. The particular obligations for the franchisee are to be spelled out in the individual franchise agreement. In French law, similar to in the PEL CAFDC and unlike in Spanish law, the restraints imposed on the franchisee need to be justified as a means to guarantee uniformity and they may not jeopardise the independence of the franchisee. Spanish courts have so far been tolerant towards situations in which the independence of the franchisee is endangered. As to the remedies, the general contract law remedies for non-performance apply in all three systems. In France, lack of compliance with this obligation has been considered a defence to exclude the liability of the franchisor.

Chapter IV. General Conclusions Differences and similarities as to scope of application, contents and form of the obligations, remedies for non-performance and outcome of judicial decisions The basic framework of obligations for the parties under the PEL CAFDC resemble that under French and Spanish law: the three systems all contain an obligation to inform pre-contractually for the franchisor and all charac-

Chapter IV. General Conclusions

239

teristic contractual obligations according to the PEL CAFDC are also characteristic obligations in France and Spain. These are the obligations for the franchisor to license intellectual property rights and to communicate his know-how and the obligation for the franchisee to pay and to follow the business method of the franchisor. The French and Spanish sytems are however different from the PEL CAFDC in that they also regard the obligation to assist as a core obligation in franchising relationships. As a result, whereas a contract can be classified under the PEL CAFDC as a franchising contract even if the obligation to assist is excluded, this is not the case under French and Spanish law. All three systems are also similar as regards the policy they follow in monitoring the quality of performance of the franchisor. The aim is not only guaranteeing that the franchisor complies with basic obligations but also that his performance complies with certain requirements of form and substance in order to make it adequate to allow the franchisee to operate the franchise business. The most important difference between the PEL CAFDC and the French and Spanish national regimes regards the system of remedies. Whereas the PEL CAFDC favour preserving the validity of the relationship, the remedies most frequently invoked and applied by the courts in France and Spain are the nullity and the annulability of the contract. Regarding the remedies for non-performance of the obligation of pre-contractual disclosure, the Principles offer to the franchisor the possibility to prevent the annulment of the contract by proposing to the franchisee to adapt the contract. Differently, under French and Spanish law, the only remedy for defective consent is the invalidity of the agreement. Regarding the remedies for non-performance of the obligations concerning intellectual property rights and know-how, when French and Spanish courts verify that the non-compliance of the said obligations with the form and substance requirements already existed at the time the contract was concluded, they declare the franchise contract invalid with retroactive effect because one of the requirements for the valid formation of a franchise contracts was missing. The system works differently under the PEL CAFDC because compliance with the requirements as to the contents of the obligations can only be tested during performance and the validity of the contract is not at risk. Finally, concerning abusive unilateral determination of the price in franchising: whereas the Principles grant to the courts the power to revise the price, this is not the case under French or Spanish law. Under French or Spanish law, the contract is to be annulled when the price is unilaterally fixed. In judicial practice, however, the application of the remedy of avoidance is moderated by the courts. On the one hand they are often reluctant to grant avoidance for mistake because franchisees are typically regarded as professionals who should have taken care to protect their own interests before entering into the agreement. On the other hand, courts do not follow

240

Summary

a strict approach in verifying compliance with the requirements as to the substance and form of the obligations but rather pay attention to whether the franchisee has actually been able to run the franchise business.

Underpinning policies: autonomy-friendliness? Legal certainty? These findings made it possible to outline some more general considerations as to whether the regime under the PEL CAFDC is more or less autonomyfriendly than those under French and Spanish law or whether they provide for more or less legal certainty. At first sight, the regime in the Principles appears to interfere more radically with the autonomy of the parties to a franchising contract because it constitutes a proposal for codified rules in which it is explicitly indicated which rules are mandatory while in French and Spanish law the rules are spread out over the case-law and legal writing and there is no clarity as to whether they are mandatory or not. However, the comparative analysis showed that this is not the case. First, all systems contain a mandatory obligation for the franchisor to inform pre-contractually, but since the rule in the Principles provides for a more generic formulation of the required contents of the information and contains no form requirement, the Principles can be said to be more franchisor-friendly than the systems in France and Spain. Secondly, the characteristic obligations in the PEL CAFDC are also the characteristic obligations according to French and Spanish law. These obligations are to be agreed upon in order for a contract to be classified as a franchising agreement. Also on this point, the French and Spanish regimes are more restrictive towards the franchisor’s autonomy when compared to the Principles because the obligation to assist is to be agreed upon if a contract is to be classified as a franchising agreement under French and Spanish law and this is not the case under the Principles. Thirdly, the comparison also revealed that it is a common policy under all three systems to impose restrictions to the autonomy of franchisors in determining the quality of the franchisor’s performance. The shared aim is guaranteeing that the franchisee receives the business elements which are needed to adequately operate the franchise business. Fourthly, regarding the obligation for the franchisee to follow the business method of the franchisor, the Principles limit the obligation for the franchisee because the latter is required to follow only those guidelines which do not interfere with his autonomy as an independent entrepreneur. This is also the approach under French law but not under Spanish law. Finally, as far as the remedies are concerned, the approach of national courts is more interventionist, and thus less franchisor-friendly, than that taken under the Principles, because the remedies of nullity and annulment are very radical solutions. In franchising, the consequences may be even more severe for the franchisor considering that the invalidity of the

Chapter IV. General Conclusions

241

contract implies the invalidity of post-contractual clauses which are typically agreed upon by the parties to protect the franchisor’s business once the relationship terminates. From the above it follows that both in the PEL CAFDC and in French and Spanish case-law, the contractual autonomy of the franchisor is limited in order to protect the interests of franchisees. However, on several points the regime in the PEL CAFDC seems to be more franchisor-friendly than the regimes in France and Spain. Eventually, the determination of which of the systems is more or less franchisor autonomy-friendly depends on the solutions reached in judicial practice after balancing the interests of both parties to the franchise contract on a case-by-case basis. As indicated above, neither French nor Spanish courts sanction a lack of performance with the obligation to inform precontractually if the franchisee was in a position to protect his own interests or sanction a lack of compliance of the intellectual property rights and know-how with the quality requirements if it is proven that the franchisee could actually operate the franchise business. However, if French and Spanish case-law are compared, the approach taken by the courts in balancing the interests of the parties has evolved differently. French courts effectively take an interventionist approach in which the quality of the performance by the franchisor is assessed so as to guarantee that the franchisee is provided with the adequate means to successfully operate the franchisor’s method. Differently, in Spain there is a disharmony between the rule declared by the courts and the rule actually enforced by the courts after balancing the interests of the parties. A similar approach is taken in cases of non-compliance of the intellectual property rights and know-how with the required conditions. As to the question whether the PEL CAFDC provide more or less legal certainty than French and Spanish law, it is obvious that a system of obligations which has to be assembled from a vast collection of case-law and scholarly writing provides less certainty for local actors as to the legal framework which establishes the contents of franchising than a system of written rules which systematically describes the main obligations of both parties. On the other hand, in France and Spain courts and doctrine have indicated how the rules work in solving practical cases whereas this information is missing for the PEL CAFDC. On this point, they are less certain than the regimes on franchising in France and Spain.

The likely reactions of franchisors and franchisees if the Principles were to apply The possibility to opt for the PEL CAFDC instead of French and Spanish law seems to be an attractive option for franchisors. Even though both in the PEL CAFDC and in French and Spanish law, the contractual autonomy

242

Summary

of the franchisor is limited in order to protect the interests of franchisees, the PEL CAFDC are in some aspects more franchisor autonomy-friendly than the French and Spanish regimes. In addition, the Principles include clear mandatory obligations regarding payment and business method, which primarily intend to protect the interests of franchisors. For the same reasons, it would be logical for franchisees not to opt fot the Principles but to prefer the application of the French and Spanish systems. However, there is a very relevant argument which may make opting for the Principles an attractive option for franchisees too. Regarding the obligation for the franchisee to follow the franchisor’s business method, the Principles pay attention to the risks that may materialise if franchisees are compelled to follow without any limitation all restraints imposed upon them by franchisors and, accordingly, they impose certain criteria that serve as limits to the discretion of franchisors to impose the method on the franchisee. French franchisees are also granted this protection. However this positive aspect for the franchisee would be a reason for the franchisor not to opt for the Principles. The application of the Principles will most probably lead to a win-win situation for the parties in franchising when considering the applicable system of remedies. Under the Principles franchisees would not be obliged to pursue annulment if they gave defective consent or the nullity of the contract if the intellectual property rights or know-how were not of the quality required at the moment the contract was concluded, or if the price was not determined. The system of remedies in the Principles allows for the preservation of the contract’s validity and this possibility seems beneficial to both parties. Moreover, opting for the Principles implies saving time (legal certainty) and money (transaction costs) in seeking out the appropriate legal framework that applies to the relationship. This seems to be a good option for both parties. From the above, all other things being equal, it may be concluded that opting for the Principles instead of for French or Spanish law could be a rational choice for the parties in franchising contracts.

Samenvating Met de Principles of European Law on Commercial Agency, Franchise and Distribution Contracts (PEL CAFDC of Principles), die zijn gepubliceerd in 2006, doen rechtswetenschappers een voorstel voor de Europese regulering van handelsagentuur-, franchise- en distributieovereenkomsten. De Principles zijn ontwikkeld door de Study Group on a European Civil Code (SGECC), één van de groepen van rechtswetenschappers die zich al geruime tijd bezighouden met de vergelijkende analyse van het contractenrecht in Europa en het ontwerpen van gemeenschappelijke beginselen van Europees contractenrecht. Het onderhavige onderzoek richt zich op het voorstel van de SGECC voor geharmoniseerde regelgeving ten aanzien van de inhoud van franchiserelaties. Gekeken wordt naar de voornaamste rechten en verplichtingen van franchisegevers en franchisenemers. Alle 27 lidstaten van de Europese Unie hebben momenteel een eigen regeling voor franchiserelaties. Alleen voor bepaalde mededingingsrechtelijke aspecten van franchising zijn regels neergelegd in een Europese Verordening, die van directe toepassing is in alle EU-landen. Er zijn derhalve nog geen geharmoniseerde bepalingen van Europees contractenrecht voor de inhoud van franchiseovereenkomsten. Hierin zou verandering kunnen komen naar aanleiding van het politieke proces van harmonisatie van contractenrecht in Europa, dat door de Europese Commissie in 2001 in gang is gezet. Een mogelijke uitkomst van dit proces is dat de Principles voor franchising als set van regels door contractspartijen in Europa van toepassing kunnen worden verklaard op hun franchiserelatie (Hoofdstuk I). Deze analyse is uitgegaan van de aanname dat dit het geval zal zijn. Vanuit dat uitgangspunt zijn de hoofdverplichtingen die de PEL CAFDC aan contractspartijen opleggen vergeleken met de regels voor franchising in het Franse en Spaanse recht (Hoofdstuk III). Deze vergelijking wordt voorafgegaan door een beschrijving van de belangrijkste karakteristieken van de wettelijke kaders waarin franchising in Frankrijk en Spanje ingebed zijn (Hoofdstuk II). Het belangrijkste doel van deze vergelijkende analyse was om de overeenkomsten en verschillen in kaart te brengen tussen enerzijds de regels voor franchising in de PEL CAFDC en anderzijds de regulering van franchising in het Franse en Spaanse recht. Een ander doel was om, aan de hand van de verschillen en gelijkenissen tussen de manier waarop de drie stelsels de franchiseovereenkomst inkaderen, te illustreren of het systeem van de PEL CAFDC de franchisegever meer of minder vrijheid geeft de

244

Samenvating

inhoud van de overeenkomst te bepalen dan respectievelijk de Franse en Spaanse regelgeving, en of de PEL CAFDC meer of minder rechtszekerheid bieden dan de nationale systemen. De uiteindelijke intentie was om op basis van de resultaten aan te geven of een rechtskeuze voor de Principles, in plaats voor Frans of Spaans recht, een redelijk alternatief voor contractspartijen zou kunnen zijn, in de zin dat de Principles meer recht zouden doen aan de belangen van partijen dan het Franse en Spaanse recht (Hoofdstuk IV).

Hoofdstuk I. Allgemene Inleiding Dat de Principles voor franchising kunnen uitgroeien tot een regelsysteem dat partijen bij franchiseovereenkomsten in hun onderlinge verhoudingen in de plaats zouden kunnen stellen van nationale regelingen, is één van de mogelijke uitkomsten van het politieke proces met betrekking tot de europeanisatie van het contractenrecht. De Europese Commissie heeft de SGECC tezamen met andere onderzoeksteams de taak toevertrouwd om op basis van hun onderzoeksresultaten een Gemeenschappelijk Referentiekader (GRK) te ontwerpen voor het contractenrecht in Europa. Dit GRK zal dienst moeten doen als een gereedschapskist voor het Europees contractenrecht, bestaand uit beginselen, definities en modelregels. De PEL CAFDC maken deel uit van dit door rechtswetenschappers opgestelde GRK. Hoewel het GRK in de eerste plaats bedoeld is voor de stroomlijning van het consumentrecht acquis, zou het volgens de Commissie de basis kunnen vormen voor een mogelijke codificatie van het contractenrecht in Europa. Als een dergelijke codificatie zou worden verwezenlijkt, zou deze, inclusief de PEL CAFDC, door contractspartijen van toepassing worden verklaard op hun overeenkomst en daarmee het nationale recht opzij kunnen zetten. Hoofdstuk I van dit onderzoek beschrijft de wetenschappelijke en politieke dimensies van de Europeanisering van het contractenrecht in het algemeen en van franchiseovereenkomsten in het bijzonder.

