Franchising... The determination of the invalidity of the contract.

Because commercial franchising requires the franchisor to provide a systematic and organized mature business model, and the franchisor needs to have the ability to provide continuous business guidance, technical support and business training services. Therefore, the franchisor needs to have certain material conditions and organizational basis, and it is difficult for individuals to meet the relevant conditions and capabilities. In addition, in view of the advantageous position of the franchisor, it is also necessary to protect the interests of the franchisee. Based on the above factors, it is necessary to strictly limit the subject qualification of the franchisor, otherwise it may lead to chaos in the franchise order, and even affect the public interest.

Article 3, paragraph 2, of the Regulations on the Administration of Commercial Franchising stipulates that "units and individuals other than enterprises shall not engage in franchise activities as franchisees". Therefore, the franchisor can only be an enterprise, and individuals and individual industrial and commercial households cannot be the franchisor. Judicial practice generally believes that the above-mentioned provisions on the qualifications of the franchisor are mandatory provisions for the effectiveness of administrative regulations. The Supreme People's Court (2010) Min San He Zi No. 19 pointed out in its reply that the provisions of Article 3, paragraph 2, of the Regulations on the Administration of Commercial Franchising that "other units and individuals other than enterprises shall not engage in franchise activities as franchisees" can be deemed as mandatory provisions of administrative regulations. Franchise contracts signed by other units and individuals other than enterprises as franchisees with others can be deemed invalid.

The Intermediate People's Court of Dalian City, Liaoning Province (2023) Liao 02 Min Zhong No. 2263 Civil Judgment determined that according to the first paragraph of Article 3 of the Regulations on the Administration of Commercial Franchising, the nature of the contract signed by both parties is a franchise contract. Regarding the validity of the contract signed by the two parties, the second paragraph of Article 3 of the "Regulations on the Administration of Commercial Franchising" stipulates that "other units and individuals other than enterprises shall not engage in franchise activities as franchisees." The prohibitive language used in this clause is a restriction on the qualification of franchising and is a mandatory provision on the effectiveness of the subject of commercial franchising activities. Willow, as an individual, does not have the main elements of the franchisor, violates the mandatory provisions, the resulting civil legal act is invalid, the contract involved in the case should be invalid contract.

The Xinjiang Uygur Autonomous Region Higher People's Court (2023) Xinmin Final No. 98 Civil Judgment found that: "The second paragraph of Article 3 of the" Commercial Franchise Management Regulations "stipulates:" Other units and individuals other than enterprises shall not engage in franchise activities as franchisees." This provision is a mandatory provision for effectiveness. Combined with the provisions of Article 153, paragraph 1, of the the People's Republic of China Civil Code, "Civil legal acts that violate the mandatory provisions of laws and administrative regulations are invalid", it can be seen that units other than enterprises Because individuals do not have the main qualification requirements for engaging in franchise activities, the franchise contract signed by them engaged in franchise activities shall be deemed invalid according to law. Specifically in this case, the Linghe Restaurant in Yining City is an individual industrial and commercial household, and does not have the subject qualification conditions stipulated in the second paragraph of Article 3 of the aforementioned Commercial Franchise Management Regulations. Therefore, the case signed by it involves the ''Linghe Chicken Silk Franchise "Franchise Contract" is invalid due to violation of the mandatory provisions on effectiveness.

Beijing Chaoyang District People's Court (2021) Beijing 0105 Minchu No. 54131 Civil Judgment determined that after the company's business license has been revoked by the administrative authority, it shall no longer engage in business-related activities, and shall establish a liquidation within 15 days after the business license is revoked. The team began to liquidate the company's claims and debts. After the defendant's business license was revoked by the Beijing Chaoyang District Market Supervision Administration on May 20, 2019, he still signed a contract with the plaintiff on August 21, 2019 to continue to engage in business activities. This behavior violated the company law and the registration of enterprise legal persons. According to the mandatory provisions of the regulations, the contract involved in the case should be invalid.

Article 8, paragraph 3, of the Regulations on the Administration of Commercial Franchising stipulates that if the franchised products or services can only be operated with approval in accordance with the law, the franchisor shall also submit the relevant approval documents. According to the Decision of the State Council on Establishing Administrative Licenses for Administrative Examination and Approval Items that Really Need to Be Retained (revised on August 25, 2016), products or services that should be approved according to law refer to automobiles, books, newspapers and magazines, drugs, pesticides, agricultural films, crude oil, refined oil, audio-visual products, grain, vegetable oil, sugar, tobacco, cotton and other products or services such as education, medical treatment, pawn, audio-visual program information network dissemination.

Enterprises operating the above-mentioned products or services shall pass the administrative license from the relevant examination and approval departments and obtain the approval documents. If the corresponding approval is not obtained, the signed franchise contract is invalid. However, if the franchisor or franchisee has met the relevant specific conditions before the franchise dispute occurs, the relevant contract may be deemed valid.

