Legal Analysis Of Legal Protection Of Franchisors Over Unilateral Termination Of Franchisee's Franchisel In Indonesia

Abstract

Unilateral termination of franchise agreements is a recurring source of dispute in Indonesian franchise practice, and it can originate from either the franchisor or the franchisee. Existing literature has focused predominantly on protecting franchisees from franchisor overreach, leaving the reverse scenario comparatively underexplored. This study examines the legal basis for terminating franchise agreements under the principle of good faith, and the legal protection afforded to a franchisor when its franchisees unilaterally terminate their agreements, based on Decision Number 854/Pdt.G/2022/PN Jkt.Sel of the South Jakarta District Court. Using a normative legal method with statutory, case, and conceptual approaches, this study analyzes the Indonesian Civil Code (Articles 1266, 1320, 1338, and 1365), Government Regulation Number 42 of 2007 on Franchising, Minister of Trade Regulation Number 71 of 2019, and the court decision itself. The findings show that Article 1266 of the Civil Code requires termination of reciprocal agreements regardless of which party initiates it, so that a franchisee who terminates unilaterally, even while alleging the franchisor's own non-compliance with franchise-disclosure obligations, commits an unlawful act under Article 1365. In the case examined, the court granted the franchisor's claim partially, declared four franchise and license agreements void, and ordered the two franchisees to pay material damages of Rp. 315,464,970 and Rp. 121,467,000 respectively, while dismissing the franchisees' counterclaim as procedurally defective (obscure liability) without reaching its substance. The decision illustrates that Article 1266's judicial-termination requirement operates reciprocally, protecting whichever party did not initiate the termination, and it highlights an unresolved gap in how franchisees can seek redress for a franchisor's own regulatory non-compliance.