Hoofdstuk II. De Belangrijkste Karakteristieken van het Frans an Spaans Recht inzake Franchising De PEL CAFDC bieden een model voor een codificatie, als waren zij een wetsvoorstel. Voor de onderhavige rechtsvergelijking is derhalve gekeken naar de modelregels voor franchising zoals deze in de Principles worden

Hoofdstuk III. Beschrijvingen en Vergelijking

245

voorgesteld en naar het verklarend commentaar bij deze regels. In Frankrijk en Spanje is daarentegen geen specifieke wetgeving voorhanden aangaande de inhoud van franchiseovereenkomsten. De regels betreffende de franchiseverhouding dienden daarom te worden afgeleid uit de respectievelijke nationale rechtspraak op het gebied van franchising en uit de rechtsliteratuur. Zowel de Franse als de Spaanse wetgeving leggen franchisegevers niettemin precontractuele informatieplichten ten aanzien van franchisenemers op, respectievelijk in artikel L. 330-3 van het Franse Wetboek van Koophandel en artikel 62 van de Spaanse Detailhandelwet. In Spanje bevat Real Decreto 2485/98, de regeling betreffende openbaarmaking van informatie die een uitwerking vormt van de Detailhandelwet, verder een bepaling omtrent het algemene kader voor franchiseverbintenissen, maar deze bepaling ziet slechts op de reikwijdte van die verbintenissen. Het wettelijke kader, waarin franchising in deze twee nationale rechtssystemen ligt ingebed, wordt verder uitgewerkt in dit hoofdstuk.

Hoofdstuk III. Beschrijvingen en Vergelijking Dit Hoofdstuk omvat een beschrijving van het voor de analyse geselecteerde geheel van verplichtingen van partijen, in de PEL CAFDC en vervolgens in het Franse en Spaanse recht, gevolgd door een vergelijking op basis van deze beschrijvingen. De regels die worden vergeleken, zijn die met betrekking tot reikwijdte, verplichtingen om pre-contractuele informatie te geven, om een licentie op intellectuele eigendomsrechten te verlenen, om know-how door te geven en om begeleiding te geven aan de franchisenemer. En de verplichtingen van de franchisenemer om vergoeding te betalen en de bedrijfsformule te volgen.

Reikwijdte De drie stelsels – PEL CAFDC, Frans en Spaans recht – zijn met elkaar in overeenstemming wat betreft de verbintenissen die kenmerkend zijn voor de franchiserelatie. Aan de kant van de franchisegever is dat de verplichting om intellectuele eigendomsrechten en know-how ter beschikking te stellen. De franchisenemer, aan de andere kant, neemt de verplichting op zich daarvoor een vergoeding te betalen en de bedrijfsformule van de franchisegever te volgen. De definitie van franchising in de Principles verschilt op een punt van de definities in Frankrijk en Spanje: in de genoemde landen worden overeen-

246

Samenvating

komsten die de franchisegever niet verplichten om zijn franchisenemers te begeleiden niet gezien als franchisecontracten.

Precontractuele informatieplicht van de franchisegever Alledrie de stelsels verplichten de franchisegever precontractuele informatie te verstrekken aan de franchisenemers. Het doel hiervan is zeker te stellen dat de franchisenemer de informatie ontvangt die nodig is om met volledige kennis van de relevante feiten de overeenkomst te sluiten. De bepaling in de Principles vertoont bovendien gelijkenis met de Franse en Spaanse regels ten aanzien van de inhoud van de informatieplicht. Alledrie de regels sommen de onderwerpen op waarover informatie dient te worden gegeven en alledrie benadrukken zij dat de informatie adequaat en tijdig moet zijn. Geen van drieën verplicht de franchisegever voorspellingen te doen met betrekking tot de te verwachten verkoopcijfers. Zowel in de Principles als in Franse en Spaanse rechtspraak is niettemin bepaald dat wanneer de franchisegever zich aan dergelijke voorspellingen waagt, deze op gedegen onderzoeken gebaseerd dienen te zijn. De bepaling met betrekking tot de informatieplicht in de Principles verschilt echter van de Franse en Spaanse regels waar het de tijds- en vormvereisten betreft. In tegenstelling tot de Principles bevatten de Franse en Spaanse regels een vormvereiste: de informatie moet op schrift aangeboden worden. Wat de tijdsvereiste betreft, de informatieplicht in Frankrijk en Spanje vereist dat de informatie minimaal 20 dagen vóór het sluiten van de overeenkomst wordt aangeboden. Hoewel de bepaling in de Principles een tijdsvereiste kent, verschilt die van de Franse en Spaanse regels voorzover zij geen bepaald aantal dagen noemt, maar bepaalt dat informatie gegeven dient te worden gegeven binnen een redelijke termijn vòòr het sluiten van de overeenkomst. Het is derhalve aan de nationale gerechten om te bepalen wat naar de omstandigheden van het geval een redelijke termijn is. Wat de beschikbare rechtsmiddelen betreft, kan de franchisenemer in alle onderzochte stelsels een beroep doen op de rechtsgevolgen van dwaling indien wordt vastgesteld dat de overeenkomst gebrekkig tot stand is gekomen. De Principles verschillen echter van het Franse en Spaanse recht op het punt dat zij, zelfs indien dwaling niet is aangetoond, de franchisenemer de mogelijkheid bieden schadevergoeding te vorderen. Deze mogelijkheid bestaat niet in Frankrijk en Spanje. Ook het scala aan beschikbare rechtsmiddelen voor dwaling in de Principles vertoont verschillen met de Franse en Spaanse regels voor franchising. Volgens de Principles is nietigheid één van de mogelijke rechtsmiddelen, maar de franchisegever kan nietigverklaring voorkomen door een aanpassing van het contract voor te stellen en zodoende aan te geven dat hij bereid is tot nakoming van de

Hoofdstuk III. Beschrijvingen en Vergelijking

247

overeenkomst op de wijze waarop de franchisenemer deze had begrepen. Het Franse en het Spaanse recht kennen deze mogelijkheid niet. Wat de rechtspraktijk betreft, blijkt dat alleen de Franse gerechten de regels met betrekking tot de informatieplicht toepassen en een effectieve sanctie bieden in geval van een gebrekkige wilsovereenstemming. Tot nu toe hebben de Spaanse gerechten de bepalingen betreffende de informatieplicht in de meeste gevallen niet toegepast, ondanks het feit dat franchisenemers er een beroep op hebben gedaan. De Spaanse gerechten hebben de algemene regels inzake wilsgebreken gehanteerd. Zowel in de Franse als de Spaanse rechtspraak zijn de meest gebruikte criteria om te bepalen of de franchisegever aansprakelijk kan worden gehouden voor het niet voldoen aan zijn informatieplicht de criteria voor het vaststellen van de toerekenbaarheid van dwaling. In verschillende Franse uitspraken is een beroep op dwaling niet geslaagd omdat de dwaling naar de mening van de rechters voor rekening van de dwalende franchisenemer bleef. Ook in Spaanse zaken over de precontractuele informatieplicht zijn vorderingen afgewezen op basis van het argument dat de franchisenemer in de uitoefening van een bedrijf handelde en zich derhalve voorzichtiger had moeten opstellen om gebrekkige wilsvorming te voorkomen.

Verplichting van de franchisegever om een licentie op intellectuele eigendomsrechten te verlenen De drie onderzochte systemen leggen alle de franchisegever een verplichting op zijn franchisenemers het gebruik toe te staan van de intellectuele eigendomsrechten die nodig zijn om de franchiseonderneming draaiende te houden. Dit betekent, aan de ene kant, dat de overeenkomst een bepaling van die strekking dient te bevatten als partijen haar willen benoemen als franchisecontract. Aan de andere kant zullen de intellectuele eigendomsrechten van een kwaliteit moeten zijn die de franchisenemer in staat stelt op adequate wijze de onderneming te exploiteren. De Principles verschillen van het Franse en Spaanse recht ten aanzien van de beschikbare rechtsmiddelen tegen de nalatigheid van de franchisegever om relevante intellectuele eigendomsrechten ter beschikking te stellen op het tijdstip dat de overeenkomst tot stand komt. Wanneer de Principles van toepassing zijn, kunnen de rechtsmiddelen voor niet-nakoming worden ingeroepen. In Frankrijk en Spanje, daarentegen, wordt in geval van een dergelijke tekortkoming in het voldoen aan deze ‘beginvoorwaarden’ aangenomen dat de intellectuele eigendomsrechten niet voldoen en derhalve als afwezig moeten worden beschouwd. Dit is een reden om nietigheid van het franchisecontract te vorderen vanwege het niet voldoen aan een vereiste voor de geldigheid ervan.

248

Samenvating

In de juridische praktijk hebben Franse gerechten, in geval de intellectuele eigendomsrechten niet voldoen aan formele of materiële vereisten, in het algemeen de nietigheid van franchiseovereenkomsten uitgesproken wegens het ontbreken van een causa. De Spaanse rechtspraak heeft zich slechts beziggehouden met vorderingen wegens het niet registreren van intellectuele eigendomsrechten. In sommige zaken hebben Spaanse rechters overeenkomsten op deze grond nietig verklaard. Niettemin zijn er in beide landen ook voorbeelden van uitspraken te vinden waarin de gerechten een pragmatische benadering hebben gekozen, waarin niet zozeer het voldoen aan de specifieke verplichtingen centraal staat, maar is gekeken of de franchisenemer de intellectuele eigendomsrechten, en dus het imago van de franchisegever, daadwerkelijk heeft kunnen gebruiken. Waar dat het geval was, stonden de franchisenemer geen rechtsmiddelen ter beschikking.

Verplichting van de franchisegever om zijn know-how door te geven Net zoals franchisegevers intellectuele eigendomsrechten ter beschikking moeten stellen, verplichten alledrie regelsystemen hen ook hun know-how door te geven aan hun franchisenemers. Bovendien moet de know-how aan bepaalde vereisten voldoen. In alledrie systemen is voor wat betreft de basisvoorwaarden aansluiting gezocht bij het Europese mededingingsrecht: de know-how dient door de franchisegever van tevoren getest te zijn en gekwalificeerd als geheim, wezenlijk en geïdentificeerd. Rechters en wetenschappers hebben nadere invulling gegeven aan deze abstracte begrippen om ze geschikt te maken voor toepassing in civiele zaken. De ratio van deze regels is gelegen in het zekerstellen dat de franchisenemer alle benodigde informatie ontvangt met betrekking tot de exploitatie van de onderneming om de succesvolle bedrijfsformule te kunnen volgen. De rechtsmiddelen die de Principles geven voor een tekortkoming door de franchisegever in de nakoming van zijn verplichting om de benodigde knowhow door te geven op het moment van contractsluiting verschillen van de rechtsmiddelen in het Franse en Spaanse recht. In Frankrijk en Spanje kan de overeenkomst nietig worden verklaard, terwijl op grond van de Principles alleen sprake kan zijn van een geval van niet-nakoming. Wanneer de franchisegevers tekortkoming is gelegen in het nalaten know-how van voldoende kwaliteit ter beschikking te stellen gedurende de looptijd van het contract, bieden alledrie de stelsels echter dezelfde rechtsmiddelen, namelijk die voor niet-nakoming. In de praktijk hebben Franse en Spaanse gerechten, net als ten aanzien van intellectuele eigendomsrechten, vaak een soepele benadering gekozen. Zij beoordelen de kwaliteit van de know-how niet zozeer aan de hand van

Hoofdstuk III. Beschrijvingen en Vergelijking

249

alle specifieke vereisten, maar hanteren een meer pragmatisch criterium. In Frankrijk is het criterium of de franchisenemer in een voordelige positie is geplaatst ten opzichte van zijn concurrenten, terwijl in Spanje wordt gekeken of de know-how het de onderneming van de franchisenemer mogelijk maakt zich te onderscheiden van de concurrentie. In de Franse rechtspraak zijn bovendien veel voorbeelden te vinden van verweren die hebben geleid tot het niet aannemen van aansprakelijkheid van de franchisegever (bijvoorbeeld het geval waarin een franchisenemer een vordering instelt terwijl hij de know-how al gedurende lange tijd gebruikt, wanneer hij de franchisegever niet op de hoogte heeft gesteld van het feit dat de know-how niet voldoet, of indien de franchisenemer, als professionele partij, zich bewust had moeten zijn van het niet voldoen van de know-how).

Verplichting van de franchisegever om begeleiding te geven Anders dan ten aanzien van de verplichtingen van de franchisegever met betrekking tot intellectuele eigendomsrechten en know-how, bestaan grote verschillen tussen de PEL CAFDC en het Franse en Spaanse recht wat betreft de verplichting van de franchisegever om zijn franchisenemers te begeleiden. Onder het regime van de Principles is de verplichting tot begeleiding van regelend recht; partijen kunnen haar uitsluiten bij overeenkomst. Dit is anders in het Franse en Spaanse recht: het opnemen van de verplichting voor de franchisegever om begeleiding te geven is een vereiste voor het kwalificeren van de overeenkomst als franchisecontract. Een tweede punt van aanmerkelijk verschil is dat de PEL CAFDC zich bezighouden met de kwaliteit van de te geven begeleiding, terwijl de Franse en Spaanse gerechten geen vereisten hebben gesteld aan de inhoud van de begeleidingsverplichting. De zaken die voor de Franse en Spaanse rechters zijn gekomen, betreffen uitsluitend vorderingen wegens de niet-nakoming van een verplichting tot begeleiding zoals die in de overeenkomst is opgenomen. In sommige van deze gevallen is aan de gerechten de vraag voorgelegd te beoordelen of de verplichting die volgens de franchisenemer niet is nagekomen kan worden afgeleid uit een in algemene bewoordingen opgestelde contractuele begeleidingsverplichting. De Franse en Spaanse gerechten voeren op dit punt een verschillend beleid. Franse rechters onderwerpen een contractsbepaling betreffende begeleiding doorgaans aan een grondige analyse, wat in sommige gevallen resulteert in een engere interpretatie van de contractuele bepaling en in andere gevallen tot een ruimere uitleg. Als gevolg van die benadering zijn de verplichting om te adviseren bij het kiezen van een locatie en de verplichting bijstand te verlenen wanneer de franchisenemer moeilijkheden ondervindt bij het exploiteren van de onderneming aangemerkt als implied

250

Samenvating

terms. Spaanse rechters volgen daarentegen een restrictieve benadering: nakoming van een bepaalde verplichting tot begeleiding kan slechts worden gevorderd indien een dergelijke verplichting uitdrukkelijk is overeengekomen in het franchisecontract. Bovendien is in veel Spaanse uitspraken de vordering van de franchisenemer afgewezen om de reden dat de franchisenemer geen aanvullende termijn voor nakoming had gegeven. De literatuur in beide landen neigt naar een benadering die meer lijkt op die van de PEL CAFDC: rechtswetenschappers zijn van mening dat begeleiding van een kwaliteit dient te zijn die de franchisenemer in staat stelt de onderneming succesvol te exploiteren. Wat de rechtsmiddelen betreft, geldt dat aan de franchisenemer volgens alledrie de regelsystemen de middelen voor niet-nakoming ter beschikking staan.

