Journal of Legal, Ethical and Regulatory Issues (Print ISSN: 1544-0036; Online ISSN: 1544-0044)


Good Faith as a Key Principle of Business Ethics to Franchise Agreement and Development in Indonesia

Author(s): Pan Lindawaty Suherman Sewu

Franchising is a business application in providing guarantees to other parties to use the trademarks along with the processes and sales distribution of goods/services. Interactions between the franchisor and franchisee relationships build on the basis of an agreement. The main principle of creating a franchise agreement is a base on good faith. The relationship between the parties in the franchise agreement is based on human dignity. Freedom of contract is subject to the norms and values of goodwill which embodied in business ethics especially when implemented in business activity. The principle of good faith is a universal value with global principle. The principle of good faith basically has two dimensions of honesty-rationality and decency/fairness. Regulation on the franchise especially with regards to clause contained in a franchise agreement and disclosure document (prospectus) must be be formulated based on good faith of the parties. The principle of good faith in the franchise agreement on business practices in Indonesia must develop better so the development of the franchise will be increased significantly. Application of the principle of good faith cannot be imposed entirely to the parties, because the perception and understanding of the pattern of the franchise in the businesses may vary among parties. Application of the principle of good faith in the franchise agreement and franchising practices must be supported by legal institutions that can provide guarantees and legal protection for the interests of the parties, especially the franchisee.

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