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10 October 2006
If a new franchise agreement is concluded which contains an obligation to obtain regular supplies, then as a rule the new franchisee will be entitled to revoke not only the supply obligation, but also the franchise agreement as a whole. The franchisee may revoke the agreement within two weeks of its conclusion, provided he or she was instructed on the right of revocation at the time the agreement was concluded in accordance with the statutory requirements (Section 355(2) of the Civil Code). If the franchisee was not correctly instructed and the franchisor does not remedy the situation by providing the correct instruction, the franchisee is entitled to revoke the agreement at any time.
Uncertainty regularly arises as to whether an instruction on the right of revocation complies with the statutory requirements. The Higher Regional Court of Oldenburg recently held that the wording "dispatch of the notice of revocation in due time (date as postmark) shall suffice for compliance with the set period" could be misunderstood, rendering the instruction on revocation invalid.(1)
In order to avoid such uncertainty, in 2002 the Federal Ministry of Justice issued a model instruction on the right of revocation.(2) However, the model instruction is not in line with the requirements of the Civil Code.(3) It is thus unclear whether these deficiencies render the model instruction invalid, with the result that in cases where it is followed the franchisee will not be considered to have been properly instructed on the right of revocation. In a May 13 2005 decision, which was recently published, the Regional Court of Halle stated its opinion on this issue for the first time.
The Regional Court of Halle rendered a decision on an instruction on the right of revocation dating from 2003 which corresponded to the model instruction according to Section 14(1) of the Regulation on Information Duties, and read as follows:
"The contracting partner may revoke the contractual declaration within two weeks in text form (eg, letter, fax, email) without stating any grounds, or by returning the goods. The set period shall commence at the earliest upon receipt of this instruction. Dispatch of the notice of revocation or of the goods in due time shall suffice for compliance with the set period for revocation. The notice of revocation shall be addressed to: X-GmbH."
In the opinion of the Regional Court of Halle, an instruction on revocation which corresponds to the model instruction from 2002 is invalid. A layman without expertise in the law would be unable to interpret the words 'at the earliest', since he or she would not know when, in his or her specific case, the set period commenced. The words 'upon receipt of this instruction' were also deemed misleading since, according to the statutory requirements,(4) the revocation period may not commence until the day after receipt of the instruction. Consequently, the model instruction according to Section 14(1) of the Regulation on Information Duties conflicts with the statutory provisions and is no longer covered by the regulatory authorization.(5) It is therefore null and void.
While setting out comprehensible grounds, the Regional Court of Halle has drawn the logical conclusion from the substantive defects in the model instruction on the right of revocation dating from 2002. However, the judgment does not mean that all instructions on the right of revocation based on the official model will automatically become invalid. The reason is that, with effect from December 7 2004, the legislature pronounced the model instruction through legislation. The prevailing opinion is that - notwithstanding the deficiencies - the courts of ordinary jurisdiction are now bound by this legislation. The Federal Constitutional Court alone can make corrections. Consequently, new franchise agreements entered into after December 7 2004 containing the model instruction on the right of revocation cannot be revoked, because the text of the model instruction is based not solely on a ministerial regulation, but rather on parliamentary legislation.
Notwithstanding this legal situation, in an instruction on the right of revocation it is advisable to avoid the wording in the model instruction which was criticized by the Regional Court of Halle. These passages are likely to be misunderstood and in part are legally incorrect. In view of this situation, the best option is to avoid using these passages and to adjust the model instruction accordingly.
For further information on this topic please contact Karsten Metzlaff or Karl Rauser at Nörr Stiefenhofer Lutz by telephone (+49 30 20 94 20 00) or by fax (+49 30 20 94 20 94) or by email (email@example.com or firstname.lastname@example.org).
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