Betalingsverplichting van de franchisenemer Alle onderzochte stelsels laten partijen vrij te bepalen hoe en hoeveel de franchisenemer moet betalen. De belangrijkste taak van de gerechten is om vast te stellen of de franchisenemer zijn verplichting heeft vervuld zoals overeengekomen. Echter, wanneer de Principles van toepassing zouden zijn, zouden Franse en Spaanse rechters moeten toestaan dat de franchisegever gedurende de looptijd van het contract eenzijdig periodieke betalingsverplichtingen oplegt. Daarmee wordt afgeweken van de in die rechtsstelsels geldende regel dat eenzijdige prijsbepaling een grond oplevert voor nietigverklaring van het contract wegens afwezigheid van een geldigheidsvereiste, te weten het vastleggen van een bepaalde prijs. Hoewel de Franse rechtspraak inmiddels een soepeler benadering hanteert ten aanzien van de eenzijdige prijsbepaling in contracten die voortvloeien uit de franchiserelatie, is niet duidelijk of dit beleid ook van toepassing is op de prijs die wordt overeengekomen voor de kaderovereenkomst zelf. Op het eerste gezicht lijkt deze soepele aanpak tegen het belang in te gaan van de partij die zich de eenzijdige prijsbepaling door de andere partij moet laten welgevallen. Het toelaten van eenzijdige bepaling van de prijs is evenwel niet synoniem aan het gedogen van een willekeurige prijsvaststelling. De Principles voorzien in een controle-instrument voor de discretionaire bevoegdheid van de franchisegever, voorzover zij hem verplichten een redelijke prijs te bepalen. De nationale rechter zal moeten vaststellen of van een redelijke prijs sprake is. In geval de rechter van mening is dat dit niet het geval is, mag hij de onredelijke prijs vervangen door een redelijke prijs. De Franse gerechten zijn bekend met dit controlesysteem, gezien de vaste jurisprudentie betreffende de toetsing van de prijsbepaling in koopcon-

Hoofdstuk IV. Algemene Conclusies

251

tracten binnen franchiserelaties. De Spaanse rechtspraak kent daarentegen geen vergelijkbaar controlemechanisme.

Verplichting van de franchisenemer om de bedrijfsformule van de franchisegever te volgen Samen met de betalingsverplichting wordt de verplichting van de franchisenemer om de bedrijfsformule van de franchisegever te volgen beschouwd als karakteristiek voor franchising in alledrie de onderzochte systemen. Ongeacht of een franchiseverhouding wordt beheerst door de Principles dan wel het Franse of Spaanse recht, is de franchisenemer derhalve verplicht de bedrijfsformule van de franchisegever toe te passen (intellectuele eigendomsrechten, know-how en begeleiding) en niet te handelen op een wijze die schade zou kunnen toebrengen aan de reputatie van het netwerk. Geen van de drie regelsystemen stelt vereisten ten aanzien van de vorm en inhoud van deze verbintenissen. De specifieke verplichtingen van de franchisenemer dienen echter expliciet te worden opgenomen in de franchiseovereenkomst. Naar Frans recht, net als volgens de PEL CAFDC en anders dan naar Spaans recht, dienen beperkingen voor de franchisenemer te worden gerechtvaardigd vanuit de noodzaak de uniformiteit te bewaken en mogen zij niet de onafhankelijkheid van de franchisenemer aantasten. Spaanse gerechten hebben zich tot dusver tolerant opgesteld ten aanzien van gevallen waarin de onafhankelijkheid van de franchisenemer in het geding is. Wat de rechtsmiddelen betreft, zijn in alledrie de stelsels de middelen uit het algemeen contractenrecht van toepassing. In Frankrijk is niet-nakoming door de franchisenemer van de verplichting de bedrijfsformule te volgen aanvaard als verweer van de franchisegever ter beperking van zijn aansprakelijkheid.

Hoofdstuk IV. Algemene Conclusies Verschillen en overeenkomsten met betrekking tot toepassingsbereik, inhoud en vorm van de verplichtingen van partijen, rechtsmiddelen tegen niet-nakoming en de uitkomst van rechterlijke uitspraken De hoofdverplichtingen van partijen onder de PEL CAFDC tonen overeenstemming met die onder Frans en Spaans recht. Enerzijds leggen alledrie de systemen de franchisegever een precontractuele informatieplicht op.

252

Samenvating

Anderzijds zijn alle belangrijke contractuele verplichtingen volgens de PEL CAFDC ook kenmerkend in Frankrijk en Spanje. Dit zijn de verplichtingen voor de franchisegever om een licentie te verlenen op intellectuele eigendomsrechten en zijn know-how door te geven, en de verplichtingen voor de franchisenemer om een vergoeding te betalen en de bedrijfsformule van de franchisegever te volgen. De Franse en Spaanse regels verschillen echter van de PEL CAFDC voorzover zij ook de verplichting tot begeleiding als een kernverplichting in franchiserelaties beschouwen. Dit heeft tot gevolg dat een overeenkomst die onder de PEL CAFDC als franchisecontract kwalificeert zelfs indien de verplichting tot begeleiding is uitgesloten, naar Frans en Spaans recht niet als zodanig wordt erkend. De drie systemen vertonen bovendien gelijkenis met betrekking tot het beleid dat zij voorstaan met betrekking tot de controle op de kwaliteit van de prestaties van de franchisegever. Doel is niet alleen om te garanderen dat de franchisegever aan zijn hoofdverplichtingen voldoet. Ook dient te worden bewerkstelligd dat zijn prestaties voldoen aan bepaalde vereisten aangaande vorm en inhoud, om het de franchisenemer mogelijk te maken de onderneming te runnen. Het belangrijkste verschil tussen de PEL CAFDC en de Franse en Spaanse nationale regelgeving betreft de beschikbare rechtsmiddelen. Terwijl de PEL CAFDC bij voorkeur de overeenkomst in stand houden, is het meest ingeroepen en toegepaste rechtsmiddel in Frankrijk en Spanje de nietigverklaring of de vernietiging van de overeenkomst. In geval van nietnakoming van de precontractuele informatieplicht bieden de Principles de franchisegever de mogelijkheid vernietiging van de overeenkomst te voorkomen door de franchisenemer een voorstel te doen tot aanpassing van het contract. Naar Frans en Spaans recht, daarentegen, is de enige beschikbare remedie voor een gebrekkige wilsvorming de vernietiging van de overeenkomst. Wat de niet-nakoming van de verplichtingen met betrekking tot intellectuele eigendomsrechten en know-how betreft, verklaren Franse en Spaanse rechters de overeenkomst nietig omdat aan één voor de geldigheidsvereisten niet is voldaan, indien zij vaststellen dat reeds op het moment van totstandkoming van het contract niet werd voldaan aan formele of substantiële vereisten. Dit is anders onder de PEL CAFDC, aangezien slechts gedurende de looptijd van het contract kan worden getoetst of inhoudelijk aan de verplichtingen wordt voldaan en de geldigheid van de overeenkomst derhalve niet in het geding is. Tot slot, wat betreft het misbruik maken van eenzijdige prijsoplegging: waar de Principles de rechter de bevoegdheid geven de prijs aan te passen, bestaat deze mogelijkheid niet in het Franse en Spaanse recht. In Frankrijk en Spanje dient de overeenkomst nietig te worden verklaard wanneer de prijs eenzijdig is bepaald. In de rechtspraktijk wordt de toepassing van het rechtsmiddel van nietigverklaring echter aan banden gelegd door de gerechten. Aan de ene

Hoofdstuk IV. Algemene Conclusies

253

kant zijn zij veelal niet snel bereid tot nietigverklaring wegens dwaling, omdat franchisenemers in het algemeen worden beschouwd als professionals die hun belangen goed dienen te beschermen alvorens zij een overeenkomst sluiten. Aan de andere kant leggen rechters niet zozeer de nadruk op de controle of aan vorm- en inhoudsvereisten is voldaan, maar kijken zij eerder of de franchisenemer in staat is geweest daadwerkelijk de franchiseonderneming te exploiteren.

Onderliggende beleidsdoeleinden: nadruk op autonomie? Rechtszekerheid? Op basis van deze onderzoeksresultaten konden meer algemene overwegingen worden geformuleerd met betrekking tot de vraag of de PEL CAFDC meer nadruk leggen op autonomie dan het Franse en Spaanse recht met betrekking tot franchising. Ook kon worden beoordeeld of zij meer of minder rechtszekerheid bieden. Op het eerste gezicht lijken de PEL CAFDC drastischer in te grijpen in de autonomie van partijen bij een franchiseovereenkomst. Zij geven immers een voorstel voor gecodificeerde regels waarin uitdrukkelijk wordt aangegeven welke regels van dwingend recht zijn. In Frankrijk en Spanje zijn de relevante regels daarentegen verspreid over rechtspraak en literatuur en bestaat geen duidelijkheid over het dwingendrechtelijk karakter ervan. Uit de vergelijkende analyse is echter gebleken dat de PEL CAFDC partijautonomie juist niet meer inperken dan het Franse en Spaanse recht. Ten eerste kennen alledrie de stelsels een precontractuele informatieplicht voor de franchisegever, maar bevatten de Principles een algemenere formulering van de inhoudsvereisten van deze verplichting en geven zij geen vormvoorschriften. De Principles lijken op dit punt dus meer franchisegevervriendelijk te zijn dan het Franse en Spaanse recht. Ten tweede komen de PEL CAFDC en de Franse en Spaanse regels overeen wat betreft de kenmerkende verbintenissen van een franchiseovereenkomst. Het contract dient bepalingen met betrekking tot deze verbintenissen te bevatten om te kunnen worden aangemerkt als franchiseovereenkomst. Ook op dit punt zijn de Franse en Spaanse regelgeving restrictiever dan de Principles, nu de overeenkomst naar Frans en Spaans recht een verplichting tot begeleiding dient te bevatten om te kwalificeren als franchisecontract, terwijl dit geen vereiste is onder de Principles. Ten derde is uit de vergelijking gebleken dat het in alledrie de stelsels beleid is om de autonomie van franchisegevers te beperken voor wat betreft de kwaliteit van de door de franchisegever te leveren prestaties. Het gemeenschappelijke doel is om zeker te stellen dat de franchisenemer de intellectuele eigendomsrechten en know-how tot zijn beschikking krijgt die nodig zijn voor het adequaat exploiteren van de onderneming. Zowel in de

254

Samenvating

PEL CAFDC als in de Franse en Spaanse rechtspraak is de contractsvrijheid van de franchisegever beperkt om de belangen van de franchisenemers te beschermen. Ten vierde leggen de Principles de franchisenemer slechts een beperkte verplichting op om de bedrijfsformule van de franchisegever te volgen: de franchisenemer is enkel verplicht de richtlijnen te volgen die niet ingrijpen in zijn autonomie als zelfstandig ondernemer. Deze benadering is dezelfde als die onder Frans recht, maar wijkt af van het Spaanse recht. Tot slot: wat betreft de rechtsmiddelen is de werkwijze van de nationale rechters ingrijpender dan de in de Principles gevolgde benadering, en derhalve minder franchisegever-vriendelijk, nu zij veelal voor de drastische oplossing van nietigverklaring kiezen. De gevolgen voor de franchisegever kunnen nog zwaarder worden wanneer wordt bedacht dat de nietigverklaring van de overeenkomst ook leidt tot nietigheid van postcontractuele clausules die veelal worden opgenomen om de bedrijfsvoering van de franchisegever te beschermen na beëindiging van het contract. Op grond van het bovenstaande lijken de PEL CAFDC dus op sommige punten meer franchisegevervriendelijk te zijn dan de Franse en Spaanse regelgeving. Uiteindelijk berust de beoordeling van welk systeem meer of minder nadruk op autonomie legt op de resultaten die in de rechtspraak van geval tot geval worden bereikt na afweging van de belangen van beide partijen bij de franchiseovereenkomst. Zoals eerder aangegeven, leggen zowel Franse als Spaanse rechters geen sancties op voor het niet nakomen van een precontractuele informatieplicht in het geval dat de franchisenemer in de positie was zijn belangen afdoende te behartigen. Bovendien laten zij het tekortschieten in kwaliteit van intellectuele eigendomsrechten en know-how onbestraft indien vaststaat dat de franchisenemer in staat was de onderneming daadwerkelijk te exploiteren. Niettemin blijkt uit een vergelijking van de Franse en Spaanse rechtspraak dat de benadering van de nationale rechters ten aanzien van de afweging van de belangen van partijen zich op verschillende wijze heeft ontwikkeld. In Frankrijk ligt de nadruk op rechterlijke tussenkomst, waarbij de rechters controleren of de kwaliteit van de door de franchisegever geleverde prestaties van zodanig niveau was dat de franchisenemer over voldoende middelen beschikte om succesvol de formule van de franchisegever toe te passen. In Spanje bestaat daarentegen een verschil tussen de door de rechters verkondigde regel en de regel die daadwerkelijk wordt toegepast na afweging van de belangen van partijen. Een vergelijkbare benadering wordt gevolgd in gevallen van tekortkomingen in de nakoming van verbintenissen betreffende intellectuele eigendomsrechten en knowhow. Wat betreft de vraag of de PEL CAFDC meer of minder rechtszekerheid bieden dan Frans en Spaans recht, spreekt het voor zich dat een regelsysteem dat moet worden afgeleid uit een grote verzameling uitspraken en literatuur

Hoofdstuk IV. Algemene Conclusies

255

minder zekerheid biedt aan nationale actoren ten aanzien van het juridisch kader voor franchising dan een systeem van geschreven regels dat systematisch de verplichtingen van partijen beschrijft. Aan de andere kant hebben Franse en Spaanse rechters en rechtswetenschappers wel duidelijk gemaakt hoe regels uitwerken in de praktijk, terwijl dergelijke informatie ontbreekt voor de PEL CAFDC. Op dit punt bieden de Principles minder zekerheid dan de Franse en Spaanse regelgeving op het gebied van franchising.

