FRANCE Law and Practice Contributed by: François-Xavier Awatar and Lina Lahlou, Osborne Clarke
Goodwill Compensation Under Commercial Agency Laws Under French law, pursuant to Article L. 134-12 of the Commercial Code, a commercial agent is enti - tled, upon termination of the agency contract, to an indemnity in compensation for the loss of the clientele that the agent has brought in or developed on behalf of the principal. For a contractual arrangement to be characterised as a commercial agency agreement, the agent must, in particular, have the power to negotiate and, where applicable, to conclude contracts for the sale of goods or the provision of services in the name and on behalf of the principal. The risk of a franchise agreement being reclassified as a commercial agency contract is extremely limited under French law, given that the franchisee operates as an independent undertaking that purchases goods and subsequently resells them or sells services in its own name and on its own account. 5.3 Termination of the Franchise Agreement Under French law, the parties enjoy full contractual freedom to determine the notice period applicable to the termination of the franchise agreement. Not - withstanding the foregoing, Article L. 442-1 II of the Commercial Code prohibits the abrupt termination of established commercial relationships. A party that terminates such a relationship without prior written notice, or with a notice period that is manifestly insuf - ficient having regard to the duration and nature of the commercial relationship, shall be liable in damages to the aggrieved party. This provision applies irrespective of whether the agreement is concluded for a fixed or indefinite term. The adequacy of the notice period is assessed by the courts on a case-by-case basis, having regard to the totality of the circumstances, including, inter alia: • the duration of the commercial relationship; • the degree of economic dependence of the party to whom notice is given; • the volume of business generated thereunder; • the existence of exclusivity obligations; and
• the investments specifically undertaken in connec - tion with the franchise. It should be noted, however, that Article L. 442-1 II of the Commercial Code provides that a notice period of 18 months constitutes a maximum, the observance of which precludes the terminating party from incurring any liability on this ground. Nevertheless, in respect of fixed-term franchise agreements, early termination by the franchisor in the absence of a demonstrated contractual breach by the franchisee may give rise to an obligation to pay damages for anticipatory termina - tion, in accordance with Article 1212 of the Civil Code. 6. Restrictions on Competition in Franchise Agreements 6.1 Treatment of Competition Restrictions in Franchise Agreements Exclusivity Clauses The franchisor is under no obligation to grant territo - rial or contractual exclusivity to its franchisees. The grant of exclusivity, where applicable, is a matter fall - ing within the contractual freedom of the parties. Where the franchise agreement contains an exclusiv - ity clause, the duration thereof is subject to the fol - lowing limitations: • under French law, pursuant to Article L. 330-1 of the Commercial Code, any exclusive or quasi- exclusive supply commitment must be limited to a maximum duration of ten years; and • under European law, pursuant to EU Regulation 2022/720 on vertical agreements (VBER), the dura - tion of such exclusivity obligations may not exceed five years. An exclusive sourcing clause requiring the franchisee to procure goods or services exclusively from the fran - chisor or from suppliers approved by the latter is valid under French and European law, provided that it is necessary for the replication of the franchise system and the preservation of the network’s identity, and that the franchise confers a genuine competitive advan - tage upon the franchisee.
17 FRANCHISING 2026
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