Will there be special protection for the franchisee as the contract’s weaker party? – on the governmental project to amend the Civil Code

dr hab. Jan Rudnicki
21.12.2023

A few days before the change of government, on December 8, the stepping-down Council of Ministers managed to adopt and submit to the Sejm a draft bill amending the Civil Code,[1] the aim of which is to introduce new provisions regulating the franchise agreement into the code.

As widely known, so far in Polish law, franchising was a typical unnamed contract, i.e. not regulated in detail either in the Civil Code or in any other act – only general provisions on contractual obligations and, of course, the provisions of individual contracts themselves applied to it. The designers of the Ministry of Justice justified their decision to change this situation with many arguments. Firstly, it was pointed out that currently, the franchise agreement is the basis for running a business in many industries. There are approximately 1,300 franchise chains, and up to half a million people may be involved in this type of economic relations. Secondly, according to the project’s authors, franchise agreements very often involve significant economic inequality between the parties, and franchisors offer franchisees adhesion agreements based on rigid templates. This leads to the third argument: dysfunctions and abuse of dominant positions by franchisors occur within franchise systems, significantly affecting business activities, especially those performed by small and micro-entrepreneurs.

The shape of the proposed regulation was highly influenced by these premises. In eleven new articles of the Civil Code (Articles 764 10 -764 20), the drafters included primarily such issues as:

  • essential elements of the franchise agreement and the requirement to conclude it in a written form,
  • informative obligations of the franchisor towards the franchisee,
  • grounds for terminating the contract by both parties, including the possibility of immediate termination by the franchisee in the event of a breach of informative obligations by the franchisor,
  • limitations on the ability to enforce contractual penalties,
  • the scope of possible non-competition and avalisation of bills of exchange for the franchisor’s claims.

It is worth noting that all the solutions, which undoubtedly intended to improve the situation of the franchisee, are peremptory norms, while the more laconic regulations concerning the protection of the franchisor’s special interest are in the form of default rules. This shape of the proposed regulations is not accidental. The justification for the project states explicitly that the abovementioned regulations are intended to protect the franchisee as the weaker party of the contractual relation.

Undoubtedly, there is a long way from the adoption of the draft amendment to the Civil Code by the Council of Ministers to the final adoption of the act, especially since in the meantime the leadership of the Ministry of Justice and the entire government has changed. Therefore, it is difficult to assess the probability of the provisions governing the franchise agreement coming into force at this point. Nevertheless, the sole fact that they were designed in the given shape and purpose is not surprising. For over a hundred years, in European legal systems, there has been a clear tendency to move away from the liberally understood freedom of contract and the emphasis on the formal equality of the parties of contract. From the employee, through the tenant, and finally the consumer, the parties considered to be weaker in various contracts successively receive special protection from the legislators. The scope of this protection, however, remains the subject of political and axiological disputes. As far as Polish law is concerned, the discussed tendency is visible, especially in matters of consumer law and the well-known controversies related to consumer protection concerning various types of entrepreneurs. Moreover, the fact that the proposed franchising regulations provide special protection to the party being, after all, an entrepreneur is not a novelty. Less than two years ago, Article 3855 of the Civil Code, extended some elements of consumer protection to an entrepreneur being a natural person.[2]

Undoubtedly, the fact that this time the project authors showed concern for the legal language, naming the new contract a ‘franchise’ (in Polish “franczyza”), deserves high praise. The term will be clear to the recipients as it is commonly used in practice. At the same time its Polonized form appears to be much better than the bizarre, neither Polish nor English, “leasing contract” (in Polish: “umowa leasingu”)—mentioned in Articles 7091-70918—not to mention the institution regulated in a special act with a name that in Polish sounds striking, being a literal copy of English word “timeshare.” [3] However, a question that is not easily answerable is the one concerning the axiological justification and the purposefulness of the regulation introducing special protection of the weaker party to another type of contractual relationship and the economic consequences that such regulation would bring.


[1] https://legislatka.rcl.gov.pl/projekt/12379864/katalog/13026206#13026206 access from: December 16, 2023

[2]It was introduced by the Act Amending Certain Acts to Reduce Regulatory Burdens of July 31, 2019 (Journal of Laws of 2019, item 1495).

[3]Timeshare Act of 16 September 2011 (Journal of Laws of 2011, No. 230, item 1370).

Authors

dr hab. Jan Rudnicki
Of Counsel+48 22 416 60 04jan.rudnicki@jklaw.pl
dr hab. Jan Rudnicki
Of Counsel+48 22 416 60 04jan.rudnicki@jklaw.pl

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