Invalidity of the franchise agreement
1. Definition
Nullity is the penalty incurred when the legal act does not meet the conditions required for its formation.
The sanction consists in the annihilation, the retroactive disappearance of the legal act, which means that the parties to the contract will be returned to the situation in which they were before its conclusion.
The annulment of the contract requires the restitution of the services provided by the parties on the basis of the cancelled contract.
The nullity is pronounced by the Judge and the latter must therefore be seized for this purpose.
2. Types of invalidity
There are two types of nullity: absolute nullity and relative nullity.
2.1. Absolute nullity
Nullity is absolute when the condition of validity violated is for the protection of the public interest.
Absolute nullity is invoked when the object of the contract is lacking or when the cause of the contract does not exist or is unlawful or immoral.
Absolute nullity is also invoked when the formal requirements are not met for solemn contracts.
Any person who has an interest in acting may invoke an absolute nullity.
2.2. Relative nullity
Nullity is relative when the condition of validity violated tends to protect a particular/private interest.
The nullity of the contract will be relative if it is a question of sanctioning a defect in consent, a lack of capacity of the contracting party, a lack of power, injuries to the contract or the violation of a rule of public order or a rule of form.
Only the co-contractor may invoke the nullity of the contract.
In franchise law, the nullity of the franchise agreement is often invoked by the franchisee.
The importance of know-how in a franchise contract led the Court of Colmar to conclude that a franchise contract was null and void for lack of cause, in the event that the know-how was neither substantial, nor specific, nor secret (CA Colmar, 1st ch., sect. A, 19 July 2011, No. 09/00837, EURL Conseils Immobiliers v. SARL Immobilière Demolière).
In addition, the violation of the pre-contractual obligation of information provided for in Article L.330-3 of the French Commercial Code may also justify the nullity of the franchise contract in the event of a defect in consent (CA Versailles, 2 Sept. 2014, No.12/08963; CA Paris, September 10, 2014, No.12/11809).
We regularly write articles resulting from the nullity of the franchise agreement. You can find them in the section “the life of the franchisor”, by selecting in the drop-down menu “create, improve, develop, defend your distribution network”, then “nullity of the distribution contract“.
3. The limitation of the invalidity action
The time limit for seeking a declaration of invalidity is five years.
However, special texts provide for shorter requirements (for example: three-year period in company matters (Art. 1844-14 Civil Code); two (2) year period in insurance law (Art. L.114-1 Civil Code); two-year fixed period for revocation of the sale of real estate (Art. 1676 Civil Code).
This limitation period runs from the day “when the holder of a right has known or should have known the facts allowing him to exercise it” (Article 2224 of the Civil Code).
Article 2232, paragraph 1 of the Civil Code nevertheless provides for a deadline of twenty (20) years in all cases “the postponement of the starting point, the suspension or interruption of the limitation period may not have the effect of extending the extinctive limitation period beyond twenty years from the date of the birth of the right“.
Regarding the starting point, Article 1304 of the Civil Code provides that in cases of violence, the period begins from the day on which the violence ceased; in case of fraud or error, the period begins from the day on which the defect was discovered.
