Franchisors beware: this is the way to avoid proceedings

The obligations that a franchisee and a franchisor have towards each other may differ in form.

On the one hand, they can enter into an “effort obligation, on the other hand it is possible to enter into an agreement on the basis of a “obligation of results”.

However, this terminology is not always used. This may subsequently lead to a dispute/conflict between the franchisor and the franchisee regarding this obligation. This is important in the event of a non-performance. The way in which it is assessed depends on the type of obligation that has been entered into. In a recent decision of the court of Rotterdam (ECLI:NL:RBROT:2021:5502), this matter is the subject of dispute.

franchise uitebeeld in houten blokken

The characteristics of a best efforts obligation

In the event of a best efforts obligation, the party subject to this obligation must make an effort to achieve a certain result.

However, the mere effort is no guarantee that the result will be achieved. This makes it difficult to provide evidence in the event of a dispute, since it must reasonably be assumed that the party has made insufficient effort to achieve the intended result.

The characteristics of an obligation to achieve a result

Contrary to a best efforts obligation, two parties can also include an obligation to achieve a result in an agreement.

This form extends beyond the best efforts obligation, as the party on which the obligation rests is also contractually obliged to achieve a predetermined result.

The amount of effort is therefore irrelevant here: achieving the result or not is leading. If the party does not deliver the required result, there is often a shortcoming in the fulfilment of an agreement. This is a big difference with the best efforts obligation.

The court agrees with the franchisor

In the case mentioned above, the franchisor supplied a software package to the franchisees. For this purpose, two agreements have been entered into:

  • The first agreement stated that the franchisor “will make every effort to provide the User (read: franchisees) with a problem-free use of the Package”.
  • The second agreement states that the franchisor “will make every effort to be able to offer the franchisees use of the package”.

The first agreement expired when the second agreement was entered into. In the end, the software package turned out to be defective and malfunctions arose among the franchisees.

In the proceedings, the franchisees took the position that the software packages did not function without problems, resulting in a breach of the agreement.

However, the court considered that there was a best efforts obligation, not an obligation to achieve a result: “that on the basis of the [agreements] applicable between the parties there is a best efforts obligation and not an obligation to achieve a result.”

The judgment shows the importance of prequalifying an obligation in advance. Since this involved a best-efforts obligation, the court considered that the functionality of the software package was irrelevant and there could therefore be no question of a shortcoming.

The ruling shows the importance of prequalifying an obligation in advance. Since this involved a best efforts obligation, the court considered that the functionality of the software package was irrelevant and therefore there could be no question of a shortcoming.

This is the consequence for the franchisees

Since the franchisees had based their claims on an obligation to achieve a result, a shortcoming based on an obligation of best efforts has not been sufficiently substantiated and has also not been demonstrated.

This lawsuit emphasizes the importance of the type of obligation and whether it is properly qualified by the claimant. In the event of an incorrect qualification, a court will not be able to determine whether there has been a breach of contract, let alone allow a claim.

VIOTTA supports you as franchisor

Rules are rarely black or white. That is why experienced lawyers can help you make an analysis in advance so that you do not face difficulties afterwards. At VIOTTA, we are highly specialised and have a lot of experience in this field. Would you like more information? Contact us.

Viotta Law - Dirk de Waard

Dirk de Waard

Lawyer

If you need a legal opinion under Dutch law, please do not hesitate to contact our legal opinion expert Dirk de Waard at dirk.dewaard@viottalaw.com

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