Currently, the signing of franchise agreements is becoming more popular because of the development of the economic market and comprehensive competition in business. However, disputes in a franchise agreement are also becoming more numerous and complicated. Thus, What are franchise agreement disputes? What methods resolve disputes? The following essay will help the Client better understand issues regarding franchise agreements and their disputes.
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The attractions and advantages of a franchise have been demonstrated through practices in many developed countries. Therefore, a franchise is also one of the business forms that has been developing strongly in Vietnam.
Besides benefits, there are many legal risks and disputes related to franchise issues, particularly disputes in a franchise agreement, because the Law easily allows the parties to agree together. This is caused issues such as insanity and unfair competition between the franchising parties, a lack of one party’ capacities to train or provide other party with the development of a brand, a lack of one party’s responsibilities and obligations causing a decrease in the product, service and brand values of other party, the creation of a new brand by one party through the business secrets of other party, etc,.
A franchise is an attractive form of business in the world, so a franchise agreement that details and clearly presents the rights and benefits of the parties as well as forms of dispute resolution is absolutely important.
Although Vietnamese Law specifically stipulates the definition of a franchise agreement, it can still be understood through the definition of a franchise.
Pursuant to Article 284 of the Commercial Law 2005 stipulating a franchise, as follows:
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Therefore, a franchise agreement can be known as the parties’ agreement, thereby, a franchisor allows and requires a franchisee to self-perform purchases and sales of goods, and logistics that a franchisor owns and develops, while a franchisee will pay franchise fees to a franchisor. This is also the basis for resolving arising disputes in the processes for performing such an agreement.
A franchise agreement has to be established in writing or in other forms with equivalent legal value. (Article 285 of the Commercial Law 2005).
The franchise agreement is a bilateral agreement, thereby, the parties also have rights and obligations binding each other. Such rights and obligations are stipulated in the Commercial Law 2005, as follows:
Pursuant to Articles 288 and 289 of the Commercial Law 2005, rights and obligations of a franchisee, as follows:
- Rights of a franchisee:
Except as otherwise provided, a franchisee has the following rights to:
- Obligations of a franchisee:
Except as otherwise provided, a franchisee has the following obligations to:
A franchisor has rights and obligations according to Articles 286 and 287 of the Commercial Law 2005, as follows:
- Rights of a franchisor (Article 286):
Except as otherwise provided, a franchisor has the following rights to:
- Obligations of a franchisor (Article 287):
Except as otherwise provided, a franchisor has the following obligation to:
Disputes in the franchise agreement can be understood as contradictions, differences of opinion, or legal disputes in the understanding, implementation, conclusion and termination of the franchise agreement between the parties.
Practically, the parties arise disputes in the franchise agreement regarding the following issues:
Pursuant to Article 317 of the Commercial Law 2005, there are four (04) methods of resolving disputes in the franchise agreement that the parties can select, such as negotiation, mediation, Arbitration and The Court.
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4.1 NegotiationThe parties agree to unite in dispute resolution without the influence or support of a third party.
Mediation is a method of resolving disputes that the parties agree on and a mediator is an intermediary to mediate and support dispute resolution according to the Law (Clause 1, Article 3 of Decree 22/2017/ND-CP)
Principles, conditions, processes and procedures for resolving disputes through mediation as defined by Decree 22/2017/ND-CP.
According to the Law on Commercial Arbitration 2010, the parties can resolve disputes through Arbitration if they have agreed. The parties will bring disputes to an Arbitration Center to resolve and make judgments (Clause 1, Article 3 of the Law on Commercial Arbitration 2010)
An arbitration agreement can be established before or after arising disputes. The parties can choose arbitrators or an arbitration center to resolve disputes. Judgements of an Arbitration Tribunal* are final, and the parties cannot appeal to the Court or other organizations.
The parties will resolve disputes through the Court with the participation of a Judge. This method has an important role and is the final solution to resolve disputes when negotiation and mediation aren’t effective.
Dispute resolution through the Court is implemented according to the strict procedures and processes of the Code of Civil Procedure 2015. This method takes a long time to implement and resolve. If the parties don’t voluntarily comply with judgements of the Court, they will be forced to implement them.
Therefore, negotiation and mediation are two methods of resolving franchise agreement disputes that are simple and are used first. According to these two methods, the parties will agree upon disputes together and choose the best resolution. While an Arbitration and the Court will have significant advantages such as judgments, verdicts, and decisions that are binding to enforce for the parties; but these two methods will lose fees and time.
The Client needs to seek out prestigious law firms to receive consultation and support for resolving issues related to disputes in a franchise agreement. This will help the Client avoid obstacles during dispute resolution in a franchise agreement.
These are all information relating to AN ARBITRATION AGREEMENT IS VOID as prescribed by Vietnamese Law. Please don’t hesitate to contact us, if the clients have any further questions.
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Arbitration Tribunal (*): (also known as Arbitral Forum) is a set of arbitrators appointed according to an agreement between the parties in commercial arbitration activities so as to resolve disputes arising. (source: Legal English of NPLaw)
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