De te verwachten reacties van franchisegevers en franchisenemers in geval de Principles van toepassing zouden zijn De mogelijkheid om te kiezen voor de PEL CAFDC in plaats van voor het Franse en Spaanse recht lijkt een aantrekkelijke optie te zijn voor de franchisegever. Hoewel zowel de PEL CAFDC als de Franse en Spaanse rechtspraak de contractsvrijheid van de franchisegever beperken om de belangen van de franchisenemers te beschermen, zijn de PEL CAFDC op sommige punten meer franchisegever-vriendelijk dan het Franse en Spaanse recht. Bovendien bevatten de Principles dwingendrechtelijke verplichtingen met betrekking tot betaling en bedrijfsformule, die in de eerste plaats de belangen van de franchisegevers beogen te beschermen. Om dezelfde redenen zou het voor de hand liggen dat franchisenemers niet kiezen voor de Principles maar een voorkeur zouden hebben voor de toepassing van de Franse of Spaanse regelgeving. Er zijn echter bepaalde argumenten op basis waarvan de Principles toch een aantrekkelijk alternatief kunnen zijn: ten aanzien van de verplichting de bedrijfsformule te volgen besteden de Principles aandacht aan de risico’s die zich kunnen voordoen wanneer franchisenemers gehouden zouden zijn om zonder voorbehoud alle beperkingen te accepteren die franchisegevers aan hen opleggen. Zij beperken de vrijheid van de franchisegevers om hun bedrijfsformules aan de franchisenemers op te leggen. Franchisenemers onder Frans recht worden op een soortgelijke manier beschermd. Niettemin geldt dat dit positieve aspect voor de franchisenemer een reden zou kunnen zijn voor de franchisegever om niet voor de Principles te kiezen. Toepassing van de Principles zal waarschijnlijk tot een win-win-situatie leiden voor wat betreft het systeem van rechtsmiddelen. Onder de Principles zouden franchisenemers niet genoodzaakt zijn nietigverklaring of vernietiging te vorderen in geval van respectievelijk gebrekkige wilsvorming of het niet voldoen van intellectuele eigendomsrechten of know-how. De Principles laten toe de overeenkomst in stand te houden. Bovendien impliceert de keuze voor de Principles tijdsbesparing (rechtszekerheid) en geld (transactiekosten) omdat men geen wettelijk kader hoeft te zoeken dat

256

Samenvating

van toepassing is op de overeenkomst. Dit lijkt een goede optie voor beide partijen te zien. Op grond van het bovenstaande kan, onder gelijkblijvende omstandigheden, worden geconcludeerd dat een keuze voor de Principles een redelijk alternatief kan bieden ten opzichte van Frans en Spaans recht voor alle partijen die betrokken zijn bij een franchiseovereenkomst.

Legislation a)

Principles of European Law on Commercial Agency, Franchise and Distribution Contracts (PEL CAFDC) a) PEL CAFDC

Chapter 3: Franchise Section 1: General Article 3:101: Scope This Chapter applies to contracts under which one party (the franchisor) grants the other party (the franchisee), in exchange for remuneration, the right to conduct a business (franchise business) within the franchisor’s network for the purposes of selling certain products on the franchisee's behalf and in the franchisee's name, and whereby the franchisee has the right and the obligation to use the franchisor’s tradename or trademark and other intellectual property rights, the know-how and the business method.

Article 3:102: Pre-Contractual Information (1) The obligation to disclose pre-contractual information (Article 1:201) requires the franchisor in particular to provide the franchisee with adequate and timely information concerning: (a) the franchisor’s company and experience, (b) the relevant intellectual property rights, (c) the characteristics of the relevant know-how, (d) the commercial sector and the market conditions, (e) the particular franchise method and its operation, (f) the structure and extent of the franchise network, (g) the fees, royalties or any other periodical payments, (h) the terms of the contract. (2) If the franchisor´s non-compliance with Paragraph 1 does not give rise to a fundamental mistake under Article 4:103 PECL, the franchisee may recover damages in accordance with Article 4:117(2) and (3) PECL, unless the franchisor had reason to believe that the information was adequate or had been given in reasonable time. (3) The parties may not derogate from this provision.

258

Legislation

Section 2: Obligations of the Franchisor Article 3:201: Intellectual Property Rights (1) The franchisor must grant the franchisee a right to use the intellectual property rights to the extent necessary to operate the franchise business. (2) The franchisor must make reasonable efforts to ensure the undisturbed and continuous use of the intellectual property rights. (3) The parties may not derogate from this provision.

Article 3:202: Know-How (1) Throughout the duration of the contract, the franchisor must provide the franchisee with the know-how which is necessary to operate the franchise business. (2) The parties may not derogate from this provision.

Article 3:203: Assistance (1) The franchisor must provide the franchisee with assistance in the form of training courses, guidance and advice, in so far as necessary for the operation of the franchise business, without additional charge for the franchisee. (2) The franchisor must provide further assistance, in so far as reasonably requested by the franchisee, at a reasonable cost.

Article 3:204: Supply (1) When the franchisee is obliged to purchase the products exclusively from the franchisor, or from a supplier designated by the franchisor, the franchisor must ensure that the products ordered by the franchisee are supplied within a reasonable time, in so far as practicable, and provided that the order is reasonable. (2) Paragraph 1 also applies to cases where the franchisee, although not legally obliged to purchase from the franchisor or from a supplier designated by the franchisor, is in fact required to do so. (3) The parties may not derogate from this provision.

Article 3:205: Information during the Performance The obligation to inform (Article 1:203) requires the franchisor in particular to provide the franchisee with information concerning: (a) the relevant market conditions, (b) the commercial results of the franchise network, (c) the characteristics of the products, (d) the prices and terms for the sale of products, (e) any recommended prices and terms for the resale of products, (f) any relevant communication between the franchisor and customers in the territory, (g) any advertising campaigns relevant to the operation of the franchise.

a) PEL CAFDC

259

Article 3:206: Warning of Decreased Supply Capacity (1) When the franchisee is obliged to purchase the products exclusively from the franchisor, or from a supplier designated by the franchisor, the franchisor must warn the franchisee within a reasonable time when the franchisor foresees or ought to foresee, that the franchisor's supply capacity or the supply capacity of the designated suppliers will be significantly less than the franchisee had reason to expect. (2) Paragraph 1 also applies to cases where the franchisee, although not legally obliged to purchase from the franchisor or from a supplier designated by the franchisor, is in fact required to do so. (3) The parties may not derogate from this provision to the detriment of the franchisee.

Article 3:207: Reputation of Network and Advertising (1) The franchisor must make reasonable efforts to promote and maintain the reputation of the franchise network. (2) In particular, the franchisor must design and co-ordinate the appropriate advertising campaigns aiming at the promotion of the franchise network. (3) The activities of promotion and maintenance of the reputation of the franchise network are to be carried out without additional charge to the franchisee.

Section 3: Obligations of the Franchisee Article 3:301: Fees, Royalties and Other Periodical Payments (1) The franchisee must pay to the franchisor fees, royalties or other periodical payments agreed upon in the contract. (2) If fees, royalties or any other periodical payments are to be determined unilaterally by the franchisor, Article 6:105 PECL applies.

Article 3:302: Information during the Performance The obligation to inform (Article 1:203) requires the franchisee in particular to provide the franchisor with information concerning: a) any claims brought or threatened by third parties in relation to the franchisor's intellectual property rights. b) any infringements by third parties of the franchisor’s intellectual property rights.

Article 3:303: Business Method and Instructions (1) The franchisee must make reasonable efforts to operate the franchise business according to the business method of the franchisor. (2) The franchisee must follow the franchisor’s reasonable instructions in relation to the business method and the maintenance of the reputation of the network.

260

Legislation

(3) The franchisee must take reasonable care not to harm the franchise network. (4) The parties may not derogate from this provision.

Article 3:304: Inspection (1) The franchisee must grant the franchisor reasonable access to the franchisee's premises to enable the franchisor to check that the franchisee is complying with the franchisor's business method and instructions in so far as it is necessary to achieve the objectives of the contract. (2) The franchisee must grant the franchisor reasonable access to the accounting books of the franchisee.

b)

French Law

Article L.330-3 Code de Commerce (former Loi n° 89-1008 du 31 décembre 1989 relative au développement des entreprises commerciales et artisanales et à l'amélioration de leur environnement économique, juridique et social (commonly called the « Loi Doubin »). “Toute personne qui met à la disposition d’une autre personne un nom commercial, une marque ou une enseigne, en exigeant d’elle un engagement d’exclusivité ou de quasi-exclusivité pour l’exercice de son activité, est tenue préalablement à la signature de tout contrat conclu dans l’intérêt commun des deux parties de fournir à l’autre partie un document donnant des informations sincères, qui lui permettent de s’engager en connaissance de cause. Ce document, dont le contenu est fixé par décret, précise notamment l’ancienneté et l’expérience de l’entreprise, l’état et les perspectives de développement du marché concerné, l’importance du réseau d’exploitants, la durée, les conditions de renouvellement, de résiliation et de cession du contrat ainsi que le champs des exclusivités. Lorsque le versement d’une somme est exigé préalablement à la signature du contrat mentionné ci-dessus, notamment pour obtenir la réservation d’une zone, les prestations assurées en contrepartie de cette somme sont précisées par écrit, ainsi que les obligations réciproques des parties en cas de délit. Le document prévu au premier alinéa ainsi que le projet de contrat sont communiqués vingt jours au minimum avant la signature du contrat ou, le cas échéant, avant le versement de la somme mentionnée à l’alinéa précédent.”

b) French Law

261

DÉCRET n° 97-337 du 4 avril 1991 portant application de la loi n° 89-1008 du 31 décembre 1989 relative au développement des entreprises commerciales et artisanales et à l'amélioration de leur environnement économique, juridique et social. “Article 1: Le document prévu au premier alinéa de l'article I, de la loi du 31 décembre doit contenir les informations suivantes … (1) L’adresse du siège de l'entreprise et la nature de ses activités avec l'indication de sa forme juridique et de l'identité du chef d'entreprise s'il s'agit d'une personne physique ou des dirigeants s'il s'agit d'une personne morale; le cas échéant, le montant du capital; (2) Le numéro d'immatriculation au registre du commerce et des sociétés ou le numéro d'inscription au répertoire des métiers et, dans le cas où la marque qui doit faire l’objet du contrat a été acquise à la suite d’une cession ou d'une licence, la date et le numéroté de l’inscription correspondante au registre national des marques avec, pour les contrats de licence, l'indication de la durée pour laquelle la licence a été consentie; (3) La ou les domiciliations bancaires de l'entreprise. Cette information peut être limitée aux cinq principales domiciliations bancaires; (4) La date de la création de l'entreprise avec un rappel des principales étapes de son évolution, celle du réseau d'exploitants, s'il y a lieu, ainsi que toutes indications permettant d'apprécier l'expérience professionnelle acquise par l'exploitant ou par les dirigeants. Les informations mentionnées à l'alinéa précédant peuvent ne porter que sur les cinq dernières précèdent celle de la remise du document. Elles doivent être complétées par une présentation de l’état général et local du marché des produits ou services devant faire l'objet du contrat et des perspectives de développement de ce marché. Doivent être annexés à cette partie du document les comptes annuels des deux derniers exercices ou, pour les sociétés faisant publiquement appel à l’épargne, les rapports établis au titre des deux derniers exercices en application du troisième alinéa de l’article 341-1 de la loi n° 66-537 du 24 juillet 1966 sur les sociétés commerciales; (5) Une présentation du réseau d’exploitants qui doit comporter: A – La liste des entreprises qui en font partie, avec l’indication pour chacune d’elles du mode d´exploitation convenu; B – L’adresse des entreprises établies en France avec lesquelles la personne qui propose le contrat est liée par des contrats de même nature que celui dont la conclusion est envisagée: la date de conclusion ou de renouvellement de ces contrats est précisée: Lorsque le réseau compte plus de cinquante exploitants, les informations mentionnées à l’alinéa précédent ne sont exigées que pou les cinquante entreprises les plus proches du lieu de l’exploitation envisagée: C – le nombre d’entreprises qui, étant liées au réseau par des contrats de même nature que celui dont la conclusion est envisagée, ont cessé de faire partie du réseau au cours de l’année précédant celle de la délivrance du document. Le document doit préciser si le contrat est venu à expiration ou s’il a été résilié ou annulé:

262

Legislation

D – S’il y a lieu, la présence, dans la zone d’activité de l’implantation prévue par le contrat proposé, de tout établissement dans lequel sont offerts avec l’accord exprès de la personne qui propose le contrat, les produits ou services faisant l'objet’ de celui-ci; (6)L’indication de la durée du contrat proposé, des conditions de enouvellement, de résiliation et de cession ainsi que le champ des exclusivités. Le document doit, en outre, préciser la nature et le montant des dépenses et investissements spécifiques à l’enseigne ou à la marque que la personne destinataire du projet de contrat devra engager avant de commercer l’exploitation.”

c)

Spanish law

Article 62 (3) Ley de Ordenación del comercio Minorista “… con una antelación mínima de 20 días a la firma de cualquier contrato o precontrato de franquicia o entrega por parte del futuro franquiciado al franquiciador de cualquier pago, el franquiciador deberá haber entregado al futuro franquiciado por escrito la información necesaria para que pueda decidir libremente y con conocimiento de causa su incorporación a la red de franquicia y, en especial, los datos principales de identificación del franquiciador, descripción del sector de actividad del negocio objeto de franquicia, contenido y características de la franquicia y de su explotación, estructura y extensión de la red y elementos esenciales del acuerdo de franquicia

