The expert warns about what can happen if the contract is only verbal
Company dynamics and, sometimes, inappropriate behavior on the part of its agents prevent full compliance with contractual governance rules. In other words, on many occasions, in their eagerness to close deals quickly, entrepreneurs end up skipping some steps. Furthermore, there are also cases in which a person takes advantage of the “urgency” of the other party to obtain advantages, such as not signing the relevant documents.
In the world of franchising, in addition to other formalities, the Business Franchising Law, in light of articles 2 and 7, point I, requires the franchisor to deliver to the candidate franchisee the “Franchise offer circular, written in Portuguese, in an objectively accessible way” and that contracts that “produce effects exclusively in the national territory” must be “written in Portuguese”.
In this context, the question that arises is whether or not “verbal franchise agreements” produce any effects. For example, the TJ/SP has already ruled on the case (appeal no. Appeal no. 1025834-14.2019.8.26.0554, j. 08.11.2022) in which it annulled the signed oral contract, based on Article 166, IV, of the Civil Code, since the agreement did not follow the form prescribed by law (in this case the offer circular was not sent and no type of contract was stipulated), resulting in the restitution of the sums paid as rights of franchising and royalties.
It is interesting to note that the Court declared the nullity “per se”, without even analyzing whether the activities carried out by the parties could indicate the validity of the legal transaction.
On the other hand, according to appeal no. 1040195-49.2020.8.26.0506 (j. 26.04.2022), the same Court of Justice of São Paulo declared a verbal franchising contract valid, on the basis of the fact that, due to the fact that it occurred, the tacit nature remained configured acceptance of the affiliate.
It should be noted that, in this case, it was understood that there had been no failure to send the franchising offer circular and that the parties had signed a pre-contract. Furthermore, the Court based its decision on the fact that the franchisee’s business had been operational for more than 4 years, as well as on the fact that the franchisor had demonstrated the transfer of know-how and the provision of the necessary operational technical support.
The line adopted by the second decision reported above is the correct one, considering that the burden of seeking the complete formalization of franchising contracts does not fall exclusively to the franchisor.
The parties benefited from it
Let’s imagine a scenario in which a franchisor, still at the beginning of its business, ends up not collecting the franchisee’s signatures, due to the latter’s inexperience, structural deficiencies or bad faith. Now the parties cannot take advantage of their own turpitude.
It is worth remembering that there is consolidated jurisprudence according to which failure to send the offer circular, in itself, is not sufficient for the agreement to be annulled, i.e. it is always necessary to analyze the concrete case in light of all the existing elements.
When evaluating whether verbal franchise agreements are void or not, aspects such as the franchisee’s knowledge of the subject matter, the length of time the company has been in business, among others, must be taken into consideration.
Finally, it is important to clarify that signing the franchising contract is also of interest to the franchisee, since it will guarantee the exploitation of the brand for the agreed period of time and, therefore, a return on the investment.
Daniel Cerveira is a partner at Cerveira, Bloch, Goettems, Hansen & Longo Advogados Associados. He is the author of the books “Centri Commerciali-Limites na Liberdade de Contratar” (2011) and “Franchising” (2021).
Source: Terra
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