Shanghai Intellectual Property Court (2022) Hu 73 Civil Judgment No. 804 found that according to Item 183 of the Catalogue of Administrative Licenses Set by the State Council for Administrative Examination and Approval Items that Really Need to Be Retained revised on August 25, 2016, the examination and approval of the qualifications for wholesale, storage and retail of petroleum and refined oil products is an administrative licensing matter. In this case, the purpose of the contract signed by Lanrun Company is to obtain the needs of third-party customers by using the network platform provided by Zhuoshi Company, and then to provide diesel filling services to third-party customers by using its own refueling truck, and to measure and charge through the metering software bound on the refueling gun equipped with the refueling truck. Therefore, Lanrun Company is engaged in the retail business of refined oil. It engages in related activities without obtaining administrative permission, disrupts the operation order of the refined oil market, and has potential safety hazards, and its behavior violates the mandatory provisions of administrative regulations. The "Easy Point Refueling Agreement" signed by both parties is invalid due to violation of the mandatory provisions of administrative regulations.

The People's Court of Wucheng County, Shandong Province (2022) Lu 1428 Civil Judgment No. 748 at the beginning of the Republic of China held that the contract involved in the case mainly involved express delivery business, so the Yuantong Express Franchise Contract (2021 Edition) signed by Weimin Express Company and Wang Mou1 should be bound by the the People's Republic of China Postal Law. According to the provisions of the "the People's Republic of China Postal Law", to operate express delivery business, one shall obtain an express delivery business license; without permission, no unit or individual may operate express delivery business. In this case, for the people express company will Yuantong express express express business license to Wang Moumou 1 to join the operation, but Wang Moumou 1 as a natural person did not obtain the express business license, the contract involved in the case violated the mandatory provisions of laws and administrative regulations, is invalid contract.

A format clause is a clause that the parties have drawn up in advance for the purpose of reuse and has not negotiated with the other party at the time of the conclusion of the contract. In commercial franchising, the franchisor will formulate a formatted franchise contract in order to reduce the negotiation process, save the signing time, speed up the transaction process and improve the efficiency of the transaction. At the same time, the franchisor will take advantage of the dominant position to develop unequal format terms, and even damage the legitimate rights and interests of the franchisee. Therefore, it is necessary to examine the legality of some format clauses in order to safeguard the fairness of the transaction and the legitimate rights and interests of the franchisee. If the standard terms provided by the franchisor unreasonably exempt or reduce its liability, increase the liability of the franchisee, limit or exclude the main rights of the franchisee, the standard terms shall be invalid. It is important to note that some of the format clauses of the franchise contract are invalid and do not affect the validity of the other clauses.

The People's Court of Laoshan District, Qingdao City, Shandong Province (2022) Lu 0212 Minchu Civil Judgment No. 3873 found that the right of the franchisee to unilaterally terminate the franchise contract is a legal right, and the franchisor cannot arbitrarily restrict or deprive it. The defendant limited the "certain period" to seven days in its contract, which clearly increased the liability of the franchisee, and the agreement was a deprivation of the plaintiff's legal rights. The contract in question is a form contract provided by the defendant, so according to Article 497 of the the People's Republic of China Civil Code, if the party providing the form clause unreasonably exempts or reduces its liability, increases the liability of the other party, restricts the main rights of the other party or excludes the main rights of the other party by providing the form clause, the clause shall be null and void. Therefore, the format clause of the 7-day cooling-off period stipulated in the contract in question is invalid.

The Intermediate People's Court of Foshan City, Guangdong Province (2022) Yue 06 Min Zhong No. 16057 Civil Judgment: In this case, Article 1, Point 5 of the contract involved in the case, "No matter the contract expires, the contract is terminated halfway or for other reasons, Party A (Xiao Yao Company) will not return it", Article 2, Point 2 "No matter the contract expires, the contract is terminated halfway or other irresistible natural disasters and national policy reasons, the terms of" non-refundable "are format terms. The above clauses stipulate that no matter under what circumstances the two parties terminate the cooperative relationship, that is, no matter for what reason the contract is terminated or terminated, no matter whether Wang Cheng and Xiao Yao Company are at fault or not, Xiao Yao Company shall not bear the responsibility of refunding the alliance fee, and Wang Cheng shall not have the right to recover the alliance fee. The above clauses unreasonably exempt Xiao Yao Company from its responsibility and exclude Wang Cheng's main rights, which shall be invalid.

"Two stores for one year" refers to the second paragraph of Article 7 of the "Regulations on the Administration of Commercial Franchising" that "the franchisor shall have at least two direct stores engaged in franchise activities, and the operating time shall exceed one year." Franchisors need a mature business model and some experience to engage in franchising, and "two stores for one year" is one of the quantitative criteria to judge whether the franchisor has a continuous operation and mature business model, and is one of the conditions for the franchisor to engage in franchising activities.

