Expertise
Pre-contractual obligations
Advice on the duty to disclose and the standstill period for concluding the franchise agreement
The Franchise Act has strictly regulated the phase preceding the conclusion of the agreement. The franchisor must inform the prospective franchisee in a timely and complete manner and observe a standstill period of four weeks. We advise franchisors on the correct fulfillment of these obligations and franchisees on their rights when they have been informed incompletely or incorrectly.
- We worked for, among others:
The pre-contractual phase: information and standstill
The decision to become a franchisee is far-reaching: investments are made, financing is secured, and years of entrepreneurship are committed to a franchise formula. The legislator has therefore strictly regulated the phase preceding the conclusion of the franchise agreement. The Franchise Act obliges the franchisor to provide information in a timely and complete manner, and to observe a standstill period, so that the prospective franchisee can make a well-considered decision. Failure to comply with these obligations has legal consequences.
Who do we work for?
We assist franchisors who wish to properly structure their pre-contractual process, and prospective and existing franchisees who wonder whether they were fully and accurately informed prior to signing. When a franchisee discovers afterwards that the forecasts were too optimistic, that essential information was missing, or that the standstill period was not observed, we assess the position and potential claims. On the franchisor's side, we review and improve the information process to prevent liability.
The duty to provide information
Article 7:913 of the Dutch Civil Code obliges the franchisor to provide the prospective franchisee with timely information necessary to make an informed decision. This includes, among other things, the draft franchise agreement including appendices, information regarding the financial obligations and investments associated with the franchise, information regarding the manner and frequency of consultation, details regarding any derivative formula, and, where available, information regarding the financial position of the formula. The information must be accurate and complete.
The standstill period
Article 7:914 of the Dutch Civil Code prescribes a standstill period of at least four weeks between the provision of the information and the conclusion of the agreement. During this period, the franchise agreement may not be concluded, the agreement may not be amended to the detriment of the prospective franchisee, and the franchisor may not induce the prospective franchisee to make payments or investments related to the agreement yet to be concluded. The standstill period gives the prospective franchisee time to consider the matter and the opportunity to seek advice.
Duty to investigate and disclose
In addition to the statutory duty to provide information, a mutual duty of care applies to both parties (Article 7:912 of the Dutch Civil Code). The franchisor must provide information that he knows or ought to know is of importance to the franchisee, and the franchisee must also conduct his own research and seek information. The relationship between the franchisor's duty to disclose and the franchisee's duty to investigate is often the point of contention in disputes, particularly regarding turnover and profit forecasts.
Forecasts and the Paalman/Lampenier line
A recurring point of contention is the accuracy of forecasts provided by the franchisor. Even before the Franchise Act, the Supreme Court ruled, in line with Paalman/Lampenier and Street-One, that a franchisor is not automatically liable for the accuracy of a forecast, but may be held liable if he knew that the forecast contained serious errors and failed to point this out to the franchisee. Under the Franchise Act, the duty to provide information has been strengthened, which has reinforced the position of the franchisee in the event of defective forecasts.
The consequences of violation
When the franchisor breaches its pre-contractual obligations, this can have various consequences. Under certain circumstances, the franchisee may invoke error (Article 6:228 of the Dutch Civil Code), resulting in the annulment of the agreement, or a breach of contract or unlawful act, resulting in damages. Violation of the standstill period may affect the validity of the agreement. The assessment requires a precise reconstruction of what was provided, when, and what the franchisee could reasonably expect.
Our working method
On the franchisor's side, we assess and improve the information process, information documentation, and compliance with the standstill period to prevent liability. On the franchisee's side, we reconstruct what was provided and assess whether there was a case of error, incorrect forecasts, or a breach of the standstill. Subsequently, we determine the course of action: negotiation, annulment, damages, or litigation.
Mr. Jaime Boogaers
Corporate Law · Lawyer
Disputes regarding the pre-contractual phase are won or lost based on the documentation. As a franchisor, one who provides careful and demonstrable information prevents claims. As a franchisee, one who can reconstruct what was missing holds a strong position.
