This article has been written by Ayush Tiwari, a student of Symbiosis Law School, NOIDA. This article explains what a franchise agreement is, its uses, and the pros and cons of a franchise agreement.
It has been published by Rachit Garg.
Table of Contents
With the emergence of globalisation and liberalisation, firms have adopted a variety of business models in order to survive and thrive. One of the lucrative business concepts that involves both domestic and foreign participants is franchising. There are numerous forms of franchising systems in operation, such as dealer agreements, marketing agreements, trademark-usage agreements, product distribution agreements, production agreements, and so on.
A franchise agreement is a legally binding contract between both parties to the franchise relationship. A franchise agreement is required to assume control of a franchise as a franchisee.
A franchise agreement safeguards both parties. It protects both you as the franchisee and the franchisor’s brand. When purchasing a franchise, you will be making a significant financial investment. A written agreement grants you rights that can help protect your investment in your firm.
What is a Franchise Agreement
A franchise agreement is a legally enforceable contract between a franchisor and a franchisee. These agreements authorise a franchisee to open a franchise site while also granting the ability to use franchise-specific resources such as branding, business methods, and supplier sources. A franchise agreement, like any other contract, is intended to define precise conditions for the parties’ relationship. These agreements provide safeguards and duties that benefit both parties.
Franchise agreements define the limitations within which franchisees can operate and clarify any financial commitments they have to their franchisors. They also often provide greater safeguards to franchisors than to franchisees. Typically, these types of agreements are unilateral in nature. Even if you’re not a lawyer, one can see that the contract is drafted from the franchisor’s point of view. One of the primary goals of a franchise settlement is to protect the franchise system as a whole. This includes the brand, the integrity of the operating system, and the conduct of franchisees within the mix.
Many mandatory tasks are often included in the franchise agreement. There are a lot of rules mentioned in it. This is advantageous since one expects to be advised on how to operate the firm. It should clearly explain the actions that one must execute on a regular basis. These principles may also assist you in seeing and prioritising aspects of your business in order to achieve success.
Many actions are also prohibited by the franchise agreement. These actions may often be self-evident, such as non-compete provisions. It certainly makes sense for the franchisor to legally safeguard their investment as they prepare to reveal their various secret techniques, products, and services to you. This is also crucial to you since it will safeguard your interests when the franchise expands and adds new franchisees.
Many of the additional criteria that specify course of action in cases of variations in behaviour are in place to protect the entire group’s integrity as well as to reign in franchisee members’ acts that go beyond the franchise’s goal. In other words, such constraints should be imposed, and they should be both specific and broad in scope. This helps the business to expand in a healthy way while also preventing injuries and adverse effects on all the franchisees in the system.
Various statutes that govern a Franchise Agreement in India
While there are no explicit franchising laws in India, there are a variety of rules and regulations that can be used for franchising. These laws cover topics like competition, consumer rights, intellectual property, labour, property, and taxation law.
The Competition Act, 2002
The Competition Commission of India was established by the Competition Act in 2002, although it did not take effect until 2009. The Act’s objectives are to promote fair competition and trade, protect consumers, and prevent anti-competitive arrangements and practices that harm competition in India. The Competition Act in franchising strives to guarantee that tie-in arrangements, exclusive supply and distribution agreements, and resale price maintenance do not stifle competitiveness, as well as to prevent large franchises from forming a monopoly in the market.
The Indian Contract Act, 1872
This Act is the mother legislation that governs the essential components of the franchisee-franchisor agreement. It controls all the elements of franchise contracts, including franchise offer, acceptance, consideration, validity, breach, and termination. The statute also assures that the parties freely consent and are legally competent to contract.
The Income Tax Act, 1961
The Income Tax Act governs the tax aspects of a franchisee firm. The income tax legislation requires every corporation that benefits from Indian soil to pay the required taxes. This regulation also governs the technique of international franchising. In India, all royalties and franchise fees are taxed at the respective rates.
The Consumer Protection Act, 1986
This Act was formulated with the consumer’s best interests in mind. Consumers now have the ability to submit a complaint against both the franchisee and the franchisor under this statute. A consumer has the right to make a complaint against the unit if there is a defect in the product or service. The Consumer Protection Act shields customers from unfair business practices.