If the franchisor does not have the "two stores for one year" condition when signing the franchise contract, is the contract invalid? There was a big controversy before this issue, until the Supreme People's Court pointed out in the "Reply on the Validity of Franchise Contracts Signed by Franchisors Who Do not Have" At least 2 Direct-operated Stores and Operating Time for More than 1 Year "" (2010 Min San He Zi No. 18): "The franchisor should have at least 2 direct-operated stores and operate for more than 1 year when engaging in franchise activities, the administrative mandatory provisions of administrative regulations, the franchisor does not meet the above conditions, does not of course lead to the invalidity of the franchise contract signed with others. After that, it is generally believed in judicial practice that the franchisor does not have the condition of "two stores for one year" when signing the franchise contract will not lead to the invalidity of the contract.

Beijing Intellectual Property Court (2022) Beijing 73 Minzong No. 1017 Civil Judgment affirms that the "two stores for one year" system in franchising is actually the management requirement put forward by relevant administrative departments to the franchisor in order to further standardize the franchising industry. If Xinyue International Company carries out franchising without "two stores for one year, the legal consequences are the administrative penalties stipulated in Article 24 of the Regulations on the Administration of Commercial Franchises, etc., rather than the invalidity of the contract involved in the case advocated by Yang Yongmei. Therefore, Yang Yongmei put forward Xinyue International Company because it does not have the "two stores one year" involved in the contract invalid claim, lack of legal basis, the court does not support.

The first paragraph of Article 8 of the Regulations on the Administration of Commercial Franchising stipulates that the franchisor shall, within 15 days from the date of the first conclusion of the franchise contract, file with the competent department of commerce in accordance with the provisions of these regulations. The main reason for stipulating the filing system is that the government needs to carry out necessary supervision and management of franchise activities to maintain market order and protect the legitimate rights and interests of the parties. The franchisor filing system is conducive to the regulation and supervision of franchising by the competent commercial department, to the franchisee's understanding of the basic situation of the franchisor, and to the convenience of social supervision. At the same time, the franchisor filing system is also conducive to the protection of the franchisor's business model and franchise system.

If the franchisor does not file with the competent department of commerce, is the franchise contract invalid? Judicial practice generally believes that the provisions of the Commercial Franchise Management Regulations on the franchisor's filing are mandatory administrative provisions of administrative regulations, which do not affect the effectiveness of the franchise contract, and the franchisor's failure to file with the competent department of commerce will not lead to the contract invalid.

The Intermediate People's Court of Zhongshan City, Guangdong Province (2023) Guangdong 20 Civil Judgment No. 1606 determined that the provisions of Article 8, paragraph 1, of the Regulations on the Administration of Commercial Franchising are aimed at regulating commercial franchise activities and promoting the health of commercial franchising. Orderly development, maintenance of market order, is a mandatory administrative requirement. In this case, Mengyi Blu-ray Company violated the management mandatory regulations, not the effectiveness regulations, and did not comply with the circumstances stipulated in Article 153 of the the People's Republic of China Civil Code. The contract involved in the case is the true intention of both parties and does not violate laws and regulations. The mandatory provisions of the law are legal and effective.

It should be noted that in judicial practice, there are still a very small number of judgments that the franchisor's franchise contract is invalid when the franchisor does not meet the conditions of "two stores for one year" and has not been filed. This view is by no means a general consensus in the judicial circle, and it also violates the Supreme People's Court. The spirit of the reply, but sufficient attention should be paid when dealing with similar cases. For example, the People's Court of Chancheng District, Foshan City, Guangdong Province (2020) Yue 0604 Min Chu Civil Judgment No. 20326 determined that Articles 7 and Article 8, paragraph 1, of the Regulations on the Administration of Commercial Franchising are mandatory provisions of validity, and violate laws and administrative The mandatory provisions of the regulations shall be invalid contracts. The defendant Outing Er company violated the above provisions, so the "franchise contract" involved in the case should be invalid contract. The People's Court of Chancheng District, Foshan City, Guangdong Province (2020) Civil Judgment No. 37919 of 0604 Minchu held that in this case, a company did not have more than 2 direct stores but as a franchisor allowed Huang Lina to engage in franchise activities, so the franchise contract "Catering Service Contract" involved in the case should be invalid (the judgment was revised by Civil Judgment No. 17681 of Guangdong Province Foshan Intermediate People's Court (2021), it is considered that the Regulations on the Administration of Commercial Franchising require the franchisor to meet the conditions of "two stores for one year" and contract filing, which are mandatory administrative provisions of administrative regulations, and shall bear corresponding administrative responsibilities in violation of the above provisions, but the franchisor's failure to meet the above conditions does not of course lead to the invalidity of the franchise contract).