Real Decreto 2485/1998 de 13 de noviembre, por el que se desarrolla el artículo 62 de la Ley 7/1996, de 15 de enero, de Ordenación del Comercio Minorista, relativo a la regulación del régimen de franquicia, y se crea el Registro de Franquiciadores. Articulo 2: Actividad comercial en régimen de franquicia. 1. A los efectos del presente real decreto, se entenderá por actividad comercial en régimen de franquicia, regulada en el artículo 62 de la Ley 7/1996, de Ordenación del Comercio Minorista, aquella que se realiza en virtud del contrato por el cual una empresa, el franquiciador, cede a otra, el franquiciado, en un mercado determinado, a cambio de una contraprestación financiera directa, indirecta o ambas, el derecho a la explotación de una franquicia, sobre un negocio o actividad mercantil que el primero venga desarrollando anteriormente con suficiente experiencia y éxito, para comercializar determinados tipos de productos o servicios y que comprende, por lo menos:

c) Spanish law

263

a) El uso de una denominación o rótulo común u otros derechos de propiedad intelectual o industrial y una presentación uniforme de los locales o medios de transporte objeto del contrato; b) la comunicación por el franquiciador al franquiciado de unos conocimientos técnicos o un "saber hacer", que deberá ser propio, sustancial y singular c) y la prestación continúa por el franquiciador al franquiciado de una asistencia comercial, técnica o ambas durante la vigencia del acuerdo; todo ello sin perjuicio de las facultades de supervisión que puedan establecerse contractualmente. 2. Se entenderá por acuerdo de franquicia principal o franquicia maestra aquel por el cual una empresa, el franquiciador, le otorga a la otra, el franquiciado principal, en contraprestación de una compensación financiera directa, indirecta o ambas el derecho de explotar una franquicia con la finalidad de concluir acuerdos de franquicia con terceros, los franquiciados, conforme al sistema definido por el franquiciador, asumiendo el franquiciado principal el papel de franquiciador en un mercado determinado. 3. No tendrá necesariamente la consideración de franquicia, el contrato de concesión mercantil o de distribución en exclusiva, por el cual un empresario se compromete a adquirir en determinadas condiciones, productos normalmente de marca, a otro que le otorga una cierta exclusividad en una zona, y a revenderlos también bajo ciertas condiciones, así como a prestar a los compradores de estos productos asistencia una vez realizada la venta. Tampoco tendrán la consideración de franquicia ninguna de las siguientes relaciones jurídicas: a) La concesión de una licencia de fabricación. b) La cesión de una marca registrada para utilizarla en una determinada zona. c) La transferencia de tecnología. d) La cesión de la utilización de una enseña o rótulo comercial. (wording which corresponds to RD 419/2006 of 7 april). Artículo 3: “Con una antelación mínima de veinte días a la firma del contrato o precontrato de franquicia o a la entrega por parte del futuro franquiciado al franquiciador de cualquier pago, el franquiciador a franquiciado principal deberá dar por escrito al potencial franquiciado la siguiente información veraz y no engañosa:” (a) Datos de identificación del franquiciador: nombre o razón social, domicilio y datos de inscripción en el Registro de Franquiciadores, así como, cuando se trate de una compañía mercantil, capital social recogido en el último balance, con expresión de si se halla totalmente desembolsado o en qué proporción y datos de inscripción en el Registro Mercantil, cuando proceda. Cuando se trate de franquiciadores extranjeros, además, los datos de inscripción en los registros de franquiciadores a que vengan obligados, de acuerdo con las leyes de su país o Estado de origen. De tratarse de franquiciado principal se incluirán, además, las circunstancias anteriores respecto de su propio franquiciador. (b) Acreditación de tener concedido para España, y en vigor, el título de propiedad o licencia de uso de la marca y signos distintivos de la entidad franquiciadora; y de los

264

Legislation

eventuales recursos contra aquéllos, si los hubiere, con expresión, en todo caso, de la duración de la licencia. (c) Descripción general del sector de actividad objeto del negocio de franquicia, que abarcará los datos más importantes de aquél. (d) Experiencia de la empresa franquiciadora, que incluirá, entro otros datos, la fecha de creación de la empresa, las principales etapas de su evolución y el desarrollo de la red franquiciada. (e) Contenido y características de la franquicia y de su explotación, que comprenderá una explicación general del sistema del negocio objeto de la franquicia, las características del "saber hacer" y de la asistencia comercial o técnica permanente que el franquiciador suministrará a sus franquiciados, así como una estimación de las inversiones y gastos necesarios para la puesta en marcha de un negocio tipo. En el caso de que el franquiciador haga entrega al potencial franquiciado individual de previsiones de cifras de ventas o resultados de explotación del negocio, éstas deberán estar basadas en experiencias o estudios, que estén suficientemente fundamentados. (f) Estructura y extensión de la red en España, que incluirá la forma de organización de la red de franquicia y el número de establecimientos implantados en España, distinguiendo los explotados directamente por el franquiciador de los que operen bajo el régimen de cesión de franquicia, con indicación de la población en que se encuentren ubicados y el número de franquiciados que hayan dejado de pertenecer a la red en España en los dos últimos años, con expresión de si el cese se produjo por expiración del término contractual o por otras causas de extinción. (g) Elementos esenciales del acuerdo de franquicia, que recogerá los derechos y obligaciones de las respectivas partes, duración del contrato, condiciones de resolución y, en su caso, de renovación del mismo, contraprestaciones económicas, pactos de exclusivas, y limitaciones a la libre disponibilidad del franquiciado del negocio objeto de franquicia. ”

Table of Cases European Court of Justice Case 161/84 Pronuptia de Paris GmbH v. Pronuptia de Paris Imgard Schillgalis, [1986] ECR 353. Case 87/14, Yves Rocher [1987], OJ L8/49. Case C-376/98 Germany v. European Parliament and Council [2000] ECR I-84190.

French case-law Cour de Cassation Cass. com. 21 October 1970, JCP 1971, 10131, note J.M. Leloup. Cass. com. 12 October 1982, JCP 1984, II, 20166, note G. Signoret. Cass. com. 24 June 1986, RTD civ. 1987, p. 95. Cass. com. 4 November 1986, D. 1998, somm, p. 23, obs. D. Ferrier. Cass. com. 25 February 1986, JCP 1988, II, 20995. Cass. com. 10 February 1987, JCP 1988, II, 20995. Cass. com. 12 January 1988, 86-12838 (pub.bull), http://www.legifrance.gouv.fr. Cass. com. 3 October 1989, D. 1990, somm., p. 370, obs. D. Ferrier. Cass. com. 12 December 1989, Bull. civ. IV, no. 318; D. 1990, p. 369, obs. D. Ferrier. Cass. com. 13 March 1990, Bull. civ. IV, n. 77. Cass. com. 9 October 1990, Lettre distrib. 1990-12. Cass. com. 4 December 1990, JCP 1991, II, 21725, note G. Virassamy. Cass. com. 19 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier. Cass. com. 5 November 1991, 90-11694 (pub. bull), http://www.legifrance.gouv.fr. Cass. com. 17 March 1992, RTD civ. 1993, p. 1152, obs. J. Mestre. Cass. com. 19 May 1992, JCP E, 1993, II, 387, note L. Leveneur.

266

Table of Cases

Cass. com. 12 July 1993, Lettre distrib. 1993-11. Cass. com. 9 November 1993, D. 1995, somm., p. 79, obs. D. Ferrier; JCP 1994, II, 22304, note G. Virassamy. Cass. com. 10 May 1994, Lettre distrib. 1994-07. Cass. com. 24 May 1994, Cont. conc. consomm. 1994, n. 191, obs. L. Leveneur. Cass. com. 13 december 1994, 92-19055 (inédit titré), http://www.legifrance.gouv.fr. Cass. com. 3 May 1995, D. 1997, somm., p. 57, obs. D. Ferrier. Assemblée Plénière de la Cour de Cassation 1 december 1995 (quatre arrêts), D.1996, jur. p. 13, concl. M. Jéol, note L. Aynès. Cass. civ. 11 June 1996, D. 1997, somm. p. 57, obs. D. Ferrier. Cass. com. 30 January 1996, JCP 1996, I, 3929, obs. Ch. Jamin. Cass. com. 30 January 1996, RJDA 6/1996, no. 776. Cass. com. 26 March 1996, Cont. conc. consomm. 1996, n. 136, obs. L. Leveneur. Cass. civ. 11 June 1996, D. 1997, somm. p. 57, obs. D. Ferrier. Cass. com. 9 July 1996, JCP 1996, II, 22721. Cass. com. 21 January 1997, D. 1997, jur. p. 414, note Ch. Jamin. Cass. civ. 25 February 1997, D. 1997, somm., p 319, obs. J. Penneau. Cass. com. 29 April 1997, D. 1998, somm., p. 338, obs. D. Ferrier. Cass. civ. 21 May 1997, JCP G 1998, II,10057, note L. Mauger-Vielpeau; D. 1998, jur., obs. B. Fages. Cass. com. 2 December 1997, D. 1998, somm., p. 334, obs. D. Ferrier. Cass. com. 10 February 1998, D. 1998, somm., p. 334, obs. D. Ferrier. Cass. com. 24 February 1998, D. 1998, somm., p. 337, obs. D. Ferrier. Cass. soc. 25 February 1998, 95-44096 (pub.bull), http://www.legifrance.gouv.fr. Cass. com. 17 November 1998, Cont. conc. consomm. 1999, n. 20, obs. L. Leveneur. Cass. com. 23 February 1999, Cont. conc. consomm. 1999, n. 68, obs. L. Leveneur. Cass. com. 18 May 1999, 97-17433 (inédit), http://www.legifrance.gouv.fr. Cass. com. 19 October 1999, D. 2001, somm., p. 296, obs. D. Ferrier. Cass. com. 21 November 2000, JCP E 2001, 712. Cass. com. 5 December 2000, 98-16524 (inédit), http://www.legifrance.gouv.fr. Cass. com. 26 February 2002, 99-14283 (inédit), http://www.legifrance.gouv.fr. Cass. com. 6 May 2002, 99-20130 (inédit), http://www.legifrance.gouv.fr. Cass. com. 28 May 2002, 98-20212 (inédit), http://www.legifrance.gouv.fr. Cass. com. 22 October 2002, 00-22174 (inédit titré), http://www.legifrance.gouv.fr.

French case-law

267

Cass. com. 4 June 2002, 99-19464 (inédit), http://www.legifrance.gouv.fr. Cass. com. 18 June 2002, 99-20788 (inédit titré), http://www.legifrance.gouv.fr. Cass. com. 14 January 2003, D. 2003, jur. (comm.), p. 2304, note H. Kenfack. Cass. com. 14 January 2003, 01-10120 (inédit), http://www.legifrance.gouv.fr. Cass. com. 11 February 2003, D. 2003, jur. (comm.), p. 2307, note H. Kenfack. Cass. com. 11 March 2003, 97-14367 (inédit), http://www.legifrance.gouv.fr. Cass. com. 6 May 2003, 01-00515 (inédit), http://www.legifrance.gouv.fr. Cass. com. 1 July 2003, 01-12699 (inédit), http://www.legifrance.gouv.fr. Cass. com. 8 July 2003, 02-11691 (inédit), http://www.legifrance.gouv.fr. Cass. civ. 17 May 2005, 04-12176 (inédit), http://www.legifrance.gouv.fr. Cass. com. 17 January 2006, Bull. civ. 2006 IV, N 9, p. 8. Cass. com. 20 March 2007, 06-11290 (inédit), http://www.legifrance.gouv.fr.

Cours d’appel CA Paris 28 April 1978, Cah. dr. entrep. no. 42, October 1980, obs. J.M. Leloup CA Colmar 9 June 1982, D. 1982, p. 553, obs. J.-J. Burst. CA Bordeaux 7 June 1983, JCP 1983, II, 20087, note H. Seillan. CA Paris 21 October 1986, D. 1988, somm., p. 23, obs. D. Ferrier. CA Versailles 9 December 1987, Cah. dr. entre. no 2, p. 40, note J.-J. Burst. CA Paris 10 March 1989, Gaz. Pal. 1989, 2, p. 544 ff, obs. Ch. Jamin. CA Paris 24 April 1989, RTD. civ. 1989, 747, obs. J. Mestre. CA Paris 21 September 1989, D. 1990, somm., p. 369, obs. D. Ferrier. CA Paris 19 January 1990, D. 1990, somm., p. 370, obs. D. Ferrier. CA Colmar 9 March 1990, D. 1990, 232, somm., obs. J.-J. Burst. CA Paris 27 April 1990, D. 1990, somm., p. 370, obs. D. Ferrier. CA Paris 7 June 1990, D. 1990, inf. rap., p. 176. CA Paris 14 February 1991, D. 1992, somm, p. 392, obs. D. Ferrier. CA Paris 19 February 1991, D. 1992, somm., p. 392, obs. D. Ferrier. CA Paris 4 March 1991, D. 1991, inf. rap., p. 103. CA Paris 16 April 1991, D. 1992, somm., p. 392, obs. D. Ferrier. CA Paris 23 January 1992, D. 1992, somm., p. 392, obs. D. Ferrier. CA Paris 25 February 1992, D. 1992, somm., p. 392, obs. D. Ferrier. CA Paris 29 May 1992, D. 1992, somm., p. 392, obs. D. Ferrier. CA Paris 11 June 1992, D. 1992, somm., p. 392, obs. D. Ferrier. CA Paris 18 June 1992, D. 1995, somm., p. 78, obs. D. Ferrier. CA Paris 22 September 1992, D. 1995, somm., p. 77, obs. D. Ferrier. CA Paris 29 September 1992, D. 1995. somm., p. 78, obs. D. Ferrier.

