Article 17 of the Saudi Franchise Law

This article gives the franchisee a special right to terminate the agreement where the franchisor breaches two basic obligations: disclosure and registration, as the Law and the Implementing Regulations set them out.

Conditions for exercising this right:

• The breach must be material; a minor mistake is not enough.
• It must relate to the disclosure or registration obligations set out in the Law and the Implementing Regulations.
• Termination must be by written notice to the franchisor.
• Termination must take place before one year has passed from the date the franchisee learned of the breach, or before three years have passed from the date it occurred, whichever is earlier.

The effect: The franchisee terminates the agreement without compensating the franchisor for doing so.

An example of calculating the period: if the breach occurred two and a half years ago and the franchisee learns of it today, the three-year period from the occurrence of the breach ends in six months, which is earlier than the one year from knowledge, so it is the final limit.

This right differs from the grounds for automatic ending in Article 16 (such as death and liquidation), and from Article 18, which restricts the franchisor's right to terminate the agreement before the end of its term, so that he may not do so without the franchisee's written consent except for a lawful ground from those it lists.

Because assessing whether a breach is "material" and calculating the period can be fine, it is advisable to consult a lawyer who specializes in commercial cases before giving notice.