Intellectual Property Laws
In India, Intellectual Property Rights (IPRs) are protected by four acts: the Copyright Act (1957), the Patents Act (1970), the Trademarks Act (1999), and the Designs Act (2000). These rights are critical to the franchising industry’s existence because they safeguard trademarks, patents, and design rights and permit third parties to be sued for violation of these rights.
The Foreign Exchange Management Act, 1999
When foreign cash or assets are involved, this Act comes into play. The Act governs all multinational brands with franchises in India. It is also in charge of foreign currency payments. The Indian government is aiming to simplify legislation so that multinational businesses may operate franchises in India without too much difficulty.
Trade Secret laws
Given the value of trade secrets to a franchise system and the risk of loss if a single individual involved with the franchise fails to take reasonable efforts to keep them secret, franchisors and franchisees must take steps to preserve the franchise system’s trade secrets. There is no specific legislation governing trade secrets in India, the Indian Contract Act by means of principles of equity and action for breach of trust helps protect trade secrets.
What should a standard franchise agreement include
The format of the contract varies from one franchise system to another. Every agreement will vary in type, language, and content. They also have a covenant, which defines a promise, proper, or responsibility that the franchisee or franchisor owes to the opposite, or that provides advantages to the franchisor or franchisee.
1. Basis of the agreement
This section acknowledges both the franchisor’s and franchisee’s goals, as well as what each party expects to gain from the agreement. It expressly indicates that the franchisee wishes to open a franchise location and that the franchisor wishes to grant them permission to do so.
2. Grant of a franchise
The “Grant” section informs franchisees that the franchisor is granting them a limited, non-exclusive, non-transferable licence to use the franchisor’s emblems, logos, service marks, and method of operation for the duration of the franchise agreement. The franchisee does not obtain ownership of the marks or system, and the franchisor has the right to terminate the franchisee’s grant of license at any moment if the franchisee violates the agreement.
3. The agreement’s duration
The term of the franchisor-franchisee relationship is the time period of the agreement. Franchisors often provide franchise opportunities for five to 10 years. One of the most crucial components of the agreement is the duration of the connection. It can also be extended if the relationship between the parties is good and they both want to continue working together.
4. Fee for franchising
The amount that the franchisee must pay is also specified in a franchise agreement. Franchisees often pay the franchisor an initial and ongoing fee when they first join the franchise system. There is a slew of extra costs spelt out in the contract. The franchise fee is the money that a franchisee pays to the franchisor in exchange for the right to utilise the brand name, logo, and other aspects of the brand.
5. Operations management
Another item that must be clearly stated in a franchise agreement is the franchisee’s company operations. One of the most significant benefits of owning a franchise is that you may benefit from the franchisor’s knowledge and expertise. As a result, it’s critical to include all relevant details concerning the franchisor’s level of assistance as well as the franchisee’s additional duties. This covers things like purchasing goods or services, adhering to the franchisor’s operating requirements, and account administration, among other things.
6. Services provided by franchisor
While not all franchisors may repeat their pre-and post-opening services in the franchise disclosure form, appropriate drafting principles would demand that these problems be reiterated in the franchise settlement. This, together with the franchisor’s services provided inside the franchise settlement, eliminates the threat of litigation as a way to incorporate rights in the contract that are not explicitly mentioned.
7. Safety of Intellectual Property
Franchisors grant a temporary licence to the franchisee regarding the specifications of the product that make up its private, confidential, and trade-secret data, which is specified by specific wording from the franchisor. It then specifies the limitations on the franchisee’s use of such information.
A franchisee must appoint a representative who will assume managerial duties for the franchise site under the “Training” part of the franchise agreement. The franchisee will then request that the general manager attend and finish a training programme. If the franchisor believes the manager already has adequate experience, they may waive this provision of the agreement.
The franchisor’s commitment to assist franchisees with marketing and advertising should be included in the agreement. Unfortunately, some franchise agreements place greater demands on franchisees than they do on franchisors. In certain franchises, the franchisee is obligated to spend a particular proportion of their revenue on local advertising, while the franchisor is astonishingly free of such requirements.