What we help with
We assist franchisors and franchisees with the pre-contractual duty of disclosure and the standstill period.
- Structuring the pre-contractual information process
- Duty to provide information (Article 7:913 of the Dutch Civil Code)
- Compliance with the standstill period (Article 7:914 of the Dutch Civil Code)
- Assessment of provided forecasts
- Duty to disclose and investigate (Article 7:912 of the Dutch Civil Code)
- Appeal to error (Article 6:228 of the Dutch Civil Code)
- Compensation for incorrect information
- Defense against claims from franchisees
- Reconstruction of the pre-contractual phase
- Negotiation and settlement agreement
- Procedure in case of a dispute regarding information or forecast
When should you call in a specialist?
The pre-contractual phase is a liability risk for the franchisor and a decisive moment for the franchisee. Incomplete provision of information, an overly optimistic forecast, or a disregarded standstill period can lead to annulment or damage claims years later. Have the information process reviewed before rolling out a franchise formula, or have your position assessed if you feel you have been misinformed.
- You are going to inform prospective franchisees
- Your pre-contractual documentation is not in order
- You doubt whether the standstill period has been observed
- A forecast turns out to be far too rosy
- A franchisee invokes error
- The results fall far short of expectations
- Essential information appears to have been missing before signing
- A claim regarding the pre-contractual phase is looming
The truth of the pre-contractual phase lies in the documentation
Disputes regarding the pre-contractual phase are decided based on what was demonstrably provided and when. For the franchisor, a careful and documented information process is therefore the best protection against subsequent claims. For the franchisee, an accurate reconstruction of the information provided and the standstill observed is the key to a successful claim based on error or compensation. We assess the documentation, reconstruct the course of events, and determine the most promising course of action based on this.
Our approach
We assess or reconstruct the pre-contractual phase and then determine the course of action.
01
Intake and assessment
We discuss the situation and the available documentation from the pre-contractual phase.
02
Analysis of information and standstill
We assess what has been provided, when, and whether the standstill has been observed.
03
Assessment of forecasts
We verify the accuracy and substantiation of provided revenue and profit forecasts.
04
Determine strategy
You receive advice on setup and prevention, or on error, compensation, or defense.
05
Execution
We improve the process, negotiate, or litigate where necessary.
Franchise specialists
We combine legal analysis with practical experience in cases for entrepreneurs, directors, and organizations.
The franchise team at MKBjuristen.nl advises franchisors on a careful pre-contractual process and assists franchisees who feel they have been misinformed or incompletely informed. We are familiar with the duty to inform, the standstill period, the mutual duty of care, and case law regarding forecasts, from Paalman/Lampenier to the stricter requirements under the Franchise Act.
Where necessary, we engage fellow specialists: contract law regarding error and damages, corporate law regarding the formula structure, and, where forecasts are in dispute, a financial expert for substantiation.
Frequently asked questions about pre-contractual obligations
Below, we answer frequently asked questions regarding the duty to provide information, the standstill period, and the consequences of incorrect or incomplete information.
When is legal advice advisable?
Legal advice is wise as soon as pressure arises, deadlines are running, an opposing party takes a position, or when the financial or strategic interests are significant.
Can MKB Juristen also help if there is already a conflict?
Yes. We assess your legal position, advise on strategy, and can assist with correspondence, negotiation, defense, or further legal steps.
How much does specialist legal advice cost?
Specialist advice is provided on an hourly basis in principle. Where possible, we provide clarity in advance regarding the expected approach, costs, and next steps.
Can I have a no-obligation consultation first?
Yes. You can request a free consultation. We will briefly discuss your situation and indicate which course of action is likely the sensible one.
Discuss the pre-contractual phase with a specialist
Do you want to get your information process in order, or do you feel misinformed as a franchisee? Discuss your situation with a lawyer or in-house counsel. You will receive an initial assessment of your position and the available courses of action.
More expertise within Franchise
Also view the other sections within this area of law.
Contact us
Leave your details. We will contact you to briefly discuss your situation.
Contact us
Want to know more about our services?
Then contact our specialists.
