PERU Law and Practice Contributed by: Walter Aguirre, María Angela Vásquez and Sebastian Montes, Aguirre Abogados & Asesores
Accordingly, this principle imposes a duty on both the franchisor and the franchisee to disclose relevant information to the other party at every stage of the franchise approval process. 2.2 Consequences of a Failure to Disclose If the aggrieved party can demonstrate that it has suf - fered any damage resulting from a lack of good faith in respect of the disclosure of information, it may file a claim for compensation against the other party. Fur - thermore, if the aggrieved party proves that it was mis - led due to the other party’s failure to disclose material information it possessed, such failure may be grounds for annulment of the agreement, according to Section 201 of the Peruvian Civil Code. Notwithstanding the foregoing, it must be noted that litigation before Peruvian civil courts is time-consum - ing, and it takes many years to obtain a final decision. 2.3 Franchise Disclosure Exemptions Since the duty of disclosure is not expressly regulated under Peruvian law, there are no formally recognised exceptions to such duty. 2.4 Franchise Disclosure Language/ Translation Requirements The franchise agreement may be drafted in any lan - guage agreed upon by the parties. Peruvian legisla - tion does not expressly prohibit the use of foreign languages in this context. Nonetheless, it is recom - mended that the agreement be drafted and executed in a language understood by both the franchisor and the franchisee. In practice, franchise agreements are usually executed in either Spanish or English.
for the Defense of Competition and the Protection of Intellectual Property ( Instituto Nacional de Defensa de la Competencia y de la Protección de la Propiedad Intelectual INDECOPI). 3.2 Franchise Registration Process Regarding the registration process and related for - malities, see 3.1 Mandatory Registration . 3.3 Consequences of a Failure to Register As noted previously, there are no consequences for failing to register the franchise agreement, as no requirement to do so currently exists. However, in the case of industrial property rights (trade marks, pat - ents, industrial designs, trade secrets, trade names, etc) belonging to the franchisor, registration with INDECOPI is necessary to ensure protection that is enforceable against third parties. Applicable Peruvian law does not require any demon - stration of prior business profitability as a prerequisite to operating a franchise. However, from a commercial standpoint, this is clearly a fundamental factor that any prospective franchisee should evaluate carefully. 5. Duration, Renewal and Termination 5.1 Duration of a Franchise Agreement The term or duration of a franchise agreement is freely determined by the parties and generally depends on the nature of the business, the investment recovery period and the expected profitability. Based on the authors’ experience, franchise terms typically range from five to seven years, depending on these factors. 5.2 Franchise Renewal 4. Other Requirements 4.1 Past-Profitability Requirements There is no statutory obligation to renew a franchise agreement or provide any form of compensation upon non-renewal. However, the parties may agree in advance to the conditions under which the agreement may be renewed. Otherwise, the franchise agreement will automatically expire upon completion of its term.
3. Franchise Registration 3.1 Mandatory Registration
Under the current legal framework, there is no spe - cific obligation to register a franchise agreement. Not - withstanding the foregoing, if the franchise agreement involves a licence to use the franchisor’s intellectual property in favour of the franchisee, it is highly rec - ommended that such intellectual property be pre - viously registered in the franchisor’s name with the competent authority, namely the National Institute
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