10. Limitations relating to defaults and damages
Every franchise agreement will include a list of franchise settlement breaches that will very certainly be treated as a breach. These infractions may also be divided between those that result in the franchise agreement being terminated quickly with no treatment provided and those that result in treatment being provided.
11. Obligations upon expiration
Once the franchise relationship has ended, either because the time period has naturally ended or not been renewed, or because the franchisee’s affiliation with the franchise system has been terminated due to a breach, it is common for the contract to list a series of steps which the franchisee should take to “de-identify” the business and the franchisee’s affiliation with the franchise system.
The franchisee does not have the ability to set off any royalties owed to the franchisor under this clause. It further states that the franchisee cannot withhold any money owed to the franchisor based on the franchisor’s perceived nonperformance.
13. Quality assurance
The franchisee commits to maintaining and running their franchise according to the standards and specifications included in the operations manual in the “Quality Control” portion of the franchise agreement, with the knowledge that the franchisor may amend such stipulations at any time.
Every franchise agreement will include an indemnity clause, which states that the franchisee shall reimburse the franchisor for any losses incurred as a result of the franchisee’s carelessness or malfeasance. The covenants are nearly invariably one-sided and in the franchisor’s favour, implying that the franchisee, not the franchisor, is responsible for the day-to-day running and upkeep of the business. An in-term covenant, as the name implies, prevents a franchisee from competing against the franchisor and other franchisees while the franchise settlement is being negotiated.
15. Geographic restrictions
In some cases, this covenant applies to all franchised, company-owned, and affiliate-owned businesses in a specific geographic area. After the franchise settlement ends or is terminated earlier owing to a breach of the agreement, the former franchisee is covered by a post-term covenant.
Every franchise agreement will stipulate that the franchisee gets insurance to support its business activities. Every franchisee’s insurance policy would demand that the franchisor be identified as a “further insured,” which means that the franchisor receives the same protection as the franchisee but does not pay for it.
17. Restrictions and non-compete covenants
A non-competition covenant is one that prohibits a franchisee from starting a business that competes with the franchised business. The covenant is usually divided into two parts: an “in-term” covenant and a “post-term” covenant. While the franchise settlement is in progress, an in-term covenant prevents the franchisee from competing against the franchisor and other franchisees.
Types of franchise agreements
Agreement for a Single-Unit Franchise
The franchisee, by means of the agreement, is granted the right to open and run a single franchise unit under a single-unit agreement. This is the most basic and often used type of agreement. These franchise agreements are particularly appealing to new franchisors because they provide a simple method to engage in the process of franchising. If a franchisee succeeds over time, the franchisor may consider increasing the contract to cover more units.
Agreement for a Multi-Unit Franchise
A multi-unit agreement is a contract that allows a franchisee to open and run many franchise locations. A multi-unit setup isn’t restricted to a certain geographical area. Franchisees may have locations in various parts of a city. In other circumstances, these franchise agreements include deadlines, requiring the franchisee to follow a set of guidelines for creating a certain number of units. The franchisor may have the authority to engage with other interested parties if the franchisee fails to achieve the agreed-upon timeline.
Area Development Franchise Agreement
A franchisee who is also an area developer has the right to open many units in a certain region at the same time. In contrast to the multi-unit agreement, the franchisor provides the franchisee exclusive rights to develop that region in the area development agreement. For example, a franchisee may contract to open 5 units in a certain region over the course of five years. That franchisee has exclusive rights to that region, and other units cannot be opened there during the contract time.
Master Franchise Agreement
The master franchise agreement has more rights than an area development agreement. The master franchisee, in addition to having the right and responsibility to open and run a specified number of units in a defined region, also has the ability to sell sub-franchisees to other persons inside the territory. It’s similar to being a franchisor, but only in a limited geographic area. For example, you continue to receive excellent assistance from the membership (the primary franchisor), but in your area, you assume many of the franchisor’s functions and responsibilities, such as providing support and training. However, because you are working as a franchisor in the area, you are entitled to receive fees and royalties from the franchisees inside the territory.