268

Table of Cases

CA Douai 6 October 1992, D. 1995, somm., p. 75, obs. D. Ferrier. CA Versailles 29 October 1992, D. 1995, somm., p. 76, obs. D. Ferrier. CA Paris 29 October 1992, D. 1995, somm., p. 75, obs. D. Ferrier. CA Paris 26 November 1992, D. 1995, somm, p. 78, obs. D. Ferrier. CA Paris 23 March 1993, D. 1995, somm., p. 76, obs. D. Ferrier. CA Paris 27 May 1993, D. 1995, somm, p. 78, obs. D. Ferrier. CA Versailles 27 May 1993, D. 1995, somm., p. 78, obs. D. Ferrier. CA Paris 7 April 1993, D. 1995, somm., p. 75, obs. D. Ferrier. CA Versailles 27 May 1993, D. 1995, somm., p. 78, obs. D. Ferrier. CA Paris 16 June 1993, D. 1995, somm., p. 79, obs. D. Ferrier. CA Paris 12 January 1994, RJDA, 1994, n 795. CA Paris 3 February 1994, D. 1995, somm., p. 76, obs. D. Ferrier. CA Paris 24 March 1995, JCP 1995, I, 3867, obs. Ch. Jamin. CA Paris 17 May 1995, D. 1997, somm., p. 55, obs. D. Ferrier. CA Versailles 29 June 1995, D. 1997, somm., p. 55, obs. D. Ferrier. CA Paris 8 March 1996, D. 1996, inf. rap., p.108. CA Paris 21 June 1996, Lettre distrib., 1996-11. CA Paris 18 June 1997, Lettre distrib., 1997-11. CA Paris 8 July 1997, D. Aff. 1997, p. 960. CA Paris 9 September 1997, Lettre distrib. 1997-12. CA Paris 14 November 1997, D. 1998, somm., p. 337, obs. D. Ferrier. CA Paris 14 November 1997, Lettre distrib. 1998-2. CA Montpellier 4 December 1997, JCP E, 1998, p. 604. CA Paris 16 January 1998, D. 1998, somm., p. 337, obs. D. Ferrier. CA Toulouse 13 January 2000, D. 2000, jur. (act. jurisp.), p. 261. CA Versailles 27 January 2000, Lettre. distrib. 2000-3. CA Paris 11 February 2000, 1997/23653 (pub.bull), http://www.legifrance.gouv.fr. CA Montpellier 21 March 2000, D. 2001, somm., p. 296, obs. D. Ferrier. CA Orléans 8 March 2001, RJDA 5/2001, no. 589. CA Lyon 2 November 2001, D. 2002, p. 2601, obs. O. Tiquant. CA Douai 6 February 2003, 00/001673 (publié), http://www.legifrance.gouv.fr. CA Lyon 11 March 2004, 2003/02660, http://www.legifrance.gouv.fr. CA Lyon 31 March 2005, http://www.legifrance.gouv.fr. CA Orléans 26 October 2006, 392, http://www.legifrance.gouv.fr. CA Toulouse 26 October 2006, 673, http://www.legifrance.gouv.fr.

Tribunal de Grand Instance TGI Bressuire 19 June 1973, D. 1974, jur., p.105, note F. Bories. TGI Lyon 24 April 1989, D. 1990, somm., 370, obs. D. Ferrier. TGI Paris 20 November 1989, D. 1990, somm., 370, obs. D. Ferrier.

Spanish case-law

TGI Paris 1 November 1990, D. 1990, somm., p. 369, obs. D. Ferrier. TGI Carcassone 2 May 2002, D. 2002, jur. (comm.), p. 2597, note O. Tiquant.

Tribunal de Commerce T. com. Paris 22 March 1993, D. 1994, somm., p. 281, obs. T. Hassler.

Spanish case-law Tribunal Supremo STS 14 June 1943, RA 719. STS 19 October 1944, Ar. 1176. STS 28 January 1958, Ar. 554. STS 5 March 1960, RA 950. STS 5 March 1962, RA 1532. STS 31 January 1963, RJ 1963\753. STS 27 February 1964, Ar. 1152. STS 8 June 1968, RA 3766. STS 15 October 1973, RA 3797. STS 8 June 1979, Ar. 2347. STS 8 February 1980 (R. 933). STS 9 May 1980, RJ 1980\1790. STS 21 March 1986 (R. 1275). STS 28 July 1986, Ar. 462. STS 17 october 1987, Ar. 7293 . STS 29 February 1988 (R.1310). STS 28 February 1990, Ar. 726. STS 27 June 1996, RJ 1996\6646. STS 27 September 1996, RJ 1996\6646. STS 4 March 1997, RJ 1997\1642. STS 29 April 1997, RJ 1997\3409. STS 30 April 1998, RJ 1998\3456. STS 10 July 1998, RJ 1998\6600. STS 9 October 2003, RJ\2003\8232. STS 21 October 2005, Id Cendoj 28079110012005100801.

269

270

Table of Cases

Audiencias Provinciales SAP La Rioja 13 July 1992, AC 1992\1072. SAP Vizcaya 27 January 1993, AC 1993\34. SAP Valencia 21 May 1993, AC 1993\1024. SAP Barcelona 16 December 1996, AC 1997\1650. SAP Pontevedra 2 May 1997, AC 1997\1147. SAP Orense 7 January 1999, AC 1999\79. SAP Zaragoza 23 February 1999, ARP 1999\447. SAP Zaragoza 10 April 2000, AC 2000\1287. SAP Valencia 28 April 2000, AC 2000\1193. SAP Barcelona 10 May 2000, JUR 2000\211264. SAP Granada 5 June 2000, JUR 2000\225079. SAP Zaragoza 18 July 2000, JUR 2000\272692. SAP Zaragoza 25 July 2000, JUR 2000\273349. SAP Valencia 17 January 2001, AC 2001\1269. SAP Asturias 22 January 2001, AC 2001\959. SAP Barcelona 23 January 2001, JUR 2004\54712. SAP Barcelona 31 March 2001, JUR 2001\215218. SAP Teruel 24 October 2001, AC 2001\1931. SAP Sevilla 28 January 2002, JUR 2002\47775. SAP Burgos 11 February 2002, AC 2002\892. SAP Tarragona 6 September 2002, JUR 2002\271881. SAP Barcelona 9 September 2002, AC 2002\1728. SAP Barcelona, 12 February 2003, JUR 2003\196372. SAP Zaragoza 16 September 2003, AC 2003\1507. SAP Zaragoza 17 November 2003, AC 2003\2350. SAP Barcelona 28 November 2003, JUR 2004\5933. SAP Barcelona 23 December 2003, AC 2004\433. SAP Barcelona 24 March 2004, JUR 2004\122633. SAP Barcelona 16 April 2004, JUR 2004\152123. SAP Barcelona 24 March 2004, JUR 2004\122633. SAP Orense 28 April 2005, La Ley Juris 2022134/2005. SAP Madrid 27 September 2005, La Ley Juris 2178345/2005. SAP Madrid 16 January 2006, Id Cendoj 28079370142006100001. SAP Valencia 10 February 2006, Id Cendoj 46250370092006100018. SAP Barcelona 1 March 2006, Id Cendoj 08019370192006100054. SAP Oviedo 7 March 2006, Id Cendoj 33044370052006100091. SAP Barcelona 13 March 2006, Id Cendoj 08019370052006100101. SAP Cádiz 16 March 2006, Id Cendoj 11012370022006100062. SAP Barcelona 21 March 2006, Id Cendoj 0801937004200600601. SAP Madrid 28 March 2006, Id Cendoj 28079370212006100175. SAP Vitoria 10 April 2006, Id Cendoj 01059370012006200128. SAP Zaragoza 11 April 2006, Id Cendoj 50297370042006100187.

Spanish case-law

SAP Alicante 4 May 2006, Id Cendoj 03014370082006100185. SAP Málaga 15 May 2006, Id Cendoj 29067370052006100309. SAP Málaga 22 May 2006, Id Cendoj 29067370052006100320. SAP Madrid 5 June 2006, Id Cendoj 28079370102006100346. SAP Barcelona 20 June 2006, Id Cendoj 08019370152006100283 SAP Barcelona 26 June 2006, Id Cendoj 08019370152006100136. SAP Madrid 30 June 2006, Id Cendoj 28079370122006100413. SAP Málaga 5 July 2006, Id Cendoj 29067370052006100448. SAP Madrid 26 July 2006, Id Cendoj 28079370132006100293. SAP Mallorca 1 September 2006, Id Cendoj 07040370042006100298. SAP Segovia, 25 September 2006, Id Cendoj 40194370012006100274. SAP Albacete 10 October 2006, Id Cendoj 02003370022006100326. SAP Madrid 11 October 2006, Id Cendoj 28079370092006100558. SAP Bilbao 17 October 2006, Id Cendoj 48020370042006100294. SAP Lugo 23 November 2006, Id Cendoj 27028370022006100513. SAP Barcelona 28 November 2006, Id Cendoj 08019370172006100570. SAP Pamplona 11 February 2006, Id Cendoj 31201370032006100154. SAP Valencia 20 December 2006, Id Cendoj 46250370092006100454. SAP Madrid 22 December 2006, Id Cendoj 28079370132006100536.

271

Bibliography Aguiló Piña 1986 J.F. Aguiló Piña, Consideraciones sobre el contrato de franquicia, en RGD, n. 456/507, 1986, pp. 4087-4842. Albaladejo 2004 M. Albaladejo, Derecho Civil I, Introducción y Parte general, 16 ed, Madrid, 2004. Alfaro 1995 J. Alfaro Águila-Real, Voz “Franchising”, en Enciclopedia Jurídica Básica, vol II, Cor-Ind, Madrid, 1995, pp. 3153-3158. Alonso Espinosa 1999 F.J. Alonso Espinosa et als. (coord.), Régimen Jurídico General del Comercio Minorista. Comentarios a la Ley 7/1996, de 15 de Enero, de Ordenación del Comercio Minorista, y a la Ley Orgánica 2/1996, de 15 de enero, complemetaria de la de Ordenación del Comercio Minorista, Madrid, 1999. Alonso Prieto 1997 M. Alonso Prieto, Una franquicia para mi nuevo negocio, Madrid, 1997. Alonso Soto 2001 R. Alonso Soto, Los contratos de distribución comercial, en Uría & Menéndez et als., Curso de Derecho Mercantil, Madrid, v. II, 2001, pp. 167 ff. Amiel-Cosme 1995 L. Amiel-Cosme, Les Réseaux de Distribution, LGDJ, Paris, 1995. Aynès 1993 L. Aynès, Indétermination du prix dans les contrats de distribution: comment sortir de l’impasse?, Recueil Dalloz Sirey, 1993, 4 Cahier, chron. p. 25-27. Aynès 1998 L. Aynès, Obligations, in Cours de Droit Civil, T. VI, 9 ed, Cuyas, Paris, 1998.

274

Bibliography

von Bar 1999 C. von Bar, The Study Group on a European Civil Code, Reproduced from “Study of the systems of private law in the EU with regard to discrimination and the creation of a European Civil Code”, European Parliament, Directorate General for Research, Working Paper, Legal Affairs Series, JURI 103 EN (June 1999), Chapter III, 137-150, 1999. von Bar 2005 C. von Bar, Working Together Towards a Common Frame of Reference, Jurídica International X/2005. von Bar 2006 C. von Bar, foreword PEL CAFDC, 2006, p. 4. von Bar & Lando & Swann 2002 C. von Bar & O. Lando & S. Swann, Communication on European Contract Law, Joint Response of the Commission on European contract Law and the Study Group on a European Civil Code, in ERPL, issue 2, pp. 183-248, 2002. Barendrecht & van Peursem 1997 J.M. Barendrecht & G.R.B. van Peursem, Distributieovereenkomsten, Deventer, 1997 Basedow 2001 J. Basedow, Codification of Private Law in the European Union: the making of a Hybrid, ERPL, 2001, pp. 35-49. Beale 2002 H. Beale, Finding the Remaining Traps Instead of Unifying Contract Law, in S. Grundmann and J. Stuyck (eds.), An Academic Green Paper on European Contract Law, The Hague, 2002, p. 67-72. Beale 2006 H. Beale, The European Commission’s Common Frame of Reference Project: a progress report, in ERCL, 2006, issue 2, pp. 305-314. Béhar-Touchais 1994 M. Béhar-Touchais, La structure du contrat-cadre de distribution et la détermination du prix des contrats d’application, JCP 1994, I, 3800, pp. 485-491. Behar-Touchais & Virassamy 1999 M. Béhar-Touchais & G. Virassamy, Les contrats de la Distribution, LGDJ, Paris, 1999.

Bibliography

275

Bercovitz 1998 A. Bercovitz, Notas sobre los aspectos jurídico-mercantiles de la Ley de Ordenación del Comercio Minorista, in Estudios de Derecho Mercantil, Homenaje al profesor Justino F. Duque, Valladolid, 1998, pp. 941-951. Bessis 1991 Ph. Bessis, Le contrat de franchisage, notions actuelles et apport du droit européen, LGDJ, Paris, 1991. Betlem & Hondius 2001 G. Betlem & E. Hondius, European Private Law after the Treaty of Amsterdam, in ERPL, 2001, issue 1, pp. 3-20. Blanc-Jouvan 2002 X. Blanc-Jouvan, Reflections on the Common Core of European Private Law, in U. Mattei & M. Bussani, The Common Core of European Private Law, Private law in European Context Series, Kluwer Law International, The Hague, 2002. Bonet Sánchez et al. 2004 J.I. Bonet Sánchez et al., Contratos Mercantiles, Francis Lefebvre, 2003-2004, pp. 529-545. Bouloc 1990 B. Bouloc, Chroniques de législation et de jurisprudence francaises. Vente, transports et autres contrats commerciaux, RTD. com, 1990, p. 458, n. 18. Broseta Pont 2003 M. Broseta Pont, Manual de Derecho Mercantil, 11 ed. by F. Martínez Sanz, v. II, Madrid, 2003. Brunet & Ghozi 1998 A. Brunet & A. Ghozi, La jurisprudence de l’Assemblée plénière sur le prix du point de vue de la théorie du contract, Recueil Dalloz, 1998, chron. p. 1. Burst 1988 J.-J. Burst (1988), Elements de ralliement de la clientèle et franchise, JCP, Cah. Dr. Entre., 1988, p. 40. Burst 1990 J.-J. Burst, Droits de propriété industrielle et franchise, Mélanges offerts à Albert Chavanne, p. 203.

