Deductible - Information obligation and blocking minority

The nullity of a franchise agreement is pronounced for a lack of information from the franchisee on the existence of a blocking minority and its consequences.

The Commercial Court of Caen, in a decision of 25 January 2023, declared the nullity of a participatory franchise agreement for lack of information from the franchisee on a minority of blocking of the franchisor induced by the signature – a posteriori – of model statutes.

Relying on Articles L.330-3 of the Commercial Code and its pre-contractual information obligation and on Articles 1112-1 and 1137 of the Civil Code, the Commercial Court considered that the contract was concluded “on a false conviction” having the character of “a fraudulent reluctance” causing a “vice of consent”.

Short and quick reminder of the context: The Carrefour group, for several years, has had to deal with many complaints from some of its franchisees operating convenience stores. Indeed, the latter reproach, in essence, the head of the network with pricing practices that do not ensure a profitable activity for the members of its network. En effet, ces derniers reprochent, en substance, à la tête de réseau des pratiques tarifaires n’assurant pas une activité rentable pour les membres de son réseau.

A 26% stake by the franchisor in the capital of the franchisee company through various subsidiaries eliminates any possibility for a franchisee to change brands. Indeed, any change of brand is subject to the agreement of the shareholders representing at least three quarters of the shares.

It is in this context that the Commercial Court of Caen was seized by an entity of the Carrefour group which criticized the majority manager of a franchised company for having denounced the contract and carried out a change of brand in violation of the articles of association.

The Commercial Court rejects the franchisor‘s requests for approval of Articles L.330-3 of the Commercial Code and Articles 1112-1 and 1137 of the Civil Code.

Indeed, the Commercial Court notes first of all that if the pre-contractual information document given to the manager highlights a possibility of termination of contracts after 7 years, this possibility becomes “illusory” after the signature of the statutes establishing the previously exposed arrangement.

In addition, always relying on Article L.330-3 of the French Commercial Code concerning the obligation to submit a pre-contractual information document, the court highlights the requirement for a submission of “sincere information” and by extension a faithful representation of the reality of the future exploitation.

Thus, the Commercial Court considers that the pre-contractual information was not honestly drafted and that “the intention to deceive is amply proven”.

Indeed, it is considered that the information provided is “neither exhaustive, nor accurate, nor above all honestly written”. The Commercial Court also suggests that “only a particularly knowledgeable professional adviser could have detected the consequences of the articulation of contracts between them”. The franchisee’s consent was therefore “vitiated at the time of the formation of the contract”. The Commercial Court considers that “the conditions of validity of the contract of Article 1178 paragraph 1 of the Civil Code are not met, the consequence being the nullity of the contracts”.

The Commercial Court extends its reasoning by stating that, on the basis of Article 1184 paragraph 1 of the Civil Code that “the misleading clause constituting a determining element of the commitment of the parties or one of them, it is not only the clause but the entire contract that is null and void, this nullity being absolute, and of public order (…)”.

Thus, as such, the Commercial Court of Caen sanctions the nullity of the franchise contract and decides not to rule on the alleged nullity of the contracts associated with the franchise contract, the change of sign or the validation of the statutory changes.

Commercial Court of Caen, 25 January 2023, No. 2021002666_12