Franchise agreement: lack of pre-contractual disclosure obligation by the franchisor.
The Supreme Court, in a sentence of June 30th, 2009 has confirmed the Sentence of the Regional Court of Barcelona (April, 26th 2005). The Courts examined an agreement signed by ‘Innovaciones Comerciales y Empresariales Inverarte’ and ‘Franchising Direct Cantina Mariachi’ (after on ‘Grupo Restmon’) in October 11th 2002.
The Courts have decided that it was not a lack of pre-contractual disclosure obligation by the Franchisor, when the Franchisee already had several establishments in the same franchise, the partners had relevant experience in the market and they did not ask the Franchisor for further information. This lack of pre-contractual information will not authorise the Franchisee to consider the agreement signed as null and void.
Franchise agreement: use of trademarks after the termination of the agreement.
The Provincial Court of Cuenca in a sentence of September 1st 2009, has examined a Franchise agreement signed in April 29th 2006.
According to this agreement, the parties had accepted a penalty for the use by the Franchisee of the trademarks after the termination of the relationship. The Court has decided that the evidences of such use of the trademark by the Franchisee have to be procured by the Franchisor. In case of absence of these evidences, no penalty can be applied. Moreover, the Court has considered that is not enough as an evidence of such use and therefore to prove the right to the penalty, to show a mere photocopy of a sales ticket.
Franchise agreement: resale price maintenance clause.
The Supreme Court, in a sentence of July 30th, 2009 has examined a franchise agreement signed by ‘National Hair Center’ (Franchisee) and ‘Svenson Internacional’ (Franchisor) for two different cities (Pamplona and Vitoria) in June 21st, 1991 and November 1st, 1993.
In these agreements the parties had included a clause of resale price maintenance. According to the First Instance Court (Sentence of October 22nd 2001) and confirmed by the Provincial Court of Madrid (June 28th 2004) this clause was null and void because it did not only recommend prices by Franchisor to Franchisee but every year the Franchisor was sending a list of resale prices.
This clause has been considered restrictive even if: (i) for some products of the franchise only a minimum price or a minimum and a maximum price were fixed, and (ii) the price was fixed not for all the products of the Franchise but only for some of them.
In fact, according to the Courts, this procedure of price fixing did not take into account and did not guaranty the commercial margin of the Franchisee and affected the royalties to be paid by him.
The Supreme Court has confirmed this view and the possibility of Ordinary Civil Courts to apply competition rules and to deduce from them the consequences for private contracts (the nullity of a clause). This nullity is complete and total, according to the Court, because its suppression will not only affect the freedom of the Franchisee to decide the resale prices but also, indirectly, the exploitation royalty to pay to the Franchisor, which is a structural and essential element of the franchise. In this case, nevertheless, the Supreme Court has considered that the behaviour of the Franchisor could not be considered as malicious and that both parties had participated in the same way to include the clause in the agreement. For this reason, and in order to avoid an unfair enrichment, the Court has decided not to apply Article 1.306,2 of the Civil Code (when the nullity is due to the activity of only one party this party cannot ask for the reimbursement or the fulfilment of the agreement and the other can ask for what he has granted without being obliged to perform his contractual obligations), but Article 1.303 of the Civil Code: the parties were obliged to reimburse to each other what they had received and to pay what it was due.
Ignacio Alonso, agency & distribution Country Expert for Spain.
