VIETNAM: New provisions on commercial agency and franchising contracts.

Silvia BORTOLOTTI | VIETNAM | 2006-12-15


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The law includes new and more specific provisions on commercial agency contracts (Art. 155 et seq.): the termination notice of at least 60 days to be notified to the other party; the right of the agent to request a goodwill indemnity, amounting to one month’s average commission for each year the agent has been bound to the contract, or one month’s remuneration if the contract lasted less than one year. Furthermore, the law statutes that the right to a termination payment will not arise, where the agency contract is terminated by the agent.

Chapter VI, Section 8 of the Commercial Law contains the legal framework on commercial franchising (Art. 284 et seq.), which is also regulated in details by the Guidelines issued by the Government Decree No. 35/2006/ND-CP of March 31, 2006). The main rules on franchising agreements are the following:

– The franchising agreement must be in writing and in Vietnamese (apart for franchising granted overseas, where the language of the contract might be agreed upon by the parties) and the business system intended for franchise should be in operation for at least one year;
– The franchisor is entitled to receive royalty payments from the franchisee, and the law grants the franchisee the right to carry out its business under the franchisor’s supervision, trademark and related intellectual property (know-how, trade names, logos);
– The franchisee might, subject to previous authorization of the franchisor, sub-franchise to a third party, with the same rights and obligations provided for the franchisee;
– The intended franchisor must register its intended franchising activity into the relative Register at the Ministry of Trade and the Government might specify the conditions and the procedures for registration.

The contents of a franchising agreement are carefully listed in the guidelines: content of the franchised commercial right; rights and obligations of the parties; price, periodical franchisee fee and mode of payment; valid term of the contract; renewal, termination and settlement of disputes.
The Decree also provide for a disclosure obligation of the franchisor, to be performed at least 15 days before signature of the contract.

IDI Editorial Board

The text of the mentioned law can be found in the Legislation Section of the IDI website.

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