PERU Law and Practice Contributed by: Walter Aguirre, María Angela Vásquez and Sebastian Montes, Aguirre Abogados & Asesores
5.3 Termination of the Franchise Agreement In addition to termination upon expiration of the term or mutual agreement between the parties, Section 1430 of the Peruvian Civil Code permits the estab - lishment of express termination or early termina - tion grounds for franchise agreements. This type of clause is known as an “express termination clause” and becomes applicable upon the mere occurrence of the specific circumstance defined in the agreement, together with the effective notice to the other party of the termination of the agreement. Such clauses are commonly accompanied by the imposition of penal - ties. It is strongly recommended that the franchise agree - ment explicitly provide that non-compete and con - fidentiality obligations will remain in effect following termination, in order to protect the franchisor’s busi - ness model. 6. Restrictions on Competition in Franchise Agreements 6.1 Treatment of Competition Restrictions in Franchise Agreements Under the applicable legal framework, it is advisable and common to include broad non-compete clauses in the franchise agreement in order to safeguard the franchisor’s rights and protect the integrity of its busi - ness model. There are no specific restrictions. However, the following legal provisions should be taken into account to ensure proper enforcement of the franchise agreement. • Legislative Decree ( Decreto Legislativo ) No 1034: prohibits and penalises anticompetitive conduct with the objective of promoting market efficiency and consumer welfare. This legal provision regu - lates and prohibits abuse of dominant market position, as well as horizontal and vertical collusive practices. • Legislative Decree ( Decreto Legislativo ) No 1044: prohibits and penalises any act or conduct con - stituting unfair competition that may actually or potentially distort or impede the proper functioning of the competitive process. This includes acts such
as deception, confusion, undue exploitation of another’s reputation, disparagement, misappropria - tion of trade secrets, business sabotage and false advertising, among others. Additionally, it is important to highlight Law No 31112, the Act on Prior Control of Business Concentration Operations, which, since 2021, has established a prior approval regime for business concentration transac - tions with the aim of promoting effective competition and economic efficiency in markets for the benefit of consumers. Under certain circumstances, this regula - tion will apply to business concentration transactions that produce effects in Peru, including mergers, asset acquisitions, the formation of a new economic entity or the execution of a joint venture agreement or any “other similar contractual arrangement” that entails the acquisition of control over one or more economic agents. Although uncommon, a franchise agreement could potentially be subject to this law and therefore require prior authorisation. 6.2 Exclusive Territories and Competing Businesses Exclusive territories are permitted, and it is essen - tial that the franchisor clearly define the specific territory in which the franchise agreement will be in effect. Franchise agreements in Peru often include an express prohibition to operate a business that directly or indirectly competes with the franchised business. Furthermore, the franchisor may validly enforce such a prohibition even after the expiration of the agreement. 6.3 Requiring Franchisees to Purchase Specific Goods and Services Similar to what was described in 6.2 Exclusive Ter- ritories and Competing Businesses , it is possible to establish valid and exclusive obligations for the fran - chisee to acquire from the franchisor certain goods, services or technology related to the delivery or distri - bution of the franchisor’s offerings. These obligations may be incorporated into the franchise agreement itself or included in annexes and/or supplementary agreements. 6.4 Channel Reservation It is common practice for the franchisor to reserve cer - tain sales channels, including direct and online chan -
80 CHAMBERS.COM
Powered by FlippingBook