The difficulty of testing the incumplimentos the franchisor in the franchise agreement

 

To solve a franchise agreement the franchisor for breach, sufficient proof is required

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The Section 8, the Madrid Provincial Court has given its decision in Case 11 June 2019 with No.. resolution 130/2019. The case concerned the signing of a franchise agreement. After a while, the franchisor failed to comply with the obligations assumed in the contract. The franchisee brought an action which was dismissed for lack of evidence. So, He resorted requesting, inter alia, compensation for damages occasions repeated breaches and unjust enrichment conviction that the franchiser had obtained with their performances. The Court considered incompatible compensation for damages with the declaration of unjust enrichment especially when the latter needs a requirement for lack of cause.

Fact background,,es,Juan Alberto and Paulina filed suit against FTA,,es,Asset Securitization Fund,,es,requesting the declaration of nullity for abusive of the floor and ceiling clauses contained in the novation contract of the mortgage loan of,,es,with the corresponding refund of amounts unduly collected,,es,The Securitization Fund Management Company,,es,Beech,,es,acting on behalf of FTA, he responded to said claim alleging that he lacked passive legitimacy since the entity had no legal personality and that it constituted only a private and open fund and that therefore the passive legitimization corresponded to BBVA as successor of Catalunya Banc that was the Company fund constituent,,es

The 5 October 2012, Ms.. Maria Cristina, on behalf of CREATIONS ARTEFIMO S.L. (franchisee) y D. Arthur (franchisee) signed a franchise agreement.

The contract was operating a shop selling handicraft products and fine arts, the preparation of such products, the use of brand franchisee and the application of know-how transmitted.

The business started off Alcalá Norte Local Mall 26 Madrid, on lease.

The contract period was one year with automatic extensions.

exclusivity was agreed in the contract procurement, the obligations of each party and an entry fee payable by the franchisee 16.000 euros 3.360 euros in I.V.A. In concept of “royalty” It would be paid annually from 2% the amount of the corresponding I.V.A sales.

Finally, It was contemplated in the contract the same early termination for breach of the obligations of the franchisor.

After a few months, D. Aturo he is written directed against D. Efrain (representative with Dña. Maria Cristina de la franquiciadora) denouncing the breach of contract.

The 31 May 2013 D. Arturo informed the franchiser's early termination of the contract for several breaches:

  • Infringement of exclusive provincial pacted (the forthcoming opening of a shop ARTEFIMO)
  • Nonexistence of a project to adapt, decoration and execution
  • Failure to ensure adequate supply of products and orders
  • The lack of an adequate software
  • Failure to give initial training 15 days and unfair competition

In the same letter, D. Arturo announced its intention to make claim for the full amount of the investment. And, It requested the franchiser to, within 7 days withdraw the material stock valued at 7.214 euros.

 D. Arturo finally filed suit against CREATIONS ARTEFIMO alleging S.L. breach of contract by the franchiser. Therefore the actor urged the termination of the contract with compensation for damages amounting to 74.304,23 euros for damages and 12.800 euros in lost profits.

Primera Instancia

The 14 March 2018, the Court of First Instance and Instruction No.. 4 Collado-Villalba of gave judgment for the lawsuit was dismissed by D. Arthur and Mrs.. Noelia.

In addition to the entity absolved CREATIONS ARTEFIMO S.L., Ms. Maria Cristina and D. Efrain.

The reason for the dismissal lay in the Failure Test and this despite the existing documentary.

Segunda Instancia

Instance judgment against the plaintiff appealed. He gave the following reasons:

– First. Error in assessing the evidence produced, considered infringed the arts. 217.2, 218.2, 304, 316 and 326.

About the actor claimed that the evidence assessment of Judge Instance was wrong and did not comply with the rules of sound. This is because had not disputed the economic damage suffered by the contractual breaches by the franchiser.

– Segundo. procedural violation of Art. 429.1 LEC: The judging did not make the necessary legal warnings or practice of any evidence requested.

Actor considered the Juzgadora Instance had ignored its obligation to warn the alleged insufficient evidence. At the same time, office had not proposed adequate proof, thereby infringing Article. 429.1 LEC.

– Third. clerical error that could infringe Article 218.1 and 2 LEC.

– Fourth. Providing Expert Report.

The actor claimed that if an accountant economic report was provided. And, this that credited the economic losses suffered repeated again for contractual breaches of the defendants.

– Fifth. Existence of unjust enrichment in favor of the defendants and appellees correlative impoverishment of the actor.

The 11 June 2019 the Section 8 of the Provincial Court of Madrid destimando the appeal gave judgment.

For the Audience "While it is true that it has provided extensive documentary, however the defendant suffers from a probationary defect This Juzgadora considers essential and which is none other that the absence of a solid expert an economic expert to analyze the relationship between franchisor and franchisee... This type of management experts analyze franchise; marketing strategies franchise (…) and everything related to the previous feasibility study on Business ".

The documents produced by the plaintiff had been made unilaterally by it so they lacked the necessary expert support. Therefore, there was an error in assessing the evidence.

The rebellion of the defendants did not exempt the plaintiff to prove the facts on which he based his claim.

The second plea, the Court noted that "Article. 429.1 LEC collects the novel possibility that the court brought to the attention of the parties in the conduct of the trial probation failure ... this should be seen as a mere discretion for the judge granted, without thereby undermined principles remain as essential as the device and praying instancewithout the judge can come to establish itself defender of one of the parties…”.

So, also he cited art. 282 LEC regulating the evidentiary initiative and stated that "practice tests are parte ".

The third plea the Court made a remark and is not said to infringe Article. 218 LEC, but can infringe upon. Thus, the appellant must urge the relevant clarification according to art. 215 LEC. The third ground of appeal was dismissed.

The fourth plea, the Court rejected the provision of expert opinion on appeal.

 The fifth plea, the Court cited the judgment of the Supreme Court 634/1989 of 20 September which treats unjust enrichment so that "the <<conditio>> based on said unjust enrichment, requires, for success, among other requirements, lack of cause in the transfer of assets and consequent advantage gained, budget evidently It is lacking in cases of compensation for breach of contract reprochable the taxpayer of the application for an order (sentences 16 December 1959, 21 April 20 November 1964, 24 January 1975, 18 May 1984 and 17 January 1985).

So, in the case of unjust enrichment was non-existent. damages arising from a breach of contract that resulted in the plaintiff would exercise the contractual resolution demanded.

Therefore, The hearing concluded by dismissing the appeal filed and upheld the judgment at first instance.

Conclusion

In the event of default by the franchisor, It is essential to the existence of evidence to support it. On the other hand, the claim of a conviction for unjust enrichment and claims for damages arising from a breach of contract are incompatible. There is unjust enrichment for lack of cause is necessary. And yes there is a breach of contract cause that is, in this case, Own franchise agreement.  

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