France | Pre-contractual disclosure in distribution and franchise agreements

Under French Law, franchisors and distributors are subject to two kinds of pre-contractual information obligations: each party must spontaneously inform their future partner of any information they know is decisive to their consent. In addition, for certain contracts – i.e a franchise agreement – there is a duty to disclose a limited amount of information in a document. These pre-contractual obligations are mandatory rules of public policy. Thus, these two obligations apply simultaneously to the franchisor, distributor or dealer when negotiating a contract with a partner.

Takeaways

• The information required by the DIP must be fully completed and updated ;
• The information not required by the DIP but provided by the franchisor must be carefully selected and sincere;
• Franchisee must be given the opportunity to request additional information from the franchisor;
• Franchisee’s experience in the economic sector enables the franchisor to considerably limit its exposure to the risk of contract cancellation due to a defect in the franchisee’s consent;
• Franchisor must keep the proof of the actual disclosure of pre-contractual information (whether mandatory or not).
• The general information obligation under common law (Article 1112-1 of the French Civil Code) may apply concurrently with the special disclosure obligation provided for under Article L. 330-3 of the French Commercial Code.

General duty of disclosure for all contractors

What is the scope of this pre-contractual information?

This obligation is imposed on all counterparties, for any kind of contract. Indeed, article 1112-1 of the Civil Code states that:

(§. 1) The party who knows information of decisive importance for the consent of the other party must inform the other party if the latter legitimately ignores this information or trusts its counterparty.

(§. 3) Of decisive importance is the information that is directly and necessarily related to the content of the contract or the quality of the parties. »

This obligation applies to all contracting parties for any type of contract.

French courts have ruled that this general information obligation may apply concurrently with the special disclosure obligation under Article L. 330-3 of the French Commercial Code (see below), answering the question in the affirmative (Paris Court of Appeal, 27 March 2024, no. 22/12665). The scope of the latter has however, been defined by the French Supreme Court (« Cour de cassation ») : only information bearing a direct and necessary link with the subject matter of the contract or the qualities of the parties is subject to the disclosure obligation (Cass. com., 14 May 2025, no. 23-17.948).

Who bears the burden of proof?

The burden of proof rests on the person who claims that the information was due to him. He must then prove (i) that the other party owed him the information but (ii) did not provide it (Article 1112-1 (§. 4) of the Civil Code)

Special duty of disclosure for franchise and distribution agreements

Which contracts are subject to this special rule?

French law requires (art. L.330-3 French Commercial Code) the provision of a pre-contractual information document (in French “DIP”) and the draft contract, by any person:

• which grants another person the right to use a trade mark, trade name or sign,

• while requiring an exclusive or quasi-exclusive commitment for the exercise of its activity (e.g. exclusive purchase obligation). The quasi-exclusive nature of the commitment is assessed on a case-by-case basis by French courts, independently of the 80% purchase threshold provided for under EU Regulation 2022/720, which is treated merely as an indicative reference.

Concretely, DIP must be provided, for example, to the franchisee, distributor, dealer or licensee of a brand, by its franchisor, supplier or licensor as soon as the two above conditions are met. French courts have moreover recently had occasion to confirm that the scope of the DIP obligation is not limited to franchise agreements but extends, in particular, to dealership agreements, provided the above-mentioned conditions are met (Paris Court of Appeal, 22 May 2024, no. 22/08672).

When the DIP must be provided?

DIP and draft contract must be provided at least 20 days before signing the contract, and, where applicable, before the payment of the sum required to be paid prior to the signature of the contract (for a reservation).

What information must be disclosed in the DIP?

Article R. 330-1 of the French Commercial Code requires that DIP mentions the following information (non-detailed list) concerning:

• Franchisor (identity and experience of the managers, career path, etc.);
• Franchisor’s business (in particular creation date, head office, bank accounts, history of the development of the business, annual accounts, etc.);
• Operating network (members list with indication of signing date of contracts, establishments list offering the same products/services in the area of the planned activity, number of members having ceased to be part of the network during the year preceding the issue of the DIP with indication of the reasons for leaving, etc.);
• Trademark licensed (date of registration, ownership and use);
• General state of the market (about products or services covered by the contract) and local state of the market (about the planned area) and information relating to factors of competition and development perspective. With respect to the local market, the French Supreme Court (« Cour de cassation ») has held that the franchisor is not required to conduct a market study, but that if one is provided, it must be accurate and verifiable (Cass. com., 18 Oct. 2023, no. 22-19.329).;
• Essential element of the draft contract and at least: its duration, contract renewal conditions, termination and assignment conditions and scope of exclusivities;
• Financial obligations weighing in on contracting party: nature and amount of the expenses and investments that will have to be incurred before starting operations (up-front entry fee, installation costs, etc.).