Advantages and disadvantages of a Franchise Agreement
Advantages to a franchisee
Assistance in doing business
The franchisee receives business support from the franchisor, which is one of the advantages of franchising. The franchisee may obtain practically a turnkey company operation depending on the conditions of the franchise agreement and the structure of the organisation. They may be provided with the brand, equipment, materials, and marketing strategy. In short, they provide each and everything one needs to start or run a business.
Other franchisees may not provide everything, yet all franchises offer the franchisor’s expertise and insight. The franchisee has access to a deep reservoir of business help to guide them through the process of owning and managing a firm, whether that information is kept in a searchable, digital knowledge base or just a phone number to reach the franchisor directly.
A lower rate of failure
Franchises, on average, have a lower failure rate than sole proprietorships. When a franchisee purchases a franchise, they become part of a brand name as well as a system that will provide them with assistance and advice, reducing the likelihood of their going out of business. Furthermore, because franchisees have previously established their business model, you may be confident that the items or services you’ll be delivering will be in demand.
Franchises, on average, make more money than individually owned firms. The majority of franchises have well-known brands that draw in a significant number of individuals. As an outcome of its popularity, profits rise. Even franchises with a high franchise fee require a significant capital investment to get a favourable return on investment.
Built-in customer base
Finding consumers is one of the most difficult tasks for any new business. Franchises, on the other hand, come with an established brand and a dedicated clientele. Even if you’re building the first franchise location in a small town, chances are that potential customers have heard of the brand through TV ads or by travelling to bigger cities.
Disadvantages to a franchisee
While the franchise fee provides a lot of benefits to the franchisee, it may also be expensive—especially if you’re joining a well-known and lucrative business. While this normally leads to increased profits, it can be challenging for a small business owner to raise the required capital.
Even if you select a low-cost franchise, you’ll almost certainly need to invest some more funds. Though this may appear to be a disadvantage of franchises, it is vital to weigh the potential against the initial investment and strike the right balance for your business. Also, keep in mind that there are franchise financing options to help you with your capital investment.
Possibility of confrontation
The franchisee has little capacity to enforce the agreement without an expensive court struggle. The intimacy of the commercial connection between franchisor and franchisee is ideal for conflict, whether it’s due to a lack of support or just a clash of personalities. A franchisor should screen all possible franchisees before getting into business with them. As for the franchisor, one should take advantage of this chance to acquire a sense of the franchisor’s personality and management style.
While a franchisee can be their own boss, individuals do not have total control over their business and are unable to make decisions without contacting the franchisor.
The most significant disadvantage that most franchises face is that they must abide by the terms of the franchise agreement. The franchisor has some control over the majority of franchise operations and also franchisee decisions.
Lack of financial privacy
A lack of privacy is another downside of franchising. The franchise agreement will almost certainly state that the franchisor has complete control over the franchise’s financial ecosystem. Franchisees may view the lack of financial privacy as a negative of owning a franchise; but, if you embrace financial guidance, it may be less of a problem.
Advantages for a franchisor
Opening a business’s first location is both expensive and time-consuming. It can be nearly as tough to open a second unit. When that load is shared with another business owner, the process becomes more efficient and the initial business owner is relieved of responsibility.
When it comes to expanding your small business, a franchise may make the process of adding several locations much easier.
Increased brand recognition
Increased brand recognition is one of the numerous advantages of franchising. The more locations a company has, the more people are familiar with it. The more these clients learn about and adore the brand, the more profitable and successful it will be. Increased brand recognition for a multi-location franchise may be a win-win situation for both the franchisor and the franchisees.
One of the most important advantages of a franchise agreement for the franchisor is the flexibility to expand without greater risks. The franchisee assumes the debt and responsibility of building a unit in the franchise’s name, the franchisor reaps all of the benefits of a second location without taking on the risk.
Access to capital
The expense of growth is one of the most significant hurdles to small business expansion. While there are a variety of business financing choices available, they don’t always work out. Franchising your business will take some effort and money on your part, but it has the potential to pay you handsomely in the form of franchise fees.
