BELGIUM: A new case law on franchising.

Ingrid MEEUSSEN | BELGIUM | 2009-09-16


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1. This decision is interesting because it is the very first decision that was rendered after the entering into force of the Belgian law of 19th December 2005 on pre-contractual information relating to commercial co-operation agreements (hereinafter the ‘Law’). This law entered into force on 1st of February 2006. In the news of 16.03.2006, we had already briefly commented this law. It is important to mention that the Law only rules the pre-contractual phase of a commercial co-operation agreement and does not at all concern the rights and obligations of the parties during or at the ending of the agreement.

2. The reported case concerns an agreement dated 17.07.2006 (i.e. after the entry into force of the Law) according to which Company A put certain materials (such as coffee machine, cream-machine, etc.) at the free disposal of a Tearoom in return of which the Tearoom had to acquire/buy certain products (such as coffee, milk, sugar, biscuits, chocolates, etc.) with Company B (sister-company). On 11.07.2008 the Tearoom sent a letter to Company A, stating that the agreement would be null and void according to the Law of 2005. Company A did not agree.

3. The case was finally brought before the commercial court in Tongeren by the Tearoom claiming that the agreement be declared null and void.

3.1.The court first comes to the conclusion that the different obligations required by the Law have indeed not been fulfilled.
For your information, these obligations are laid down in article 3 of the Law according to which, at the latest one month before the execution of a commercial co-operation agreement, a copy of the draft agreement, together with a separate information document (containing the most important clauses of the agreement to be entered into and all elements that are necessary for the party that receives the right to use the commercial formula, to make an in-depth assessment of the co-operation agreement before committing itself), must be delivered to the party to which the right to use the commercial formula is granted. In case the draft of the agreement or the information document have not been delivered, or have not been delivered within the required time or according to the required forms or is incomplete, the beneficiary may request the nullity of the agreement at the latest within two years after its execution (article 5 of the Law).

3.2. The court then verifies whether the Law would or would not be applicable to the agreement between the parties. The court comes to the conclusion that this was not the case and therefore dismisses the plaintiff. The reasoning of the court is the following: The court first reminds that art. 2 of the Law, states that it rules all commercial co-operation agreements, concluded between two parties, each acting in their own name and for their own account, whereby one party grants to the other the right to use a commercial formula relating to the sale of products or the supply of services, and whereby the first party directly or indirectly receives a remuneration with respect thereto. This commercial formula may take the form of:

  • a joint signboard
  • a joint trade name
  • a transfer of know-how
  • a commercial or technical assistance.

The court then reminds that the Law does not only apply to franchise agreements (as initially wanted by the legislator) but also to a wide range of other commercial co-operation agreements (like for instance certain types of distribution and license agreements).

To verify whether the Law must apply to the contract between the parties, the court decides that it will verify whether a remuneration (i) has been paid, whether there has been a commercial formula (ii) granted to the other party and if so, whether this granting occurred in the form of technical assistance.
(i) With respect to the remuneration, the court finds that no such remuneration has been paid, since the material had been put at the disposal of the Tearoom for free and since the products (coffee etc.) were delivered by a sister company against normal market prices. The only amount paid is the price for the products (and thus not a remuneration for the commercial formula). It follows according to the court, that this excludes the application of the Law. It may however be discussed whether the materials (coffee machine, etc.) were indeed put at the disposal of the Tearoom for free. As a matter of fact, the Tearoom was only entitled to use these materials as long as it bought a series of products (coffee, sugar, etc) from a linked company. Even if the prices for the products were normal market prices, it most probably entailed an profit and thus an indirect remuneration for the Company. (ii) With respect to the commercial formula, the court refers to jurisprudence and case-law only concerning franchising agreements, whereby the court stresses that the legislator initially wanted to restrict the Law to franchising contracts. The court however states that the expression ‘commercial formula’ may not be limited to a license on know-how of the transfer of know-how known in franchising agreements, but that the interpretation given with respect to franchising cases, can and may be seen as guiding. The court then gives several examples that have been discussed in jurisprudence and case-law with respect to the commercial formula in franchising agreements, applies these examples to the present case and finally comes to the conclusion that the Law is not applicable because of the following:

  • the machines were put at disposal for free
  • there was no help with the finding of the place where the business would be run
  • no color nor a combination of colors has been imposed to be used in the Tearoom
  • no help or assistance was provided for when furnishing the Tearoom
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  • no assistance was provided for during the term of the contract, excepted for the technical assistance for the maintenance of the machines, which can not be seen as the technical assistance that the legislator had in mind
  • no (commercial) formula, no tested system nor any production process, no sales method or a package of services that has proven to be valuable, has been put at the disposal of the Tearoom.



Ingrid Meeussen, Agency & distribution country expert for Belgium.



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