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The Civil Code of the Russian Federation

(with the Additions and Amendments of February 20, August 12, 1996,
October 24, 1997, July 8, December 17, 1999, April 16, May 15,
November 26, 2001, March 21, November 14, 26, 2002,
January 10, March 26, November 11, December 23, 2003)

Part II
Section IV
Chapter 54
The Commercial Concession

Chapter 54. The Commercial Concession

Article 1027. The Contract of the Commercial Concession


1. Under the contract of the commercial concession one party (right holder) shall undertake to grant to the other party (user) for remuneration for a definite term or without reference to a term the right of using in the business of the user a complex of exclusive rights belonging to the right holder, including the right to the firm's name and/or the commercial designation of the right holder, to protected commercial information, and also to other contracted objects of exclusive rights - trademarks, service marks, etc.
2. The contract of the commercial concession shall provide for the use of a complex of exclusive rights, the business standing and commercial know-how of the right holder in a definite scope (in particular with the establishment of a minimum and/or maximum extent of use), with an indication or without indication of the territory of use with reference to a certain sphere of business activity (sales of goods obtained from the right holder or produced by the user, other trade activity, performance of works and provision of services).
3. Commercial organizations and private persons registered as individual entrepreneurs may be the parties to the contract of the commercial concession.

Article 1028. The Form and Registration of the Contract of the Commercial Concession


1. A contract of the commercial concession shall be concluded in writing. The non-observance of the written form shall invalidate the contract. Such contract shall be deemed to be void.
2. A contract of the commercial concession shall be registered by the body which has registered the legal entity or the individual entrepreneur acting as a right holder under the contract. If the right holder has been registered as a legal entity or an individual entrepreneur in a foreign State, the contract of the commercial concession shall be registered by the body which has registered the legal entity or individual entrepreneur who is a user.
In relations with third persons parties the parties to the contract of the commercial concession shall have the right to refer to the contract only since the time of its registration.
A contract of the commercial concession of the use of the object protected by patent legislation shall also be subject to registration by the federal executive body in the sphere of patents and trademarks. The non-observance of this requirements shall invalidate the contract.

Article 1029. The Commercial Subconcession


1. The contract of the commercial concession may provide for the right of the user to authorize other persons to make use of the complex of exclusive rights granted to him or a part of this complex on the terms of subconcession, agreed upon with the right holder or defined by the contract of the commercial concession. The contract may provide for the obligation of the user to submit during a definite period of time to a definite number of persons the right of using said rights on the terms of the subconcession. A contract of the commercial subconcession may not be concluded for a longer period than the contract of the commercial concession, on the basis of which it is concluded.
2. If a contract of the commercial concession is invalid, the contracts of the commercial subconcession concluded on its basis shall be invalid as well.
3. Unless otherwise stipulated by the contract of the commercial concession, concluded for a definite term, the rights and obligations of the second right holder under the contract of the commercial subconcession (the user under the contract of the commercial concession) shall pass to the right holder in case of the termination of the contract of the commercial concession short of the term, unless he refuses to assume the rights and obligations under this contract. This rules shall be applied accordingly in case of the cancellation of the contract of the commercial concession, concluded without reference to a definite term.
4. The user shall bear subsidiary liability for the harm done to the right holder by the actions of the second users, unless otherwise stipulated by the contract of the commercial concession.
5. The rules for the contracts of the commercial concession, specified by this Chapter shall be applied to the contracts of the commercial subconcession, unless the contrary follows from the specificity of the subconcession.

Article 1030. Remuneration under the Contract of the Commercial Concession


Remuneration under the contract of the commercial concession may be paid by the user to the right holder in the form of fixed non-recurrent and periodical payments, deductions from proceeds, markups on the wholesale price of goods given by the right holder for resale, or in other form stipulated by the contract.

Article 1031. The Obligations of the Right Holder


1. The right holder shall be obliged: to transfer technical and commercial documentation to its user and provide other information needed by the user for the exercise of the rights, granted to him under the contract of the commercial concession, and also to brief the use and its workers on the matters connected with these rights;
to issue contract-based licenses to the user by formalizing them in the statutory manner.
2. Unless otherwise stipulated by the contract of the commercial concession, the right holder shall be obliged: to ensure the registration of the contract of the commercial concession (Item 2 of Article 1028);
to render contract technical and consultative assistance for the user, including assistance in the training and upgrading the skill of workers;
to control the quality of goods (works and services), produced (performed and rendered) by the user on the basis of the contract of the commercial concession.

Article 1032. The User's Obligations


With account of the nature and specificity of the activity carried on by the user under the contract of the commercial concession the user shall be obliged:
to use the firm's name and/or the commercial designation of the right holder in the way indicated by the contract during the activity stipulated by the contract;
to ensure the compliance of the quality of goods, produced by him on the basis of the contract, of the works performed and the services rendered, with the quality of similar goods, works and services, produced, performed or rendered directly by the right holder;
to observe the instructions and directions of the right holder, intended for the compliance of the nature, methods and conditions of the use of the complex of exclusive rights with the way it is used by the right holder, including the directions regarding the external and internal design of commercial premises, used by the user in the exercise of the rights granted to him by the contract;
to render to the buyer (customer) all the additional services which they could expect by acquiring (ordering) goods (works, services) directly from the right holder;
not to divulge the right holder's secrets of production and other confidential commercial information received from him;
to grant the specified number of subconcessions, if such obligation is provided for by the contract;
to inform the buyers (customers) by the most patent method that he uses the firm's name, the commercial designation, trademark, service mark or any other means of individualization of virtue of the contract of the commercial concession.