Disadvantages to a franchisor
Loss of complete brand control
When business entrepreneurs start their own company, they have total control over their brand and every decision made inside the company. But, after building a franchise, they lose absolute authority over their business. For example, Nike has a lot of stores around the world that are owned by franchisees. They cannot take decisions regarding the whole company without considering the franchise owners.
Increased risk of legal disputes
When you engage in a strong commercial relationship with another person, you put yourself at risk of legal disputes. While a well-drafted and lawyer-approved franchise agreement should reduce the likelihood of legal conflicts between the franchisor and franchisees, they nonetheless exist.
Risks involved in the franchise business
A franchisor may cause trouble for a franchisee by demanding payments that aren’t necessary at times. It is a significant risk in the franchise industry since the franchisee is compelled to pay royalties and other fees as requested by the franchisor. A Franchise Agreement will come to your rescue at this moment.
Only those payments to the franchisor that are specified in the Franchise Agreement must be made.
Franchise company revenue is underreported
Franchisees who underreport their revenue or sales to the franchisor are guilty of underreporting. A few contracts provide that the franchisee may be subjected to a surprise audit by the franchisors. Others are opposed to the surprise visit clause.
Some franchise agreements enable the franchisor’s representatives to look at only a few particular papers, while others allow them to look into the franchisee’s personal tax returns and house mortgages. Underreporting of sales can result in the loss of a franchise license, according to most franchise agreements. Most franchise agreements include a termination clause that cites underreporting of sales and revenue as a method of termination to preserve the franchisor’s interests.
When the franchisor refuses to provide the necessary oversight
Any franchise’s performance is determined by two criteria.
- First and foremost, it is contingent on the franchisee’s efforts.
- Second, it is subject to the franchisor’s oversight and direction.
If a franchised unit does not get the necessary supervision from the franchisor, the franchisee’s rights may be protected by the Franchise Agreement’s non-performance clause.
A franchise agreement that isn’t well-documented
For both the franchisor and the franchisee, it is nothing less than a disaster. Few franchisors are disinterested in paying attention to their training curriculum’s manuals, agreements, and rules. A franchisee purchasing such a franchise may be able to abuse the franchisor by using the terms of a poorly worded franchise agreement.
Difference between a Licensing Agreement and a Franchise Agreement
Licensing is an arrangement between two parties in which one party (licensor) sells the rights to utilise its intellectual property or produce the licensor’s products to another party (licensee) in return for a royalty.
Before entering into a legally enforceable agreement, it’s important to understand the distinctions between these two commercial agreements.
While some business owners may consider licencing to be a less expensive option than franchising, however, it seems that the above premise is incorrect. These two forms of agreements have quite distinct legal implications and are used in different situations. Businesses that might make ideal franchises are not always good for licencing agreements, and vice versa. Let us take a deeper look at the differences between licencing and franchising.
- Licensing is a contractual agreement in which a firm (licensor) provides the licensee with the right to utilise intellectual property or create a company’s product in exchange for a stipulated price (royalty). A franchise is a commercial relationship in which the franchisor allows the franchisee to do business as an independent branch of the parent company using the franchisor’s business model, brand name, or method in exchange for a fee (franchisor).
- Licensing does not necessitate registration, but franchising necessitates registration.
- Under franchising, the franchisor provides complete training and assistance to the franchisee, which is not available in licensing.
- The licensor has authority over the licensee’s use of intellectual property, but not over the licensee’s company. The franchisor, on the other hand, has a lot of power over the franchisee’s company and processes.
- The licensee is bound by the conditions of use established by the licensor in the licensing agreement for the licensed product. The licensor, on the other hand, has no control over the licensor’s company. On the other hand, the franchisor has extensive influence over the franchisee’s company in terms of service quality, marketing and sales techniques, and so on.
- Licensing is a one-time transfer of property or rights, whereas franchising requires the franchisee’s continuous help.
- Licensing allows for a significant amount of pricing negotiation. In franchising, on the other hand, there is a uniform pricing structure.
Difference between a Distribution Agreement and a Franchise Agreement
A distribution agreement is a legally binding contract between a supplier and a distributor in which the distributor purchases and sells items from the supplier in order to sell them to retailers and/or consumers directly. As a result, the distributor does not hold any stock in the firm.
