Commercial Chamber of the Court of Cassation, December 1, 2021, No. 18-26.572
In a ruling dated December 1, 2021, the Court of Cassation upheld the conviction of a franchisor, on the grounds of fraud, to pay a sum of more than 190,000 euros in compensation for the harm suffered by one of its franchisees.
Before the scheduled date for signing the franchise agreement
In this case, the franchisor had provided the franchisee with unrealistic or incomplete information, which, according to the High Court, had the effect of misleading the franchisee by causing an error in his mind about the profitability of his business.
More specifically, the latter had been provided with "a projected account for the first three years of operation whose data turned out to be grossly unrealistic and whose discrepancy with the sales figures achieved exceeds the margin of error inherent in all data of a projected nature.".
The pre-contractual information document (DIP)
The franchisee had also received a Pre-Contractual Information Document (DIP) deemed incomplete, on the grounds that this document:
- was six (6) pages long, a relatively short length considering the amount of mandatory information required by Articles L330-3 and R330-1 of the Commercial Code;
- It contained no mention of local competition or the state of the network.
According to the Court of Cassation, these shortcomings proved the franchisor's intention to deceive the franchisee.
On this basis, the Court of Cassation therefore rejects the franchisor's arguments seeking to establish the franchisee's obligation to inquire about the network, or prior professional experience before joining the network (in this case, the franchisee had held commercial management positions for more than 18 years in a market segment identical to that of the brand concerned).
This decision serves as a reminder that such arguments cannot be used against the franchisee, who must have access to truthful, sufficient and realistic data.
