The candidate must be informed of certain events after the delivery of the dip

The transmission of a dip in accordance with the Commercial Code does not exclude the risk of a defect from the franchisee‘s consent. Events after the delivery of the dip should also be brought to the candidate’s attention, if they can influence the candidate’s decision.

Article L330-3 of the Commercial Code provides that “Any person who makes available to another person a trade name, a brand or a sign, by requiring an exclusivity or quasi-exclusivity commitment for the exercise of his activity, is required, prior to the signing of any contract concluded in the common interest of both parties, to provide the other party with a document giving sincere information, which allows him to make an informed commitment.”

Article R330-1 of the Commercial Code specifies that this document must include a presentation of the network, which includes: “c) The number of companies that, being linked to the network by contracts of the same nature as the one whose conclusion is envisaged, have ceased to be part of the network during the year preceding that of the issuance of the document. The document specifies whether the contract has expired or whether it has been terminated or cancelled”.

In this case, two partners of a company in liquidation summoned the franchisor Ucar to cancel their franchise agreement due to fraudulent reluctance.

Indeed, they considered that the franchisor had knowingly kept silent on information determining their consent, in particular Insolvency proceedings occurred in the network after the delivery of the dip and before the signature of the franchising agreement, and that if they had had this information, they would not have signed the contract.

On appeal, the Court considered that the dip complied with the provisions of Articles L. 330-3 and R. 330-1 of the Commercial Code, because it presented:

• the general state of the short-term vehicle rental market sufficiently,
• the number of companies that have, in the previous twelve months, ceased to be part of the network due to the expiry or termination of contracts or the transfer of goodwill, as well as due to collective proceedings,
• the investments foreseeable before the start of operation,
• the average turnover per vehicle reported by the franchised agencies,
• the average monthly cost of the fleet reported by the franchised agencies,
• and the fleet of vehicles to be financed.

But this was not enough for the Court of Cassation, which criticized the Court of Appeal for not having investigated whether Ucar had not intentionally remained silent on the Insolvency proceedings occurred in the network after the Handover of the TSL Prior to contract signature franchising agreement and if this information had not dissuaded the company Rouen Sud Avenir location from contracting.

The transmission of a dip in accordance with the Commercial Code does not therefore exclude the risk of a defect from the franchisee’s consent. When signing a franchise agreement with a candidate, the question should be asked whether events after the delivery of the dip could influence the candidate’s decision and, if so, communicate them to him.

The Court of Cassation also responds to another plea concerning the standing of the plaintiffs, who were partners of the company in liquidation. Indeed, Article L622-20 of the Commercial Code provides that “The judicial agent appointed by the court has sole capacity to act in the name and in the collective interest of the creditors.”

Thus, in principle, only the liquidator may bring an action relating to the damage suffered by the company in liquidation.

In this case, the Court of Cassation criticizes the Court of Appeal for not having investigated whether the alleged damages were not a fraction of the collective damage suffered by all the creditors, whose compensation fell within the liquidator’s monopoly of action, because in this case the partners were not entitled to act individually in compensation for said damages.

Court of Cassation, Commercial, Financial and Economic Chamber, 26 June 2024, No. 23-14.085