276

Bibliography

Cámara Lapuente 1999 S. Cámara Lapuente, Hacia un Código civil europeo: ¿realidad o quimera?, « La Ley », nº 4748, 5 marzo 1999, pp. 1-6. Cámara Lapuente 2003 S. Cámara Lapuente (coord), Derecho Privado Europeo, Colex, Madrid, 2003. Cano Rico 2002 J.R. Cano Rico, Manual Práctico de Contratación Mercantil, T. I, 5 ed., Madrid, 2002. Capitain & Terré & Lequette 2000 H. Capitain & F. Terré & Y. Lequette, Les grands arrêts de la jurisprudence civile, T. II, Obligations, Contrats spéciaux, sûretes, 11 ed., 2000. Carbonnier 2004 J. Carbonnier, Droit civil, Les biens. Les obligations, Paris, 2004. Clément 1991 J.P. Clément, La nouvelle donne juridique de la franchise, Gaz. Pal. 14-14 June 1991, p. 3. Clément 1994 J.P. Clément, La franchise, Vingt ans de jurisprudence, Deux Cents Décisions Commentées 1973-1993, IREF, Paris, 1994. Clément 1996 J.P. Clément, Le contrat de franchise en droit français, in B. Pinchart & J.P. Triaille (coord.), Les contrats de distribution commerciales en droit belge et en droit français, Bruxelles, 1996. Coderch 2005 P.S. Coderch, Un código civil de mínimos, in InDret, Revista para el análisis del Derecho, n. 267, Barcelona, February 2005. Collart Dutilleul & Delebecque 2002 F. Collart Dutilleul & Ph.Delebecque, Contrats civils et commerciaux, 6 ed, Dalloz, Paris, 2002 Collins 2004 H. Collins, “The Freedom to Circulate Documents: Regulating contracts in Europe”, in ELJ, vol. 10, n. 6, 2004, pp. 787-803.

Bibliography

277

Cornu 2002 G. Cornu, Un code civil n’est pas un instrument communautaire, Recueil Dalloz, 2002, chron., pp. 351-352. Couturier 2001 G. Couturier, La théorie de nullités dans la jurisprudence de la Chambre sociale de la cour de Cassation, in Études offertes à Jacques Ghestin, Le contrat au début du XXI siècle, LGDJ, Paris, 2001, pp. 273-294. De la Cuesta Rute & Valpuesta Gastaminza 2001 J.M. de la Cuesta (dctor) & E. Valpuesta Gastaminza (coord.), Contratos Mercantiles, Tomo I, Barcelona, 2001. Delforge 2000 R. Delforge, New Trends in French Case Law: the Growing Recognition of the Independence of Franchisees, in International Journal of Franchising and Distribution Law, Vol 2, Issue 1, 2000, pp. 37-44. Demolien 2001 P. Demolien, Le contrat de franchise. Chronique de jurisprudence française et Belge, 1995-2000, 2001. Dickson 1994 B. Dickson, Introduction to French Law, London, 1994. Díez de Castro & Galán González 1998 E.C. Díez de Castro & J.L. Galán González, Práctica de la Franquicia, Madrid, 1998. Díez-Picazo & Gullón 2001 L. Díez-Picazo & A. Gullón, Sistema de Derecho Civil, V. II, Madrid, 9 ed., 2001. Díez-Picazo & Roca & Morales 2002 L. Díez-Picazo & E. Roca & A.M. Morales, Los Principios de Derecho Europeo de Contratos, Madrid, 2002. Dominguez García 1985 M.A. Dominguez García, Aproximación al régimen jurídico de los contratos de distribución. Especial referencia a la tutela del distribuidor, en RDM, julio-septiembre 1985.

278

Bibliography

Dominguez García 1997 M.A. Dominguez García, Los contratos de distribución : Agencia Mercantil y Concesión Comercial, en A. L. Calvo Caravaca & L. Fernández de la Gándara, Contratos Internacionales, Madrid, 1997, p. 1275. Dominguez García 2001 M.A. Dominguez García, El contrato de franquicia, en A. Bercovitz & M.A. Calzada, Aranzadi, Pamplona, 2001, p. 296-351. Dreifuss-Netter 1990 F. Dreifuss-Netter, Droit de la concurrence et droit commun des obligations, RTD civ. 1990, p. 369 ff. Duque Domínguez 1995 J. Duque Domínguez, “Prólogo” al libro de J.A. Echebarría Sáenz, El contrato de franquicia. Definición y conflictos en las relaciones internas, Madrid, 1995. Echebarría Sáenz 1995 J.A. Echebarría, El contrato de franquicia, Definición y conflictos en las relaciones internas, McGraw-Hill, Madrid, 1995. Gallego Sánchez 1991 E. Gallego Sánchez, La franquicia, Madrid, 1991. Fabre-Magnan 1992 M. Fabre-Magnan, De l’obligation d’information dans les contrats, LGDJ, Paris, 1992. Fabre-Magnan & Sefton-Green 2004 M. Fabre-Magnan & R. Sefton-Green, Defects on Consent in Contract Law, in A. Hartkamp, M. Hesselink, E. Hondius, C. Joustra, E. du Perron and M. Veldman (eds.), Towards a European Civil Code, 3 ed., Nijmegen, 2004, pp. 399-413. Ferrier 1987 D. Ferrier, Franchise de services: première décision, in Cah. Dr. Entre., 1987-4. Ferrier 1988 D. Ferrier, L´information précontractuelle des concessionnaires, in Cah. Dr. Entre., 1988-4. Ferrier 1991 D. Ferrier, la détermination du prix dans les contrats stipulant une obligation d’approvisionnement exclusif, Recueil Dalloz, 1991, chron., p. 237

Bibliography

279

Ferrier 2001 D. Ferrier, La franchise en Droit Français, in R. Schulze, Franchising im Europäischen Privatrecht, Baden-Baden, 2001, pp. 103-111. Ferrier 2002 D. Ferrier, Droit de la distribution, 3 éd, Litec, 2002. Gandolfi 2001 G. Gandolfi (ed.) Code Européen des contrats: avant-projet, vol. 1, Milano, 2001. García Gil 1999 F.J. García Gil, Los contratos mercantiles y su jurisprudencia, 2 ed, Aranzadi, Pamplona, 1999. van Gerven 2001 W. van Gerven, A Common Law for Europe: The Future Meeting the Past?, in ERPL 2001, issue 4, pp. 485-503. van Gerven 2002a W. van Gerven, Codifying European Private Law: Top Down and Bottom Up, in S. Grundmann and J. Stuyck (eds.), An Academic Green Paper on European Contract Law, The Hague, 2002, p. 405-432. van Gerven 2002b W. van Gerven, Codifying European private law? Yes, if …!, in ELR, 2002, pp. 156-176. van Gerven 2004 W. van Gerven, Harmonization of Private Law: do we need it?, in CMLRev., 2004, vol. 41, issue 2, pp. 505-532. van Gerven 2006 W. van Gerven, Bringing (Private) Laws Closer to Each Other at the European level, in F. Cafaggi (ed.), The Institutional Framework of European Private Law, 2006. Ghestin 1987 J. Ghestin, L’obligation précontractuelle de renseignements en droit français, in D. Tallon & D. Harris, Le Contrat Aujourd’hui: Comparaisons Franco-Anglaises, Paris, 1987, pp. 169-184. Ghestin 1993 J. Ghestin, Traité de Droit Civil, la formation du contrat, 3 ed, LGDJ, 1993.

280

Bibliography

Ghestin, & Jamin & Billiau 2001 J. Ghestin & Ch. Jamin & M. Billiau, Traité de Droit Civil, les effets du contrat, 3 ed, LGDJ, Paris, 2001. Gómez Calle 1994 E. Gómez Calle, Los deberes precontractuales de información, Madrid, 1994. Goode 2003 R. Goode, Contract and Commercial Law: the Logic and Limits of Harmonisation, in Ius Commune Lectures on European Private Law, n. 8, Maastricht, June 2003. Grundman 2001 S. Grundmann, The Structure of European Contract law, in ERPL 2001, pp. 508-528. Guardiola Sacarrera 1998 E. Guardiola Sacarrera, Contratos de Colaboración en el Comercio Internacional. Agencia. Distribución. Transferencia de tecnología. Franquicia, Barcelona, 1998. Gunther 2000 J.P. Gunther, franchising, in G. Bogaert & U. Lohmann (eds.), Commercial Agency and Distribution Agreements, law and practice in the Member States of the European Union, 3 ed, London, 2000. Guyon 1996 Y. Guyon, Droit des affaires, T. I, Droit Commercial General et Sociétés, n. 835, Económica, 1996. Hernando Giménez 2000 A. Hernando Giménez, “El contrato de franquicia de empresa”, Civitas, Madrid, 2000. Hesselink 2002 M.W. Hesselink, The New European Private law, The Hague, 2002. Hesselink 2004a M.W. Hesselink, The European Commission’s Action Plan: Towards a More Coherent European Contract Law?, in ERPL, 2004, issue 4, pp. 397-419. Hesselink 2004b M.W. Hesselink, The Politics of a European Civil Code, in ELJ, vol. 10, n. 6, 2004, pp. 675-697.

Bibliography

281

Hesselink 2004c M.W. Hesselink, Contractenrecht in perspectief, Den Haag, 2004. Hesselink 2005 M.W. Hesselink, Non-mandatory rules in European contract law, in ERCL 1/2005, pp. 45-86. Hesselink 2006a M.W. Hesselink, The Ideal of Codification and the Dynamics of Europeanisation: The Dutch Experience, in ELJ, vol. 12, n. 3, May 2006, pp. 279-305. Hesselink 2006b M.W. Hesselink, A Technical “CFR” or a Political Code?, in M.W. Hesselink (ed.), The Politics of a European Civil Code, The Hague, 2006. Hesselink 2006c M.W. Hesselink, European Contract Law: a matter of Consumer Protection, Citizenship or Justice?, in ERPL, 2007, issue 3, pp. 323-348. Hesselink & Rutgers & Bueno Díaz & Scotton & Veldman 2006 M.W. Hesselink & J.W. Rutgers & O. Bueno Díaz & M. Scotton & M. Veldman, Principles of European Law, Study Group on a European Civil Code, Commercial Agency, Franchise and Distribution Contracts (PEL CAFDC), Sellier, 2006. Hesselink & de Vries 2001 M.W. Hesselink & G.P. de Vries, Principles of European Contract law, The Netherlands, 2001. Hondius 2004 E. Hondius, Towards a European Civil Code, in A. Hartkamp, M. Hesselink, E. Hondius, C. Joustra, E. du Perron and M. Veldman (eds.), Towards a European Civil Code, 3 ed., Nijmegen, 2004. Huet 1997 J. Huet Critique de la jurisprudence de l'Assemblée plénière sur l'indétermination du prix, contribution aux mélanges en l'honneur d'Alain Sayag, Litec 1997, p. 311 ff. Huet 2002a J. Huet, Nous faut-il un "euro" droit civil ? (propos sur la communication de la Commision concernant le "droit européen des contrats", et, plus généralement, sur l'uniformisation du droit civil au niveau européen), Recueil Dalloz, 2002, point de vue, p. 2611.

282

Bibliography

Huet 2002b J. Huet Traité de Droit Civil, Les Principaux Contrats Spéciaux, 2 ed, LGDJ, Paris, 2002. Husa 2003 J. Husa, Farewell to Functionalism or Methodological Tolerance?, in N. Jansen, Die Struktur des Haftungsrechts, 2003. Jamin & Mazeaud 2001 Ch. Jamin & D. Mazeaud, L’harmonization du Droit des Contrats en Europe, 2001. Jamin 1996a Ch. Jamin, La formation du contrat, JCP, 1996, I, p. 188. Jamin 1996b Ch. Jamin II, Réseaux intégrés de distribution: de l´abus dans la determination du prix au controle des pratiques abusives, JCP 1996, I, 3959, pp. 343-348. Jestaz & Jamin 2004 Ph. Jestaz & Ch. Jamin, La doctrine, Dalloz, Paris, 2004. Jimenez Sánchez 2003 G. J. Jimenez Sánchez (coord.) Derecho Mercantil, 8 ed., Barcelona, 2003. Jourdain 1983 P. Jourdain, Le devoir de se renseigner, Recueil Dalloz 1983, chron., p. 139. Kenfack 2003 H. Kenfack, Franchise, précisions sur l´obligation précontractuelle d´information, Recueil Dalloz 2003, jur., p. 2304. Lasbordes 2000 V. Lasbordes, Les Contrats Déséquilibrés, T. I, 2000. Kennedy 2003 D. Kennedy, The Politics and Methods of Comparative Law, in The Common Core of European Private Law, in: Mauro Bussani and Ugo Mattei (eds.), The Common Core of European Private Law, “Private Law in European Context Series” volume 1, Kluwer Law International 2003, pp. 131-207. Lacruz Berdejo et al. 2003 J.L. Lacruz Berdejo et al., Elementos de Derecho Civil II, Derecho de Obligaciones, v. 1, 4 ed, Madrid, 2003.

