When compiling the Code of Business Law, the legislature was generally reluctant to modify existing laws, in most cases simply incorporating them "as is" into the new code. However, despite this cautious approach, a number of new provisions were included in the code, such as the introduction of class actions and substantive changes to the act on the provision of pre-contractual information in the context of commercial partnership agreements (the "Act").
The Act, which entered into force in 2006, is intended to place on equal footing the two parties enter-ing into negotiations for the purpose of concluding a commercial partnership agreement. The legisla-ture had indeed noted that in this type of agreement, pursuant to which one party obtains from another the right to use, for example, a common trade name or commercial sign, an imbalance may exist be-tween the party requesting the right and the party granting it. The playing field is levelled in particular by means of an obligatory exchange of information, which takes the form of a draft agreement and a special document (known as the "pre-contractual infor-mation document", hereinafter the "PID") containing required items of information (e.g. the obligations and consequences for non-fulfilment of these obligations, the method of calculating the compensation to be paid by the recipient of the right, etc.), at least one month prior to conclusion of the agreement, in order to allow the party requesting the right to take a decision with full knowledge of the facts.
While the goal was undoubtedly a worthy one, a number of weaknesses and questions become appar-ent over the years which rendered uncertain the scope of application of the Act and undermined its effectiveness. The legislature thus decided to take action to remedy these shortcomings.
First, it tackled the scope of application of the Act. The Act was applicable to commercial partnership agreements entered into between two persons, each acting in its own name and on its own behalf, pursuant to which one person granted the other a right, in return for direct or indirect compensation, to use a commercial formula (in one or more forms) upon the sale of goods or the provision of services
In order to broaden the scope of application of the Act and settle a number of controversial issues, the legislature decided to amend the definition of commercial partnership by modifying certain require-ments for this type of agreement and doing away with others.
While previously such a partnership agreement had to be concluded by two parties, it will now be possible to have more parties to the agreement. In addition, compensation is no longer a requirement for a commercial partnership agreement. Furthermore, the requirement that the parties act in their own name and on their own behalf has been abolished, which means that the Act is henceforth applicable to commercial agents, commission agents and brokers (thus resolving the uncertainty surrounding the question of whether this requirement pertained to the pre-contractual stage of the agreement or to the actual performance of the contract).
Further, it should be noted that the practical application of the Act gave rise to number of questions, one of which involved the duty of confidentiality and the monetary sanctions for breach of this duty. The Act already imposed a duty on persons receiving information obtained with a view to entering into a commercial partnership agreement to keep such information confidential but did not provide for any sanctions in the event of violation of this duty.
In practice, this omission was almost made up for by the fact that, under the old version of the Act, no obligation, compensation or other amount could be paid or requested prior to expiry of a one-month period following submission of the PID.
The amended Act sheds much-needed light on this matter, maintaining of course the duty of confiden-tiality with the possibility to provide for contractual damages for breach of this duty.
The Act also clarifies the rules in the event of modification of the information contained in the PID or modifications to the proposed agreement during the one-month waiting period. A new one-month period starts to run each time modified information is provided, except where the modifications are requested in writing by the weaker party, i.e. the party requesting the right.
So as not to interfere any more than necessary with the course of business, the legislature has intro-duced a simplified procedure to renew a commercial partnership agreement or modify such an agree-ment during its performance. The applicable formalities need not be fulfilled again, as the Act provides that a simplified PID and simplified draft agreement can be used.
Although the requirement of compensation has been removed from the definition of a commercial partnership agreement, the legislature still took pains to clarify this concept. In the event of direct compensation, the compensation must be defined precisely in the PID; for indirect compensation (for example, a profit margin or a year-end rebate), the compensation must be mentioned and the calcula-tion method described, although the precise amount need not be indicated.
The grounds for invalidity are unchanged but the Act has added an arrow to the quiver of the request-ing party. If certain information is not provided or is provided incorrectly, which is not a ground for invalidating the agreement, the abovementioned party can take legal action on the basis of general rules of law on the vitiation of consent or liability in tort.
As the amended Act will only enter into force on 31 May, it is difficult at this time to estimate its effects, which we hope will meet the legislature's ambitious expectations.