Beyond the exhaustiveness of the information required under the aforementioned provision, the DIP is subject to a qualitative standard. All information provided — including information provided spontaneously — must be accurate and truthful to ensure that the prospective network member’s consent is fully informed and free from any defect.

How to prove the disclosure of information?

The burden of proof for the delivery of the DIP rests on the debtor of this obligation: the franchisor (Cass. Com., 7 July 2004, n°02-15.950). The ideal for the franchisor is to have the franchisee sign and date his DIP on the day it is delivered and to keep the proof thereof.

The clause of contract indicating that the franchisee acknowledges having received a complete DIP does not provide proof of the delivery of a complete DIP (Cass. com, 10 January 2018, n° 15-25.287).

The franchisor is subject to a duty to update the DIP until the contract is signed

In a ruling dated 26 June 2024 (no. 23-14.085 PB), the French Supreme Court held that formal compliance of the DIP at the time of its delivery is not sufficient to exonerate the franchisor from all pre-contractual liability. This position was confirmed by a subsequent ruling of 4 December 2024 (no. 23-16.684).

These two decisions appear to establish a duty of ongoing updates incumbent upon the network head throughout the entire period between the delivery of the DIP and the execution of the contract. Where significant events occur during that interval — insolvency proceedings affecting network members, major litigation, or structural changes to the network — the network head is required to proactively inform the prospective member. The court then examines whether the failure to disclose such information was liable to distort the candidate’s assessment of the network and, consequently, to vitiate his consent (Cass. com., 26 June 2024, op. cit.).

A franchisor may therefore not shelter behind the initial regularity of the DIP to discharge its disclosure duty where the network’s situation has materially changed prior to the signing of the contract.

Sanction for breach of pre-contractual information duties

Criminal sanction

Failing to comply with the obligations relating to the DIP, franchisor or supplier can be sentenced to a criminal fine of up to 1,500 euros and up to 3,000 euros in the event of a repeat offence, the fine being multiplied by five for legal entities (article R.330-2 French commercial Code).

Cancellation of the contract for deceit

The contract may be declared null and void in case of breach of either article 1112-1 of the French Code civil or article L. 330-3 of the French Code de commerce. In both cases, failure to comply with the obligation to provide information is sanctioned if the applicant demonstrates that his or her consent has been vitiated by error, deceit or violence. In this respect, courts conduct a concrete, case-by-case assessment, taking into account in particular the professional experience and personal due diligence of the distributor: a sophisticated candidate will face greater difficulty in establishing deceit, and his experience in the relevant sector may be sufficient to exonerate the franchisor (Paris Court of Appeal, div. 5 – ch. 11, 26 Apr. 2024, no. 21/13205), even where the information provided was incomplete or inaccurate (Paris Court of Appeal, 20 Jan. 2021, no. 19/03382).

The path is therefore narrow for the franchisee: he cannot invoke error concerning profitability when it is he who draws up his plan, and even when this plan is drawn up by the franchisor or based on information drawn up and transmitted by the franchisor, the experience of the franchisee who knew the local market may exonerate the franchisor.

Regarding deceit, Courts strictly assess its two conditions which are:

• (a material element) the existence of a lie or deceptive reticence (article 1137 French Civil Code), and
• (an intentional element) the intention to deceive his counterparty (article 1130 French Civil Code).

Where applicable, the parties must return to the state they were in before the contract.

Damages

Although the claims for contract cancellation are subject to very strict conditions, it remains that franchisees/distributors may alternatively obtain damages on the basis of tort liability for non-compliance with the pre-contractual information obligation, subject to proof of fault (incomplete or incorrect information), damage (loss of opportunity of not contracting or contracting on more advantageous terms) and the causal link between the two.