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

Franchise agreements, like other distribution contracts, are strongly marked by intuitus personae. The parties are therefore free to stipulate that any substantial change in the franchisee's situation will constitute legitimate grounds for termination. This is the case for the sale up to 95% of the shares in the franchised company to a competing group where the contract concluded intuitu personae  …

Transfer by the franchisee.

Franchise agreements, like other distribution contracts, are strongly marked by intuitus personae. The parties are therefore free to stipulate that any substantial change in the franchisee's situation will constitute legitimate grounds for termination. This is the case for the sale up to 95% of the shares in the franchised company to a competing group where the contract concluded intuitu personae provides for an early termination right to the benefit of the franchisor in case of substantial change in the legal form of its undertaking, completion of merger, de-merger, or capital increase by introduction of a third party , the transfer of the business to a third party without giving the franchisor the opportunity to exercise his preemption right or his right of approval  or the non-authorized transfer of shares in the franchised undertaking where the franchisee has allowed doubts to persist as to the reality of said transfer . Furthermore, a penalty clause sanctioning termination attributable to the franchisee’s fault or the early termination of the contract applies where the franchisee transfers its business to a third party who decides to switch brands . In addition, the franchisor may, without incurring liability, oppose payment of the sale price of the franchisee’s business where the latter owes it a termination indemnity, which constitutes a claim sufficient to render the entire sale price unavailable .

In principle,  the merger by absorption of the franchisee  or the transfer of the business does not result in the transfer of the franchise agreement . In particular, the franchisee cannot transfer the use of a business sign of which it is not the owner . However, where the assignee's conduct expresses its intention to pursue the franchise agreement, the contract is deemed to be transferred . Where the transfer of the business is subject to the franchisor's authorization, the termination of the franchise agreement will be at the tort of the franchisee who transfers without the required authorization . Conversely, the franchisor must not abuse its right of approval. Such is the case when the franchisor refuses to grant approval to a new manager on the basis of past misconduct that was not serious or a single breach observed immediately prior to making the decision in connection with the operation of other establishments, without any connection to the protection of its legitimate commercial interests . Conversely, the franchisor cannot be held responsible for the failure of the plan to sell the franchise to a third party merely due to the fact that he informed the potential buyer of the obligation to ensure that the premises be brought into compliance with the standards of the network, even if said standards exceeded the regulatory requirements .  Furthermore, the sudden removal of the business name in the context of the transfer of the business may cause a manifestly unlawful disturbance to the franchisor who may require that both the transferor and the transferee remedy that situation .

Cass. com., 15 January 1991, LawLex200200004436JBJ, upholding CA Orléans, 28 February 1989, LawLex200200006028JBJ.

CA Versailles, 14 February 2012, LawLex201200000357JBJ; CA Montpellier, 16 December 2021, LawLex202100006452JBJ.

CA Versailles, 12 May 2022, LawLex202200002561JBJ.

CA Paris, 16 December 2015, LawLex201500001828JBJ. 

Cass. com., 14 March 2006, LawLex200600000852JBJ.

CA Paris, 7 May 2014, LawLex201400001979JBJ.

CA Aix-en-Provence, 10 March 2022, LawLex202200001490JBJ.

Cass. com., 16 November 2022, LawLex202200010340JBJ.

CA Versailles, 7 December 2023, LawLex202300014622JBJ, which concluded that such a transaction could not constitute a breach of the clause prohibiting the transfer of the franchise contract in the franchisor's agreement.

CA Rennes, 5 December 2001, LawLex200400000191JBJ; CA Paris, 4 September 2013, LawLex201300001263JBJ: the transfer of the business has the effect of bringing about the early termination of the franchise agreement.

Cass. com., 7 January 2004, LawLex200400000059JBJ.

CA Paris, 11 December 1998, LawLex200200005161JBJ.

CA Paris, 21 September 2005, LawLex200500010391JBJ;  4 September 2013, LawLex201300001263JBJ, holding that breach of the right of preemption also causes the franchisor non-material harm and must be compensated; CA Paris, 7 May 2014, LawLex201400001979JBJ; CA Paris, 11 March 2015, LawLex201500000330JBJ.

Regarding franchising, intuitus personae can also concern the franchisor. In effect, the franchisee accepts obligations that are sometimes very restrictive only in consideration of for the qualities that it attributes to the franchisor's know-how.

