The Franchise Contract Under The Civil And Commercial Code

Author:Mr Javier Canosa
Profession:Canosa Abogados

On August 1, 2015, the Civil and Commercial Code (hereinafter "CCC") entered into force, introducing specific legal regulation on the franchise contract from Sections 1512 to 1524.

The CCC provides a legal definition of the franchise contract establishing that it is performed when one party - the franchisor - grants another party - the franchisee - the right to use a special system designed to sell certain goods or services under the trade name of the first one against direct or indirect benefit of the latter.

Regarding the main obligations of the parties to the franchising contract, the CCC establishes that the franchisor must provide economic and financial information on the previous evolution of the system offered to the franchisee as well as technical knowledge and continuous marketing advice. In the event that the franchising includes the provision of goods or services by the franchisor or third parties, it must be ensured that it will be in adequate quantities and at reasonable prices, in accordance with local and international customs. In addition, the recent legislation provides that the franchisor must be the exclusive owner of all intellectual property rights or be entitled to use and transfer them under the terms of the franchising contract, which should be internationally protected. Finally, in order to ensure franchisee's independence, the franchisor shall not have any kind of shares in the other party's company.

In connection with the franchisee's contractual duties, he must effectively develop the franchised activity complying with the technical instructions of the franchisor and, in turn, provide any information on its development, facilitating inspections from the other party. Moreover, the franchisee shall refrain from acting against the prestige or identification of the system subject of the franchise as well as avoid disclosing confidential information about technical knowledge provided by the franchisor.

According to the CCC, the parties must comply with a duty of exclusiveness, unless they decide to restrict or remove it from the franchise contract. Otherwise, the franchisee is unable to perform competitive activities against the interests contemplated in the contract, and the franchisor is forbidden to authorize the operation of another franchised system in the exclusive practice area of the franchisee unless it is expressly authorized.

Moreover, unless otherwise agreed, the CCC establishes that the franchisee shall...

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