The distribution agreement describes the parties’ rights, expenses, area, and obligations in respect of product distribution.
Three significant differences
The method of operation
The franchisee is allowed and encouraged to utilise the franchisor’s trademarks and brand name in ordinary business procedures. Instead, the distributor does business under its own identity. It acts as a product reseller and does not conduct business on behalf of the firm that manufactures the items
The degree of control
The franchisor has far more influence over the franchisee and the franchisee’s management of the franchised firm than a supplier has over the operations of a distributor.
An excellent example is a franchisor maintaining continuous quality control over its franchisees, frequently through an operations manual, marketing strategies, inspections, and other processes to guarantee brand standards are maintained across the network.
In most cases, a franchisee pays an initial fee and a continuing royalty to the franchisor in exchange for the right to operate the business under the franchisor’s name, whereas a distributor pays for the items purchased from the supplier.
Frequently Asked Questions (FAQs)
What is a franchisee?
Any corporation with a parent company that offers a fundamental business strategy and brand name is referred to as a franchisor. A franchisee is a third party who borrows the parent company’s values and brand image. While the franchise is owned, operated, and managed by people, the bigger parent firm, which is generally an MNC, oversees the entire process.
What role does the Consumer Protection Act of 1996 play?
This Act is written with the consumer’s best interests in mind. Consumers now have the ability to submit a complaint against both the franchisee and the franchisor under this statute. A consumer has the right to make a complaint against the unit if there is a defect in the product or service. Consumers are protected by the Consumer Protection Act from unfair trade practices.
What does the Foreign Exchange Management Act of 1999 do?
This statute kicks in when there is foreign cash and foreign assets involved. With this Act, international businesses such as Taco Bell, Mcdonald’s, and Nike may control and manage their franchises in India. The Indian government is working on rules that would make it easier for multinational businesses to create and manage franchises in India.
A sample Franchise Agreement
This Agreement (hereinafter referred to as the “Agreement”, which expression shall include all amendments made thereto from time to time) is made at …….. on this day of ….., 20.… by and BETWEEN_________________, a company incorporated and registered under the provisions of Companies Act, 2013 and having its Registered Office at _____________________ India, hereinafter referred to as the “Franchiser” which expression shall unless repugnant to the context or meaning thereof include its successors and assigns of ONE PART.
___________________ a proprietary firm having its ________________, and represented by _________________, S/o ___________________, aged about __________years, hereinafter referred to as the “Franchise” which expression unless repugnant to the context or meaning thereof be deemed to include, legal representative, executors, administrators, successors and permitted assigns of the
OTHER PART, each a party and collectively referred to as parties. Both parties as above have expressed a desire of entering in to a franchise agreement to meet their respective objectives, which are set out here in below,
a) __________on its part has entered into the business of _______________and is interested in furthering this business through “Franchise” (Conductor) operated
_________outlets on national basis maintaining a uniform standard facilities and services including uniformity in the charges levied from the customers for rendering the specified services.
b)“Franchise” on his part is interested in entering into the business of operating as a service provider through their cyber cafe outlet and thus carrying out the business of providing services to the customers.
c)___________ is desirous of appointing “Franchise” to conduct, manage and operate the services through the ____________ as per the uniform norms set up by _____________ in respect of nature of services and cost of services to the customer.
d)“Franchise” is desirous of taking over the services offered by _______________, for the purpose of its operations and management to carry out business on the terms and conductions contained herein.
e)The purpose of this Agreement is to set forth the terms and conditions under which the parties to the Agreement shall conduct themselves during the substances of Agreement.
NOW, THEREFORE, the parties, in consideration of the convents, undertakings, and commitments set forth therein hereby mutually agree as follows,
Section 1: Definitions and Interpretations
For the purpose of this agreement, the following expressions shall bear the respective meaning set forth below, Details of terminology for the services to be provided
Section 2: Grant of the Franchise
1. The “Franchise” warrants and represents to ______________ that it is a company/firm, validly existing and in good standing under the laws of Republic of India and has all requisite power and authority to enter into this agreement with ______________. All the obligations of the “franchise”
Under this agreement, the legal, valid, and binding obligations are enforceable per its terms. No proceedings are pending against the franchise, which may have an adverse effect on the ability of the franchise to perform and meet its obligations under this agreement.