The courts consider that the acquisition of control by the franchisor does not constitute a cause of termination of the franchise agreement by the franchisee where it affects neither the continuation of the legal entity concerned , nor the conditions of performance of the contract, since the franchisees are not deprived of the use of the brand and the know-how . On the other hand, where the purchaser of the franchisor substantially amends the basic contractual conditions, the contract may be terminated against the franchisor .

Although some judgments have considered that the transfer of its shares by the franchisor does not challenge the performance of the contract, where the intuitus personae is not required from the franchisor , this is not the opinion of the Court of Cassation, which considers that the franchise agreement is concluded in consideration of the franchisor and, except with the franchisee's consent, cannot be transferred by result of the partial transfer of assets under a de-merger or by merger . Thus, where the franchise network is transferred to a third party, without the transferee's consent, the franchisor is required to keep on performing its basic obligations until the end of the contract, without however being requested to organize a network identical to the network existing before the transfer . Where the transfer has not been notified to the franchisee and his explicit consent has not been sought, the master franchisee to whom the franchisor has transferred the franchise agreement has no standing to bring proceedings for the payment of outstanding royalties . Likewise, where the activity may no longer be carried on because there is no trade mark, which is the essential component of the contract, the termination of the contract is attributable to the franchisor who has transferred the franchise agreement without the franchisee's consent .

On the other hand, the franchisee who has signed a contract providing for the possibility for the franchisor to transfer the franchise network without having to obtain the consent of its members, cannot subsequently reproach the latter for not having informed him of its plans . Similarly, the takeover of the network by a competitor is not in itself a fault by the franchisor in respect of its members when the franchise agreement specifies that the intuitus personae of the contract relates only to the person of the franchisee . Also the placing into lease-management of the franchisor's business is automatically enforceable against the franchisee when the franchise agreement contains a clause according to which the intuitus personae only concerns the person of the latter, who moreover undertakes to accept any changes in the person of the franchisor . However, even when a clause of the franchise agreement authorizes a transfer without the consent of the franchisee, such a clause is implemented in bad faith if the transferee, instead of continuing to perform the initial contract, proposes the signing of a new agreement under much less favorable conditions .

CA Paris, 23 November 2000, LawLex200200004680JBJ; 1 July 2020, LawLex202000001699JBJ; CA Lyon, 13 January 2022, LawLex202200000359JBJ; CA Paris, 12 April 2023, LawLex202300005667JBJ, holding that the change of control within the franchisor does not require the consent of the franchisee where the contract only provides that it “may only be transferred or amended with the express agreement of the other party” and does not indicate that the franchisee had made the person of the franchisor's company a condition of its own commitment; Cass. com., 15 May 2024, LawLex202400003633JBJ, emphasizing that the transfer of all the shares or stock of the franchisor and changes in its management, which do not involve a change in the legal entity or the transfer of the franchise contract, do not require the prior consent of the franchisees, unless otherwise provided. Cf. CA Rennes, 20 January 2004, LawLex200400001608JBJ, which considers that the acquisition of the franchisor's control by a large perfumery group justifies the termination of the contract by the franchisees, where in the network in question, intuitus personae is bilateral.

CA Paris, 11 January 2002, LawLex200200004627JBJ.

CA Paris, 7 March 2018, LawLex201800000393JBJ.

CA Dijon, 8 April 2010, LawLex201000000593JBJ and LawLex201000000594JBJ.

CA Rouen, 9 November 2000, LawLex200200004690JBJ.

CA Paris, 21 May 1999, LawLex200200005216JBJ; 2 April 2008, LawLex200800001157JBJ; see also, in the presence of a clause under which the contract is concluded intuitu personae only with regard to the franchisee, CA Nîmes, 19 May 2016, LawLex201600000999JBJ.

Cass. com., 3 June 2008, LawLex200800000974JBJ and LawLex200800000975JBJ; 24 November 2009, LawLex200900003558JBJ. See also CA Lyon, 11 June 2009, LawLex201000000022JBJ;Cass. com. 12 October 2010, LawLex201000001127JBJ; 19 March 2013, LawLex201300000448JBJ. See also CA Douai, 30 August 2018, LawLex201800001230JBJ.

Cass. com., 28 June 2005, LawLex200500006748JBJ.

Cass. com., 28 May 2013, LawLex201300000899JBJ.

Cass. com., 31 January 2012, LawLex201200000186JBJ.

CA Paris, 10 May 2017, LawLex201700000876JBJ.

CA Paris, 15 November 2017, LawLex201700001898JBJ.

French Distribution Law

440. Transfer by the franchisee.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

440. Transfer by the franchisee.

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise