Language of the Franchise Agreement

Polish law does not require franchise agreements to be drawn up in Polish. If an agreement is drawn up in the language of the franchisor’s country and in the Polish language, it may stipulate that the foreign language version is binding in the event of a dispute. However, in such a case a Polish court will require the foreign language version to be translated into Polish by a sworn translator [i.e. a translator certified by the President of the competent Polish court]. It should be borne in mind that, despite speaking fluently the language of an agreement, a sworn translator does not have to be conversant in legal terminology. This is why translations of agreements should be approached with a great degree of caution.

Petrol distributor ARAL (currently BP) learned the hard way the painful consequences of errors in the translation of an agreement drawn up in a foreign language. In 1966, the company concluded a franchise agreement for operation of a gas filling station. The Polish text of the agreement was a translation from German. The agreement in question contained a provision to the effect that, should the agreement be terminated, the franchisee shall be entitled to demand reimbursement of expenses incurred in connection with the conclusion and performance of the agreement. However, pursuant to a different provision of the same agreement, the franchisee was obliged to pay any and all amounts due to the franchisor. After signing the agreement, ARAL discovered that contradiction - the result of a mistranslation of the German version of the agreement, which contained a provision to the effect that “the franchisee is not entitled to demand reimbursement of expenses...” (the word “not” was omitted in the Polish text) - and suggested that the offending provision be amended. However, the franchisee refused to comply, explaining that it was precisely because of such wording that he had chosen to conclude the franchise agreement with ARAL. The agreement was terminated in 1998. At the time of termination, the franchisee owed approx. PLN 80,000 to ARAL in outstanding fees, such as for the fuel supplied, among others. The franchisee refused to pay the amount requested, alleging offset of the amounts due to the franchisor against the expenses made by the franchisee under the franchise agreement, for which, in accordance with the above-mentioned contractual provision, the franchisee should have been reimbursed after the termination of the agreement. The Regional Court found the offset justified and dismissed the action for payment brought by ARAL. The Court of Appeals expressed a similar view on the matter and dismissed ARAL’s appeal. It was not until October 2004 that the above judgment was quashed by the Supreme Court. In the justification for its ruling, the latter stated that the above-cited provision was self-contradictory and that payment of remuneration constituted an inherent feature of franchising.

Akademia Rozwoju Systemów Sieciowych Sp. z o.o.