The Research On The Cooling Off Period Of Franchising

The Regulation on the Administration of Commercial Franchises(hereinafter referred to as “the Regulation”) was promulgated by the State Council in2007. Article 12 of the Regulation regulates “The franchiser and the franchisee shall stipulate in the franchise contract that the franchisee may unilaterally rescind the contract within a certain term after the franchise contract has been concluded.”This article is generally called the “Cooling off Clause” in the law research field, which means after the binding of the franchise contract, the franchisee shall be entitled to dissolve the contract unilaterally in a certain period. This is the first legislative establishment of “Cooling off Rules” in domestic commercial franchises domain. It is also a demonstration of referencing international legislations in commercial franchises. This clause offers a legislative protection on the franchisee in the weak position and the interest balance in order to maintain the substantive balance between the two parties in the contract and achieve the fundamental principle of equality in civil law.In the legal practice, however, an inconformity of the regulation has appeared, such as, the inconsistent standards, the unjustifiable definition of the rights, and judges` subjective discretion etc. This paper first introduces the concept of Cooling off Rules and the relevant regulations in the world. By analyzing the theoretical foundation and legislation intent of the Cooling off Clause(Article 12) in China, the nature of the rights of unilaterally rescinding the contract by the franchisee, the means and consequences of such performance, the restrictions of the abuse of the right to rescind the contract, the exclusion agreement and the non-consensus on the of unilaterally contract rescinding are respectively and thoroughly discussed in the paper from the perspectives of legal theories.The author suggests exploiting the legislative experience in the world on the Cooling off Rules, especially the successful legal practice in Australia. The nature and means of the right of the unilaterally contract rescinding should be seriously stipulated. A reasonable calculation of the length of “Cooling-off” period, the statute of limitations, and the legal consequences should be regulated clearly and confirmatively. A set of regulation designs to prevent from the abuse of the Clause should also be systematically built. The author also offers some possible improvements on this field with the intention of upgrading its practicality and advancing the well-rounded development of domestic commercial franchises.