This book provides a wide-ranging review of the European rules relating to distribution: exclusive purchase and exclusive supply, exclusive and selective distribution, motor vehicle distribution, franchises, commercial agents.

French Distribution Law

Like other distribution agreements, franchise agreements come under the scope of application of Article L. 442-1, II of the Commercial Code, which provides that liability is incurred and compensation for the damage caused is due  by : “any person engaged in production, distribution or service activities who suddenly terminates , even partially, an established commercial relationship, in the absenc …

Application of Article L. 442-1, II of the Commercial Code to franchises.

Like other distribution agreements, franchise agreements come under the scope of application of Article L. 442-1, II of the Commercial Code, which provides that liability is incurred and compensation for the damage caused is due  by : “any person engaged in production, distribution or service activities who suddenly terminates , even partially, an established commercial relationship, in the absence of written notice which takes account in particular of the duration of the commercial relationship, with reference to trade practices or inter-trade agreements (...). The provisions of this section II do not take away the right to repudiate without prior notice in the event of non-fulfillment by the other party of his obligations or in the event of force majeure”.

The provision applies to contractual relations whether or not formalized in writing and regardless of whether they are open-ended or fixed-term . It does not however cover the situation where relations are maintained after the expiry of a non tacitly renewable fixed-term contract, such relations being precarious and able to end at any time, especially where the franchisor has not indicated that there was any possibility of renewal . The franchisee whose fixed-term contract is due to expire also cannot reasonably expect any pursuit of the commercial relationship in the future . Indeed, a relationship of only two years, under a first fixed-term franchise agreement without a tacit renewal clause, does not constitute an established relationship within the meaning of Article L. 442-1, II of the Commercial Code . Furthermore, the indication that the termination of the contract at its term is notified as a precautionary measure and that the party reserves the right to withdraw it is not sufficient to create an expectation of continuation of the relationship or to render the termination at the agreed expiry date “sudden” .

In the absence of evidence of a change in the contractual balance or a decline in profitability of the franchisee, the creation by the franchisor of three competing outlets on the catchment area of a distributor who has no contractual exclusivity does not constitute a breach of contract .

Even if the provision makes an exception for cases of non-performance of the contract, a franchisor cannot justify the sudden termination of relations for allegedly outstanding payments where the due date has not been reached at the time of the notification  or where their combined amount is only EUR 5 000 . On the other hand, an immediate termination of relations due to repeated outstanding payments by the franchisee does not incur the franchisor's liability  especially when that measure is preceded by a number of reminders setting out the consequences of the failure to comply . Likewise, the violation of payment procedures put in place by the franchisor and the infringement of the image of the network constitute serious breaches justifying termination of the contract .

The notice period granted to the franchisee must be assessed, where relevant, by reference to trade practice or agreements within the trade. However, an interprofessional agreement between the FCD and the FEEF, which essentially concerns the food sector, may not be invoked by a kitchen seller to assess the duration of the reasonable notice period . It must also take into account the reputation of the contract goods and allow him to redevelop his business activity in conditions capable of guaranteeing the maintenance of an equivalent level of business . However, belonging to even a very well-known network with a low market share does not constitute an obstacle to the franchisee's possibility to diversify . The existence of a situation of dependence, justifying an extention of the notice period may result from the accumulation of clauses imposed by the franchisor limiting the franchisee's ability to convert after the termination of the commercial relationship . Conversely, a franchisee who is not bound by any exclusivity toward their franchisor and whose concentration of turnover with the latter results from a strategic commercial choice is not in a state of dependence . Likewise, the franchisee who did not use the faculty available in the contract to obtain the franchisor's authorization to sell other products is not placed in a state of dependence when it has deliberately chosen to purchase exclusively from the franchisor . Lastly, in assessing the adequacy of the notice period accorded in respect of trade conducted after the expiry of the contract, the courts must take account not of the relationship as a whole but only of the duration of the relations pursued post-contract 

CA Paris, 3 June 2011, LawLex201100001037JBJ: even if the parties have formally ruled out any tacit renewal.

CA Paris, 14 October 2015, LawLex201500001322JBJ.

CA Paris, 15 February 2017, LawLex201700000345JBJ.

CA Paris, 24 October 2018, LawLex201800001615JBJ.

CA Rennes, 28 June 2011, LawLex201100001299JBJ.

CA Paris, 22 November 2017, LawLex201700001946JBJ.

CA Paris, 16 March 2018, LawLex201800000533JBJ.

CA Nîmes, 5 May 2011, LawLex201100001049JBJ.

Cass. com., 21 June 2017, LawLex201700001130JBJ. Also CA Paris, 28 February 2018, LawLex201800000372JBJ.

CA Paris, 10 January 2024, LawLex202400000295JBJ.

CA Paris, 6 December 2023, LawLex202300014368JBJ.

CA Paris, 14 December 2016, LawLex201700000017JBJ.

CA Pau, 15 April 2010, LawLex201000000946JBJ.

CA Lyon, 7 February 2013, LawLex201300000011JBJ.

CA Paris, 8 September 2021, LawLex202100005260JBJ; 22 November 2023, LawLex202300013998JBJ.

CA Paris, 16 November 2011, LawLex201100001848JBJ.

French Distribution Law

429. Application of Article L. 442-1, II of the Commercial Code to franchises.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

429. Application of Article L. 442-1, II of the Commercial Code to franchises.

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

Demandez un accès gratuit
au contenu exclusif Livv – juristes d’entreprise