Franchising Disclosure In Argentina

Author:Mr Mario Eduardo Castro Sammartino
Profession:Castro Sammartino & Pierini

Under Argentine Law, franchise agreements are governed by the Civil and Commercial Code of the Nation (Código Civil y Comercial de la Nación, or CCCN by its Spanish acronym).

The franchisor's disclosure obligations are contained in a single provision: the Article Number 1,514, Subarticle a), of the CCCN. It reads that the franchisor must:

"a) provide, prior to the signature of the agreement, economic and financial information over the evolution of two years of units similar to the one offered in franchising, which have operated enough time, either in the country or abroad."

Constructing the above-quoted legal provision, together with the other relevant applicable provision of the CCCN, and in a way coherent with the legal system as a whole, franchising disclosure in Argentina presents the following characteristics:

  1. The franchisor's disclosure obligation is precontractual (CCCN, Article Number 1,514, Subarticle a);

  2. As an obligation the franchisor must comply with before entering into any franchise agreement, the CCCN's regulations related to preliminary dealings will apply to disclosure (CCCN, Articles Number 990 through 993), being of key importance the bona fides duty. Under Article Number 991 of the CCCN, during preliminary negotiations, and even when no offer has been made, the parties must act in good faith, so as not to frustrate the deal without justifications;

  3. Under Argentine contract law and as a general principle, the provisions the CCCN sets forth apply only in the absence of parties' stipulations. Such provisions are just default rules unless its imperative nature arises out of their way of expression, content or context (CCCN, Article Number 962). Ultimately, it will be a judge, when deciding on a concrete dispute, who will determine if a certain norm is imperative or not;

  4. Specifically, in relation to Article Number 1,514, Subarticle a), of the CCCN, setting out the franchisor's disclosure obligations, it is not clear if the same is an imperative norm or just a default rule. It does not expressly state that the parties may not agree otherwise1. Nor is it possible to just derive out of its content or context that the mere violation of such provision may turn the contract void, or that such disposition is based upon public policy principles not allowing the parties to override them by contrary agreements.

    Nothwithstanding the above, and as by definition the franchise system purports to be a tested business system (CCCN...

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