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East and Central Europe Market Intelligence

Legal Country Overviews
These are legal overviews of key CEE countries.


The flag of Overview:
In Estonia franchising agreements are very briefly regulated in Chapter 19 of the Law of Obligations Act (in Estonian: Vőlaőigusseadus), in force from 07.2002.

Following is a short overview of the regulations set forth in the Law of Obligations Act as well as other relevant issues:

Definition of franchise contract. Pursuant to the Law of Obligations Act by a franchise contract, one person (the franchisor) undertakes to grant to another person (the franchisee) a set of rights and information which belongs to the franchisor for use in the economic or professional activities of the franchisee, including the right to the trade mark, commercial identifications and know-how of the franchisor.

Form of agreement. No mandatory form is prescribed in the law for franchise agreements, thus a franchise agreement may be entered into in any form. Considering Estonian legal practice written agreements are recommendable.

Obligations of franchisor. Pursuant to law of Obligations Act the franchisor is required to provide the franchisee with instructions for the exercise of the rights franchised and to provide permanent assistance related to the franchise.

Obligations of franchisee. A franchisee is required:

- in his activities, to use the commercial identifications of the franchisor;

- to ensure that the quality of the goods manufactured or services provided by the franchisee pursuant to the contract is the same as those manufactured or provided by the franchisor;

- to follow the instructions of the franchisor which are directed at the exercise of rights on the same bases and in the same manner as the franchisor;

- to provide clients with all additional services which they could expect upon acquiring goods or contracting for services from the franchisor.

Franchisor's right to review. A franchisor has the right to check the quality of the goods manufactured or services provided on the basis of a franchise contract by the franchisee.

Registration of franchising agreement. There are no mandatory requirements to register the franchising agreement.

Sub franchising. Sub franchise agreements are not specially regulated by the Law of Obligations Act, thus, regulation of the franchise applies.

Non competition. Not regulated by law.

Liability. With regard to claims brought to franchisee as the manufacturer of the goods no joint liability with the franchisor is set forth in the law, thus the liability is borne solely by the franchisee.

Amendment and termination of the contract. A contract may be amended or terminated by agreement of the parties, or on another basis prescribed by the contract or the law. It is no longer necessary to have recourse to the court in order to declare a transaction void. It is sufficient to make a declaration to the other party within six months after cessation of the circumstances serving as the basis. Everything received under a void transaction must be returned. In case of a dispute, if the court still considers the contract to be valid, the party demanding revocation shall bear the risk of compensation for damage and payment of penalties.

Preliminary contract. A preliminary contract is an agreement under which the parties undertake to enter into a contract in the future under the terms agreed upon in the preliminary contract. If, pursuant to the law, a contract is to be entered into in a specific format, the preliminary contract shall also be entered into in the same format. The main purpose of the preliminary contract is to require the parties to the transaction to conclude the basic agreement when the preconditions are stipulated. A written basic contract requires a written preliminary contract; a notarised contract requires a notarised preliminary contract, etc. It is important to conclude a preliminary agreement in the same format as the basic agreement since the conclusion of the basic agreement may be requested on the basis of a valid preliminary agreement.


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