Article 1033. The Restrictions on the Rights of the Parties to the Contract of the Commercial Concession


1. The contract of the commercial concession may provide for the restrictions on the rights of the parties to this contract, in particular may provide for the following: the obligation of the right holder not to provide other persons with similar complexes of exclusive rights for their use on the territory assigned to the user or to refrain from his own similar activity on this territory;
the obligation of the user not to compete with the right holder on the territory to which the contract of the commercial concession extends in terms of business activity carried out by the user with the use of the exclusive rights belonging to the right holder;
the refusal of the user to receive under contracts of the commercial concession similar rights from the competitors (potential competitors) of the right holder;
the obligation of the user to get agreement with the right holder on the place of location of commercial premises to be used in the exercise of the exclusive rights granted under the contract, and also on their external and internal design.
Restrictive conditions may be recognized as invalid on the demand of the antimonopoly body or any other interested person, if these conditions contradict the antimonopoly legislation in the light of the market conditions and the economic position of the parties.
2. The conditions restricting the rights of the parties to the contract of the commercial concession shall be void, if: the right holder has the right to determine the price of the sale of goods by the user or the price of works (services), performed (rendered) by the user or to fix the upper or lower limit of these prices;
the user has the right to sell goods, perform works or render services for the exclusively definite category of buyers (customers) or exclusively for the buyers (customers) who have their place of location (place of residence) on the territory defined by the contract.

Article 1034. The right Holder's Liability for Claims Presented to the User


The right holder shall bear subsidiary liability for the claims made to the user for the inconsistency of the quality of goods (works, services), sold (performed or rendered) by the user under the contract of the commercial concession.
Against the claims made to the user as the manufacture of the products (goods) of the right holder, the latter shall be liable jointly with the user.

Article 1035. The User's Right to Conclude a Contract of the Commercial Concession for a New Term


1. The user who has discharged his obligations properly shall have the right to conclude a contract for a new term on the same conditions upon the expiry of the validity term of the contract of the commercial concession.
2. The right holder shall have the right to refuse to conclude a contract of the commercial concession for a new term, provided that during three years since the expiry of the validity of this contract he will not conclude with other persons similar contracts of the commercial concession and give his consent to the conclusion of analogous contracts of the commercial subconcession, the operation of which will extend to the same territory on which the discontinued contract operated. If before the expiry of the three-year period the right holder wished to grant to anybody the same rights which had been granted to the user under the discontinued contract, he shall be obliged to offer the user the conclusion of a new contract or to reimburse the losses sustained by him. With the conclusion of the new contract its terms and conditions shall be not less favourable for the user than those of the discontinued contract.

Article 1036. Changes in the Contract of the Commercial Concession


A contract of the commercial concession may be changed in keeping with the rules, provided for by Chapter 29 of this Code.
In their relations with third persons the parties to the contract of the commercial concession shall have the right to refer to changes in the contract only since the time of registration of these changes in the procedure, stipulated by Item 2 of Article 1028 of this Code, unless they prove that a third person knew or should have known about the earlier change of the contract.

Article 1037. The Termination of the Contract of the Commercial Concession


1. Each party to the contract of the commercial concession, concluded without reference of its validity term, shall have the right to abandon the contract at any time by notifying about this the other party six months in advance, unless the contract provides for a longer period.
2. The anticipatory cancellation of a contract of the commercial concession, concluded with the reference to its validity term, and also the cancellation of a contract, concluded without reference to its validity term, shall be subject to registration the procedure, established by Item 2 of Article 1028 of this Code.
3. In case of the cessation of the right holder's right to the firm's name and the commercial designation without the replacement of them by new similar rights the contract of the commercial concession shall cease to operate.
4. When the right holder or the user is declared to be insolvent (bankrupt), the contract of the commercial concession shall cease to operate.

Article 1038. The Validity of the Contract of the Commercial Concession in Case of the Change of the Parties


1. The transfer to another person of any exclusive right, included in the complex of exclusive rights given to the user, shall not be a ground for changing or dissolving the contract of the commercial concession. A new right holder shall become a party to this contract in respect of the rights and obligations relating to the transferred exclusive right.
2. In the event of the death of a right holder his rights and obligations under the contract of the commercial concession shall pass to his heir, provided that he has been registered or during six months since the opening of inheritance gets registered as an individual businessman. Otherwise the contract shall cease to operate. The rights of the deceased right holder and his obligations shall be accordingly exercised and discharged by the administrator appointed by the respective notary before his heir assumes these rights and obligations or before the heir is registered as an individual businessman.

Article 1039. The Consequences of the Change of the Firm's Name or the Commercial Designation of the Right Holder


In case of the change by the right holder of his firm's name or commercial designation, the rights to the use of which are a part of the complex of exclusive rights, the contract of the commercial concession shall be valid with regard to the new firm's name or commercial designation of the right holder, unless the user demands the dissolution of the contract and the reimbursement for damages. If the contract continues to operate, the user shall have the right to demand a proportionate reduction of the remuneration due to the right holder.

Article 1040. The Consequences of the Termination of the Exclusive Right the Enjoyment of Which Is Granted by the Contract of the Commercial Concession


If during the validity term of the contract of the commercial concession the validity term of the exclusive right under this contract has expired or such right has ceased to operate an another ground, the contract of the commercial concession shall be valid as before, with the exception of the provisions relating to the discontinued right, while the user, unless otherwise stipulated by the contract, shall have the right to demand a proportionate reduction of the remuneration due to the right holder.
If the rights to the firm's name or the commercial designation belonging to the right holder cease to exist, the consequences, provided for by Item 2 of Article 1037 and Article 1039 of this Code, shall occur.

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