2. On consideration of the “Franchise’s” applications and relying on such assurances and representations that “Franchise” has made to _____________, _____________ appoints the franchise as a franchise on the terms and conditions set forth in this agreement and in the website.
3. There is no product and/or service and/or territorial exclusivity granted to “Franchise” as part of this Agreement by ______________ may give such right or a similar right to persons other than “Franchise” to sell _________________products and services anywhere including the geographic, area surrounding the premises.
Section 3: Services, Terms & conditions
1. __________ would provide their entire range of services on their own. or through the service providers, which includes online ads, offline ads, value-added services and premium services to the “Franchise”.
2. “Franchise” will act as a single point e-hub for all the services provided by _______________falling within the purview of this agreement.
3. The entire business being on pre-payment basis, ______________will supply all the services based upon requests from “Franchise” up to limits available for “franchise”. Such limits will be equivalent to the funds available from “Franchise” with _________________at any point in time and will keep reducing with every transaction corresponding to the value of the transaction. __________________ will enhance the limit of Franchisee. From time to time, it receives amounts from “Franchise”.
4. ________________ and ”Franchise” shall conduct their business at all times, per the applicable statutes, regulations, and notification issued by the government or any other statutory authority.
Section 4: Confidentiality
1. “Franchise” shall keep all information of confidential nature received from the __________ in whatever form as strictly confidential and shall not disclose it to third parties without the prior written consent of __________ during the term of this agreement.
2. “Franchise” agrees not to disclose revenue without ___________________’s prior written consent.
Section 5: Limitation of liability
The Parties shall not be liable for any incidental, special, indirect or consequential damages arising out of or relating to this Agreement.
Section 6: Terms
This Agreement comes into force on the date of signing this Agreement and shall continue for one (1) year after this date. This agreement may be extended on the mutual agreement of both parties, unless earlier terminated per the agreement by paying a renewal fee to ____________________ by “Franchise”.
Section 7: Termination
1. This agreement may be terminated by either party at any time, without assigning any reason by giving prior written notice of ninety (90) days.
2. _________________ shall be entitled to terminate this agreement, with immediate effect upon happening of one or more of the following:
3. Failure of the “Franchise” to provide the services to the customers as per the expectations of _____________________
Section 8: Applicable Law
This agreement is governed by and constructed per the laws of India.
Section 9: Dispute Resolution and Jurisdiction
1. Any dispute, controversy or claims arising out of or relating to this Agreement or the breach, termination or invalidity thereof, shall be settled by arbitration per the provisions of the [Indian] Arbitration and Conciliation Act, 1996.
2. The arbitral tribunal shall be composed of three arbitrators, one arbitrator appointed by ________________, a second arbitrator appointed by “Franchise” and a third arbitrator to be appointed by such arbitrators.
3. The place of arbitration shall be at _____________ and any award whether interim or final, shall be made, and shall be deemed for all purposes between the Parties to be made in _________________
4. The arbitral procedure shall be conducted in the English language and any award or awards shall be rendered in English. The procedural law of the arbitration shall be Indian law.
This Agreement has been executed on the date set forth herein in two (2) copies of which the Parties have taken one each.
SECTION 10: FORCE MAJEURE
If either of the parties to the Agreement is prevented from the performance of this Agreement by force majeure such as government action or inaction, war, serious fire, flood, typhoon, earthquake, other natural calamities or other forces beyond the control of the parties, the time for the performance of the Agreement shall be extended by a period equal to the effect of those causes and neither party shall be responsible for loss or damages due to the delay.
The party so prevented by force majeure shall notify the other party by telex, cable or fax as soon as possible from the time of the occurrence of the force majeure.
For ____________________ For________________________
Authorized signatory Authorized signatory
Witness 1 Witness 1
Name: Name :
Address: Address :
Witness 2 Witness 2
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