Bibliography

283

Lando 1999 O. Lando, The Rules of European Contract Law, Reproduced from "Study of the systems of private law in the EU with regard to discrimination and the creation of a European Civil Code", European Parliament, Directorate General for Research, Working Paper, Legal Affairs Series, JURI 103 EN (June 1999), Chapter III, 127-136 Lando & Beale 2000 O. Lando & H. Beale (eds.), Principles of European Contract Law, PECL, Parts I and II, Prepared by the commission on European Contract Law, The Hague/London/Boston, 2000. Lando & Clive & Prüm & Zimmermann 2003 O. Lando & E. Clive & A. Prüm & R. Zimmermann (eds.), Principles of European Contract Law, PECL, Part III, Prepared by the Commission on European Contract Law, The Hague/London/New York, 2003. Legrand 1996 P. Legrand, European Legal Systems are not converging, 45 International and Comparative Law Quarterly, 1996, pp. 52-81. Legrand 1997 P. Legrand, Against a European Civil Code, MLR 60:1, January 1997, pp. 44-63. Leloup 1982 J.-M. Leloup, Franchise et savoir-faire, Cah. Dr. Entre., 1982, n. 5/6, p. 16. Leloup 1989 J.-M. Leloup, Le règlement communautaire relatif à certaines catégories d’accords de franchise, JCP E 1989, 15455, p. 205. Leloup 2004 J.-M. Leloup, La franchise, droit et pratique, 4 ed, Delmas, Paris, 2004. Lequette 2002 Y. Lequette, Quelques remarques à propos du projet de code civil européen de M. von Bar, Recueil Dalloz, 2002, pp. 2202-2214. Loos 2007 M.B.M. Loos, The Influence of European Consumer Law on General Contract Law and the Need for Spontaneous Harmonisation, in ERPL, 2007, issue 4, pp. 515-531.

284

Bibliography

Llobet i Aguado 1996 J. Llobet i Aguado, El deber de información en la formación de los contratos, Madrid, 1996. Malaurie & Aynès & Gautier 2005 Ph. Malaurie & L. Aynès & P-Y Gautier, Droit civil, Les Contrats Spéciaux, Paris, 2005. Malaurie & Aynès 1999 Ph. Malaurie & L. Aynès, Cours de droit civil, les obligations, 10 ed, Cujas, Paris, 1999. Marot 1999 Y. Marot, Prolongements de l’arrêt de la Chambre commerciale du 10 février 1998 sur l’information précontractuelle en matière de contrat de franchise, Recueil Dalloz, 1999, chron., p. 431. Martín Trilla & Echarri Ardanaz 2000 E. Martín Trilla & A. Echarri Ardanaz, La franquicia: aplicación práctica y jurídica, Aranzadi, 2000. Martínez Sanz 1993 F. Martínez Sanz, Extinción del contrato de distribución comercial y derecho de indemnización, in La ley, 3 Julio 1993, p. 282 ff Martínez Sanz 1995 F. Martínez Sanz, Contratos de distribución commercial: concesión y franchising, Scientia Ivridica, t. XLIV, nn 256/258, 1995, p. 345 ff. Matray 1992 Ch. Matray, Le contrat de franchise, Bruxelles, 1992. Mattei & Bussani 2002 U. Mattei & M. Bussani (2002), The Common Core of European Private Law, Private law in European Context Series, Kluwer Law International, The Hague, 2002. Mattei 1998 U. Mattei (1998), Comparative Law and Economics, Michigan, 2000. Mestre 1990 J. Mestre, RTD civ., 1990, p. 468.

Bibliography

285

Mestre 1991a J. Mestre, Obligations et contrats spéciaux, RTD civ. 90 (1), january-march 1991, pp. 109-118. Mestre 1991b J. Mestre, Obligations et contrats spéciaux, RTD civ. 90 (2), april-june 1991. Mestre 1996 J. Mestre, Obligations et contrats spéciaux, RTD civ. (3), july-september 1996, pp. 603-612. Moret-Bailly 2002 J. Moret-Bailly, Règles déontologiques et fautes civiles, chron., Recueil Dalloz, 2002, n. 37, pp. 2820-2824. De los Mozos 2002 J.L. de los Mozos, El Anteproyecto de Código Europeo de contratos de la Academia de Pavía, in Diario la ley, n. 5629, October 2002. Ortuño Baeza 1997 M.T. Ortuño Baeza, Contratos ligados a la propiedad industrial. Licencia de marca. Franquicia, in A. L. Calvo Caravaca & L. Fernández de la Gándara, Contratos Internacionales, Madrid, 1997, p. 1525 ff. Paz Ares & Alfaro 2001 C. Paz-Ares & J. Alfaro, La franquicia y los contratos de distribución, in Manual de Derecho Mercantil, 2001. Pellisé de Urguiza 2001 C. Pellisé de Urguiza, Le Contrat de Franchise en Espagne: Classification, Phase Précontractuelle et Exécution Contractuelle, in R. Schulze, Franchising im Europäischen Privatrecht, Baden-Baden, 2001, pp. 125-160. Roca i Trías 2003 E. Roca Trías, El “Study group on a European Civil Code-Proyecto von Bar, in S. Cámara Lapuente, Derecho Privado Europeo, Madrid, 2003, pp. 199-204. Peters 2004 L. Peters (2004), Franchising: Recent Legislation and the Unidroit Model Franchise Disclosure Law, in Business Law International, v. 5, n.1, January 2004. Rodríguez 1986 L. Rodríguez, A propósito del Franchising, in La Ley, 1986-3, p. 877-879

286

Bibliography

Rojo Ajuria 1994 L. Rojo Ajuria, El dolo en los contratos, Madrid, 1994. Roppo 2005 V. Roppo, Italy, in ERCL, vol. 1, N. 2, 2005, pp. 273-284. Ruiz de Villa Jubany 1996 J. Ruiz de Villa Jubany, Artículo 62, in Arimany, Manubens (coord) Ordenación del Comercio Minorista, Comentarios a la Ley 7/1996 and Organic Statute 2/1996, both of 15 January, Barcelona, 1996, p. 445. Ruiz de Villa Jubany 1997 J. Ruiz de Villa Jubany, El artículo 62 de la Ley de Ordenación del Comercio Minorista. Una breve aproximación jurídica, in Libro Oficial de la Franquicia en España, 1997, pp. 8-12. Ruiz Peris 2001 J.I. Ruiz Peris, Código de la Franquicia, Valencia, 2001. Rutgers 2004 J.W. Rutgers, Derde mededeling betreffende het Europees Contractenrecht, Aers Aequi 2004, n. 93. Rutgers 2005 J.W. Rutgers, The Rule of Reason and Private Law or the Limits to Harmonization, in A. Schrauwen (ed.), Rule of Reason, Rethinking another Classic of European Legal Doctrine, Groningen, 2005. Rutgers 2006a J.W. Rutgers, Europa en contractsvrijheid, NJB 2006, pp. 702-703. Rutgers 2006b J.W. Rutgers (2006), An Optional Instrument and Social Dumping, in ERPL, 2006, issue 2, pp. 199-212. Sacco 1991 R. Sacco, Legal formants: A Dynamic Approach To Comparative Law, in American Journal of Comparative Law, vol. 39, 1991. Salomons 2000 A.F. Salomons, Wie doet er mee aan het Europees BW?, in Fiat Justitia. Magazine van de Juridische Faculteitsvereniging Rotterdam 5, 2000, p. 6.

Bibliography

287

Salvador Coderch 2005 P. Salvador Coderch, Un código civil de mínimos, in InDret, n. 267, Barcelona, 2005. Sánchez Calero 2003a F. Sánchez Calero, Instituciones de Derecho mercantil, v. II, 25 ed. Madrid, 2003. Sánchez Calero 2003b F. Sánchez Calero, Principios de Derecho Mercantil, 7 ed. Madrid, 2003. Sánchez Presedo A. Sánchez Presedo, La distribución territorial del poder entre el Estado Y las Comunidades Autónomas en los acuerdos de franquicia, in Derecho de los Negocios, año 8, n. 8, pp. 31-46. Schulte-Nölke 2003 H. Schulte-Nölke, The Commission’s Action Plan on European Contract Law and the Research of the Acquis Group, in ERA Forum 2/2003. Smits 2002 J. Smits, The Making of European Private Law: Towards a Ius Commune Europaeum as a Mixed Legal System, 2002, p. 5. Smits 2005 J. Smits, Diversity of Contract Law and the European Internal Market, in J. Smit (ed.) et als, The Need for a European Contract Law, Groningen, 2005. Snijders 2003 W. Snijders, Building a European Contract Law; five Fallacies and two castles in Spain, in Ius Commune Lectures on European Private Law, n. 9, Maastricht, June 2003. Study Group on Social Justice in European Private Law 2004 Study Group on Social Justice in European Private Law, Social Justice in European Contract Law: A Manifesto, , in ELJ, vol. 10, 2004, pp. 653-674. Staudenmayer 2003 D. Staudenmayer, The Commission Action Plan on European Contract Law, in ERPL, 2003, issue 2, pp. 113-127. Staudenmayer 2005 D. Staudenmayer (2005), The Way forward in European Contract Law, ERPL, 2005, issue 2, pp. 95-104.

288

Bibliography

Teubner 1998 G. Teubner, Legal Irritants, Good Faith in British Law or How Unifying Law Ends Up in New Divergences, in MLR 61:1, January 1998. Tintoré & Peña & Naranjo 2001 A. Tintoré & Y. Peña & A. Naranjo, El contrato de franquicia, in Economist & Jurist, Año X, May 2001, pp. 47-56. Tiquant 2002 O. Tiquant, Rétablir l´autorité de la loi Doubin, Recueil Dalloz 2002, jur. pp. 2597 ff. Le Tourneau 1985 Ph. Le Tourneau, le franchisage, JCP editions, N.I. p. 13, 1985. Le Tourneau 1987 Ph. Le Tourneau, De l’allégement de l’obligation de renseignements ou de conseil, Recueil Dalloz 1987, chron., p. 103. Le Tourneau 1994 Ph. Le Tourneau Le franchisage, Economica, Paris, 1994. Le Tourneau 2003 Ph. Le Tourneau, Le contrat de franchisage, Litec, Paris, 2003. Uría 2002 R. Uría, Derecho Mercantil, 21 ed. Madrid, 2002. Vidts 2001 F. Vidts, Les contrat de franchise et les droits intellectuels, in Le contrat de franchise, Seminaire organisé à Liège le 29 septembre 2000, Bruxelles, 2001. Villagómez Rodil 1997 A. Villagómez Rodil, Contratos Mercantiles Especiales, Madrid, 1997. Virassamy 1986 G.J. Virassamy, les contrats de dépendance, thèse Paris I, LGDJ, Paris, 1986, pref. J. Ghestin. Virassamy 1990 G.J. Virassamy La moralisation des contrats de distribution par la loi Doubin du er 31 décembre 1989 (art. 1 ), JCP 1990, II, 15809, pp. 413-421.

Bibliography

289

Vogel 1995 L. Vogel, Plaidoyer pour un revirement: contre l´obligation de détermination du prix dans les contrat de distribution, Recueil Dalloz 1995, chron., p. 153 ff. Watson 1993 A. Watson, Legal Transplants, An Approach to Comparative Law, 2 ed., 1993. Watson 2000 A. Watson, Legal Transplants and European Private Law, in Ius Commune Lectures on European Private Law, n. 2, Maastricht, August 2000. Weatherill 2004 S. Weatherill, Why object to the Harmonization of Private Law by the EC?, in ERPL, 2004, issue 5, pp. 633-660. Wilhelmsson 2002 T. Wilhelmsson, The Legal, the Cultural and the Political –Conclusions from Different Perspectives on Harmonization of European Contract Law, in EBLR, 2002, pp. 541-556. Zimmermann 2004 R. Zimmermann, Roman Law and the Harmonization of Private Law in Europe, in A. Hartkamp, M. Hesselink, E. Hondius, C. Joustra, E. du Perron and M. Veldman (eds.), Towards a European Civil Code, 3 ed., Nijmegen, 2004, pp. 21 ff. Zweigert & Kötz 1998 K. Zweigert & H. Kötz, Introduction to Comparative Law, 3 ed., Oxford, 1998.

Abbreviations General coord. coords. COM EU ECJ ECL BER CMLR ed. EP EC ECEF EFF ff. ICC n. OJ p. UNIDROIT

coordinator coordinators European Commission European Union European Court of Justice European Contract Law Block Exemption Regulation Common Market Law Review edition European Parliament Treaty of the European Community European code of ethics for franchising European franchise federation following International Chamber of Commerce note Official Journal page International Institute for the Unification of Private Law

France Act. Juris. AFNOR Bull. civ. CA Cah. dr. entr. Cass. com. Cass. civ. Cass. soc. Cont. conc. consomm. chron.

Actualité jurisprudentielle Association Française de Normalisation Bulletin des arrêts de la Cour de cassation Cour d’appel Cahiers de droit de l'entreprise Cour de Cassation, chambre commerciale Cour de Cassation, chambre civile Cour de Cassation, chambre sociale Contrats, concurrence, consommation chronique

292

D. D. Aff. FFF Gaz. Pal. inf. rap. JCP jur. Lettre distrib. obs. RTD civ. RTD com. somm. TGI T. com.

Abbreviations

Dalloz Droit des Affaires Fédération Française de la Franchise Gazette du Palais informations rapides Juris-Classeur périodique (la semaine juridique) Jurisprudence Lettre de la distribution observations Revue trimestrielle de droit civil Revue Trimestrielle de droit commercial sommaire Tribunal de grande instance Tribunal de commerce

Spain AC AP Ar./RA BOE JUR Id. Cendoj LGP LCGC LM LOCM LP R/RJ RCL RD RDM RJ RGD STS SAP

Aranzadi Civil (Sentencias Audiencias Provinciales) Audiencia Provincial Repertorio Aranzadi de Jurisprudencia Boletín Oficial del Estado Resoluciones no publicadas en los productos CD/DVD de Aranzadi (Sentencias Audiencias Provinciales) Identificación Centro de Documentación Judicial Ley General de Publicidad Ley de Condiciones Generales de la Contratación Ley de Marcas Ley Orgánica del Comercio Minorista Ley de Patentes Repertorio Aranzadi de Jurisprudencia Repertorio Cronológico de Legislación Real Decreto Revista de Derecho Mercantil Aranzadi Civil (Sentencias Tribunal Supremo) Revista General de Derecho Sentencia del Tribunal Supremo Sentencia Audiencia Provincial