|Supreme Court view. 2020.12.7/News 1 © News1 Reporter Lee Dong-hae|
When the franchisee receives false or exaggerated information from the franchisee’s headquarters and concludes a contract, the Supreme Court has decided that the franchisee should compensate not only the franchisee opening costs but also the operating losses incurred while operating the franchisee.
The 2nd part of the Supreme Court (Chief Justice Min Yoo-suk) announced on the 19th that the plaintiff lost part of the lawsuit filed by Mr.
Three people, including Mr. A, signed a franchise contract with Ncat in 2015 for the ‘naughty cat’ store and received franchise operating rights to operate the store, but each closed due to accumulated losses. NCAT is a company with more than 100 franchisees.
Person A, etc., filed a claim for damages from the court, stating that Ncat did not provide a statement of estimated sales or, even if it did, write it in a different way and provide false or exaggerated information prohibited in Article 9 (1) 1 of the Franchise Business Act. filed a lawsuit
According to the Franchise Business Act, franchisors with more than 100 franchisees are obliged to provide prospective franchisees with a statement of estimated sales. In this case, the range of expected sales shall be determined based on the converted sales of the five franchisees closest to the prospective franchisee’s planned location.
However, NCAT set the expected sales range based on the sales conversion amount of five franchisees, including franchisees in other commercial areas, rather than the sales equivalent of adjacent companies, and based on this, created and provided the estimated sales calculations.
Some franchisees did not provide a statement of estimated sales, but only verbally explained it. For this reason, Ncat was also subject to a fine from the Fair Trade Commission in 2019.
In the course of the trial, Ncat argued that although the estimated sales statement provided to Mr. A and others was written in violation of the Enforcement Decree of the Franchise Business Act, it cannot be regarded as an act of providing false or exaggerated information.
Also, he explained that there is no causal relationship between the issuance of the estimated sales statement and the damage to Mr.
In the first trial, △NCAT did not seem to have even issued the estimated sales statement to two people △The estimated sales statement prepared or issued by NCAT was written in violation of the Enforcement Decree of the Franchise Business Act △the scope of the estimated sales calculated according to the original regulations; In contrast, considering that the minimum amount was overestimated from 3.7 million to 5 million won, it was judged that Ncat’s act was an act of providing false or exaggerated information.
In addition, he acknowledged the causal relationship between the damage and the illegal activity, saying that the loss caused by Mr. A and others while operating the franchise is highly likely to be caused by illegal acts in which Ncat provided false or exaggerated information.
The scope of damages includes not only the cost of opening a franchise, but also operating losses incurred while operating the franchise. The reason is that the operating loss is also a disadvantage in terms of property caused by NCAT’s illegal activities.
However, Mr. A and others saw that there were some negligences, such as the need to fully analyze the data provided by NCAT rather than trust only the data provided by NCAT, and limited NCAT’s liability to two-thirds.
The second trial admitted that NCAT was liable for two-thirds of the damages as in the first trial, but the business loss was excluded from the scope of damages for the reason that it depends on other factors such as the operating ability of Mr. A, etc. or market conditions. .
The Supreme Court returned the case to the Seoul High Court, finding that the part of the second trial judgment that excluded business losses from the scope of damages was wrong. This is because it is determined that the operating loss of Mr. A and others should be included in the scope of NCAT’s damages.
The Daebeop said, “The loss of business loss by Mr. A, etc., is objectively and to a considerable extent predictable.” “It is included in the scope of ordinary damages related to NCAT’s illegal acts and equivalent causality, and even if this damage is due to special circumstances, As for the existence of the circumstances, it should be said that there was a predictability of NCAT.”
He continued, “Even if it is difficult to prove the specific amount of the loss due to NCAT’s illegal acts among operating losses due to other factors such as operational capabilities or market conditions, in this case, the former ‘monopoly regulation and fair trade In accordance with Article 57 of the ‘Act’, a substantial amount of damage can be recognized.”
A Supreme Court official said, “The judgment clearly declared that the operating loss suffered by the franchisee who concluded the franchise contract due to the provision of false or exaggerated information by the franchisor is also included in the amount of compensation that the franchisor should compensate for and the method of recognizing the amount of damage.” He said, “It is meaningful in that it strengthened the protection of prospective franchisees and franchisees.”