Resumption of commitments and circulation of the franchise contract

In a decision of 10 June 2025, the Court of Appeal of Rennes (Court of Appeal of Rennes, 10 June 2025, No.24/01837) provides a new analysis of the terms of recovery of a franchise contract by a company in formation at the time of its conclusion. This judgment is also an opportunity for the court to rule on the validity of the transmission of a franchise contract in the context of a universal transfer of assets of the

franchisor.

In June 2007, the company K. – franchisor – entered into a franchise agreement with the company D. – franchisee – then in the process of incorporation and represented by Mr. D. its manager. The franchise agreement expired on June 8, 2019, after renewal.

As part of the contractual relationship, several amendments and transactional memoranda of understanding are regularized by the parties. One of the protocols, concluded with retroactive effect to January 1, 2014, relates in particular to the modification of the amount of royalties and the settlement of disputes relating thereto.

In November 2017, the company K. summonsed the company D. in summary proceedings in order to obtain the communication of the figures of its sales in 2015 and 2016, as well as the list of customers corresponding to these sales. Due to the existence of serious disputes, this application is rejected by the interim relief judge.

In April 2018, the company K. is absorbed by the company L. by universal transfer of assets, which will take the name of company K.

In April 2023, the company K., considering that the franchisee had seriously breached its contractual obligations, summonsed it before the Commercial Court of Rennes in order to obtain the payment of damages and the communication of sales figures and corresponding customer lists.

By judgment of 21 March 2024, the court granted the franchisor’s claims in part.

Company D. therefore appealed the decision.

In support of its appeal, the company D. argues in particular that the franchise agreement would be null (1), and that it would not have accepted its transmission as part of the universal transfer of assets that took place in April 2018 (2).

On the terms of resumption of a franchise contract by a company in formation

Company D. argues that the franchise agreement would be void because it was signed by a company in the process of incorporation.

It should be recalled that in principle a company acquires legal personality only at the time of its registration (Article 1842 of the Civil Code). Commitments entered into by a natural person in the name and on behalf of a company in formation may only be taken over by the latter under certain conditions.

Thus, for the recovery to take place, it is necessary in principle:

• that the natural person has indicated that he/she is acting on behalf of the company being formed with mention of the information allowing him/her to be identified;
• that a statement of the commitments made be annexed to the articles of association with the indication for each of them of the resulting obligations for the company, or that a decision taken by a majority of the shareholders after the registration of the company decide on the resumption of the commitments (Article 6 of Decree No. 78-704 of 3 July 1978).

On the first condition, the Court of Cassation accepted that the judge could analyze the intention of the parties to know whether they wanted the subsequently created company to take over the signed deed, when it is not expressly indicated that the signatory acted on behalf of the company in formation (Cass. com., 29 Nov. 2023, No. 22-12865, No. 22-18295 and No.22-21623 Cass. com., 9 Oct. 2024, No.23-12.401; Civil Cass. 17.OCT. 2024, No. 22-21.616; Cass. com., 6 Nov. 2024, No. 23-20089).

In the present case, if the court notes that the contract was signed by company D. in the process of incorporation, it does not apply the above criteria.

The Court notes that:

• amendment No.2 to the agreement has been signed by the franchisor and the duly registered company D., and that it refers to the franchise agreement and amends Article 5 thereof;
• amendment No.4 to the agreement has been signed by the franchisee and company D. It refers to the franchise agreement and modifies the terms of calculation of the royalties.

It concludes, in the light of these elements, that company D., once incorporated, intended to take over the franchise contract, and that there is therefore no need to examine a possible nullity since company D. has regularly committed to the contract thereafter.

The court thus seems to interpret the signature of the amendments as an indication of the will of the parties that the company D. takes over the commitments of the contract on its behalf. This analysis is part of the movement to relax the case law as to the formal requirements initially imposed in this regard.

However, despite this relaxation, it appears that the courts continue to require that the act passed on behalf of the company in formation be expressly taken over by the company in the forms of Article 6 of Decree No. 78-704 of 3 July 1978 (Court of Cassation, Civil, Civil Chamber 3, 30 March 2023, 21-25.920; Paris Court of Appeal 1^st February 2023, No. 21/02674).

The court does not, however, apply the latter condition in this case.

On the validity of the transmission of a franchise contract as part of a universal transfer of assets

Company D. argues that its contract would have been transferred to a new franchisor following a merger operation with universal transfer of assets without its agreement, and that therefore, this transfer would not be valid.

The court recalls that if, in principle, the franchise agreement concluded in consideration of the person of the franchisor can only be transferred by merger-absorption to a third company with the agreement of the franchisee, the parties may conventionally choose to opt for its transferability in the event of a restructuring operation concerning the latter.

Such a clause has the effect of obtaining the franchisee’s agreement in advance that the franchisor is the subject of a restructuring operation such as a merger, partial contribution of assets, or division.

However, in this case, the contract provided for the freedom of the franchisor to modify its financial structure. To this end, it stipulated that in the event of a change in its legal structure, the new entity would replace the old one for all the rights and obligations stipulated in the contract, and that the changes made would be enforceable against the franchisee.

The court further notes the existence of contractual clauses restricting the franchisee’s freedom to restructure. It interprets this difference in intuitu personae attached to the franchisor and attached to the franchisee, as a desire for the parties to leave greater freedom of restructuring to the franchisor than to the franchisee.

The court concludes that the fact that the franchising company was restructured through a merger operation with universal transfer of assets does not constitute a breach of its obligations. Therefore, the contract was validly transmitted as part of this operation.