FRANCE Law and Practice Contributed by: François-Xavier Awatar and Lina Lahlou, Osborne Clarke
optimistic or unrealistic. In such circumstances, the franchisee may seek the annulment of the franchise agreement on the grounds of fraud or material mistake vitiating consent, and may additionally claim damages in respect of the loss suffered. 2.2 Consequences of a Failure to Disclose In the event of a breach of the franchisor’s pre-con - tractual disclosure obligations, the franchisee may institute proceedings seeking the annulment of the franchise agreement. Such annulment operates ret - roactively, entailing the mutual restitution of all sums paid under the agreement, including, inter alia, the initial franchise fee and all royalties remitted during the term of the contract. To succeed in such proceedings, the franchisee must establish that its consent to the franchise agree - ment was vitiated by a defect within the meaning of Article 1130 of the Civil Code, thereby depriving the agreement of one of its essential conditions of valid - ity. Among the three categories of defects in consent recognised under French law, the franchisee will most commonly invoke the ground of fraud pursuant to Arti - cle 1137 of the Civil Code. The characterisation of fraud requires the demonstra - tion of both a material element – namely, deliberate manoeuvres, misrepresentations or concealment of information, including the provision of an incomplete or misleading pre-contractual information document, and an intentional element, being the franchisor’s intention to deceive the franchisee in order to induce its consent. In either case, in addition to the annulment of the agreement, the franchisee may claim damages in respect of the loss suffered as a consequence of the franchisor’s breach. Furthermore, pursuant to Article 1112-1 of the Civil Code, the franchisee may seek compensation for the loss of opportunity to have contracted on more favourable terms or to have refrained from contract - ing altogether. In addition to the civil remedies set out in the forego - ing, a breach of the pre-contractual disclosure obli -
gation constitutes a criminal offence punishable by a fine of EUR1,500, in accordance with the applicable provisions of the Commercial Code. 2.3 Franchise Disclosure Exemptions French law does not provide for any exemption from the obligation to deliver the pre-contractual informa - tion document. The experience or sophistication of the prospective franchisee is wholly irrelevant in this regard; the franchisor is required to furnish the docu - ment in all cases, irrespective of the franchisee’s prior knowledge of the sector or of franchise operations generally. 2.4 Franchise Disclosure Language/ Translation Requirements Neither Article L. 330-3 nor Article R. 330-1 of the Commercial Code prescribes any requirement as to the applicable language of the pre-contractual infor - mation document. Notwithstanding the foregoing, Article L. 330-3 of the Commercial Code provides that the document must be such as to enable the prospective franchisee to commit to the agreement in full knowledge. In this regard, the General Directorate for Competition, Con - sumer Affairs and Fraud Control ( Direction générale de la concurrence , de la consommation et de la répression des fraudes – DGCCRF) indicated that a contractual provision stipulating that only the English-language version of the document shall be authoritative may be characterised as creating a significant imbalance within the meaning of the applicable provisions of the Commercial Code. Accordingly, it is strongly recommended that the franchisor furnish both the pre-contractual informa - tion document and the draft franchise agreement in a language that the prospective franchisee is able to understand and, principally, in French, so as to ensure compliance with the aforementioned disclosure requirements and to mitigate the risk of a subsequent challenge to the validity of the franchisee’s consent.
15 FRANCHISING 2026
C HAMBERS.COM
Powered by FlippingBook