Non-Compete Clauses And Liquidated Damages In Franchise Agreements

International Law Office:

Introduction
Franchisors, as brand owners, often seek to protect their brands and the recognition thereof by including in franchise agreements certain non-compete obligations that must be met by the franchisees during or after the term of the agreement. Such non-compete clauses often have corresponding liquidated damages clauses. Such a non-compete clause is indispensable to protect a brand, but if the clause is excessively restrictive, a court may find it to be partly or entirely invalid under Article 90 of the Civil Code (ie, it may be deemed invalid from a public policy standpoint) or it may be subject to administrative scrutiny and penalties under the Anti-monopoly Act. This update considers various factors under Japanese law that should be considered when drafting or reviewing such non-compete clauses and liquidated damages clauses in franchise agreements.

Judicial precedent on validity of non-compete clauses… carry on reading.