Belgian law on pre-contractual information for commercial agent agreements (Title 2 of Book X of the Code of Economic Law, abbreviated “CDE”)

I.- Principles (Article X.27 CDE)

1. Prior to signing a “commercial agent agreement”, the “person granting the right” (i.e., the franchiser/principal/licenser/etc.) must provide their future partner with:

- A draft of the agreement they plan to sign, and

- A specific document (DIP) detailing various aspects we will cover below.

2. These items must be “provided in writing or on a durable and accessible media” to the future partner.

However, in the event of litigation, it will be up to the party granting the right to prove that all legal obligations were, in fact, complied with.

It is more prudent to request that the candidate sign and date each page of the documents provided.

3. The documents must be provided “at least one month prior to the signature of the agreement”.

4. During the one-month period, “no commitments can be made and no remuneration, amounts or deposits can be requested or paid”.

Note that it is now accepted that commitments made under a confidentiality agreement are exempted from this prohibition.

5. In the event of a change to one of the “important contractual clauses” of the contract during the one-month period, a “simplified” DIP (which only includes the modified contractual provisions) and a new amended draft contract must be provided at least one month before signature of the agreement, except if the change is requested in writing by the party receiving the right.

It is therefore important to retain written proof of the request to change the draft contract made by the partner during the one-month cooling-off period. In this case, a new DIP or draft contract do not have to be provided.

II. – DIP contents

6. The law states that the DIP consist of two parts:

- The important contractual provisions, if they are included in the commercial agent agreement (Article X.28 §1 1°);
- The information required to make an accurate assessment of the commercial agent agreement (Article X.28 §1 2°).

A- Part one: Important contractual provisions included in the commercial agent agreement

7. In addition to providing a draft contract, the DIP must list the “important provisions” included in the law (see below) which appear in the contract. However, the “franchiser” is not required to include all of the important obligations covered in the law in their contract.

8. The “important provisions” to be listed are:

• a) A statement as to whether the commercial agent agreement is being concluded in consideration of the person;
• b) The obligations;
• c) The consequences of non-execution of the obligations;
• d) The direct remuneration the person receiving the right must pay to the person granting the right and the calculation method used for the indirect remuneration the person granting the right will receive and, if applicable, the method used to revise it during the contract period and at renewal time;
  This means that all remuneration methods are covered, whether they are direct or indirect.
  All direct remuneration must be clearly stated.
  Only the “calculation method” for “indirect” remuneration must be provided in the DIP. This can include participation in advertising campaigns or training, discounts or commissions on listings, etc.
• e) Non-compete clauses with their duration and conditions;
• f) The duration of the commercial agent agreement and its renewal conditions;
• g) End-of-contract notice and conditions, notably with respect to expenses and investments;
• h) The right of pre-emption or purchase option for the person granting the right and the valuation rules applicable to the business when the right or option is exercised;
• i) The exclusivity provided to the person granting the right.

B- Part two: Information for the accurate assessment of the commercial agent agreement

9. The second part of the DIP must contain the following information:

• a) The name or corporate name of the person granting the right (franchiser or Master Franchisee) and their contact information;
• b) In the event that the right is granted by a legal entity, the identity and position of the natural person acting on its behalf;
  According to some sources, this obligation means all of the company’s management, that is, all members of the Board of Directors and of the Executive Committee.
• c) The type of activity exercised by the person granting the right;
  The broad definition of this obligation would appear to require that all activities be described, including those which are not part of the partnership agreement.
• d) The intellectual property rights whose use is granted;
• e) If applicable, the annual financial statements for the last three fiscal years of the person granting the right;
• Assuming that the company is starting up a business as a Master Franchisee, it can initially provide the annual statements of the master franchiser.
• f) Previous experience with commercial partnerships and in using the commercial method outside of a commercial agent agreement;
• g) The history, current status and prospects of the market in which the activities are carried out, from both a general and local point of view;
  We should point out that, in theory, this obligation does not require a full market study, which must be done by the franchisee.
• h) The history, current status and prospects of network market share from both a general and local point of view;
  Market share will not be easy to provide to the franchisee because it implies that the franchiser must define their market in advance, which is difficult.
  What is more, market share changes constantly…
• i) If applicable, the number of operators in the Belgian and international networks and the prospects for network growth for each of the past three fiscal years;
  Only the number of operators is requested. Their identity and precise location is not required.
• j) For the past three fiscal years, if applicable, the number of commercial agent agreements signed, the number of commercial agent agreements terminated at the initiative of the person granting the right and at the initiative of the person receiving the right, as well as the number of commercial agent agreements which were not renewed at the end of their term;
  The number of contracts signed is sufficient. The identity of the parties is not required.
• k) The expenses and investments the person receiving the right commits themselves to at the beginning and during execution of the commercial agent agreement, including the amounts and their use, the amortisation periods, the times at which they will be implemented and their disposal at the end of the contract.
  The law does not state if the expenses and investments requested are those solely dependent on the relationship between the partners or all operating expenses and investments required for the operation. It is, therefore, more prudent to select the second option.
  We should also point out that the law includes expenses and investments granted at the beginning of the relationship as well as those which will be granted during contract execution.

III. - Simplified DIP (Article X.29)

10. The law states that, under certain conditions, the franchiser can provide a “simplified DIP” in addition to the draft agreement.

11. The situations in question are the following:

- In the event of the renewal of a commercial agent agreement signed for a specific period of time
- In the event of the signature of a new commercial agent agreement between the same parties, or
- In the event of a change in the current commercial agent agreement signed at least two years earlier (except if the change is made at the written request of the party receiving the right, in which case no draft agreement or simplified document must be provided by the party granting the right).

12. The simplified DIP must include the following information, at least:

- The important contractual provisions modified in the original document or, if there is no document, compared to the date of signature of the original agreement;
- The data required for accurate assessment of the commercial agent agreement modified in the original document, or if there is no document, compared to the date of signature of the original agreement.

IV. - Sanctions (Article X.30)

13. Non-compliance with the obligations imposed by law will entitle the franchisee to invoke the nullity of the commercial agent agreement within two years of the signature of the agreement.

Various case law decisions have been rendered regarding the consequences of nullity (some have required the franchiser to repay all amounts paid by the franchisee during the contract).

14. However, a specific sanction is applicable when the DIP does not include the “important contractual provisions”. In this case, the franchisee can only invoke the nullity of the specific provisions in question. The agreement will continue in effect for the remainder.

There is no specific time-frame for invoking nullity. However, we believe that nullity is logically subject to the common law limitation period, that is, 10 years.

15. Lastly, if “information for the accurate assessment of the agreement” is missing from the DIP or incomplete or inaccurate, or if one of the “important contractual provisions” of the DIP is incomplete or inaccurate, the person obtaining the right can invoke common law in matters of absence of consent or quasi-intentional tort.

In this case, the partner must either seek to nullify the agreement or request damages and interest, on condition, however, that they provide proof that the conditions provided for in common law for this purpose are met.

16. The CDE now also regulates the issue of whether or not the franchisee can waive their right to request nullity of the agreement or of one of its provisions. A waiver is possible “following a period of one month after signature” on condition that it expressly states the reasons for the nullity it is waiving.