Argentina: Franchising In Argentina: Exclusivity and Other Clauses

Last Updated: 19 September 2016
Article by Mario Eduardo Castro Sammartino
Most Read Contributor in Argentina, November 2017

1. The term of the contract

The Civil and Commercial Code of Argentina (Código Civil y Comercial de la Nación or CCCN) imperatively determines as a general principle that the minimum term of the franchise agreement must be four years. Provided that the parties agree upon a shorter term or no term at all, the contract is deemed to have been entered into for four years. Notwithstanding this legally mandatory minimum term, a shorter term may be agreed upon under special circumstances, such as trade fairs, conferences, activities developed within premises or ventures with a foreseen shorter duration, or the like (Article 1,516).

When it comes to development franchises and as an exception to the general principle, the minimum term must be five years (Article 1,513, Sub -Article b)).

2. Exclusivity

According to Article 1,517 of the CCCN, franchises are exclusive for both parties, unless the parties stipulate otherwise limiting or excluding exclusivity. Provided that exclusivity not be limited or excluded by contractual provisions, the CCCN establishes that the franchisor cannot authorize another franchisee in the same territory, except with the consent of the existing franchisee.1

Additionally, the franchisor may not directly commercialize to third parties goods or services under the franchise within the franchisee´s territory or area of influence (Article 1,518, Sub-Article b).

Accordingly, the franchisee must perform the franchised activities at the premises specified within the territory granted or, otherwise, in the area of influence. Further, the franchisee cannot operate – directly or indirectly- franchise units or activities that may be construed competitive.

3. Other clauses

Under Article 1,518, unless otherwise agreed by the parties, the following provisions will apply to franchise agreements:


Unless otherwise agreed upon, the franchisee may not assign its contractual position or the rights emerging from the contract while the agreement is in force, except for pecuniary obligations. This provision does not apply for wholesale or master franchises, where the franchisee may grant sub-franchises (article 1,518, sub-article a)).


The right to the clientele corresponds to the franchisor. The franchisee cannot move the location of its attention or manufacturing premises (Article 1,518, Sub-article c).

Franchisee´s fees

The franchise contract is by definition onerous, being the parties free to agree on the franchise fee (Article 1,512, Article 1,513, Sub-Article a), and Article 1,515, Sub-Article e)).

Void Clauses

Article 1,519 declares null and void the clauses preventing the franchisee: 

a) To justifiably challenge the franchisor's intellectual property, trademarks, patents, commercial names, copyrights and others included in the franchise;

b) To purchase goods included in the franchise from other franchisees within the country, provided they meet the qualities and contractual characteristics; and

c) To meet with or establish non-business relationships with other franchisees.

4. Liability of the parties

According to the Article 1,520 of the CCCN, the parties to the franchise agreements are independent and no legal relationship exists between them2. As a consequence and following the cited disposition:

a) The franchisor is not liable for the franchisee´s obligations, except legal provision to the contrary;

b) The franchisee´s employees do not have labor relationship with the franchisor, without prejudice to the application of the norms on labor fraud;

c) The franchisor does not answer for the franchise system 's profitability. However, the franchisor is liable for defects in the franchise system, causing proved damages to the franchisee and not arising out of gross negligence or willful misconduct of the franchisee (Article 1,521).

5. Termination of the Franchise Agreement

Under Article 1,522, the termination of franchise agreement is governed by the following rules:

a) Death or incapacity of any of the parties if human persons

b) Termination by just cause

The agreement cannot be terminated without just cause within the term agreed between 
the parties. Notwithstanding, failure to comply with certain obligations may derive in anticipated termination by just cause, according to Article 1,084 of the CCCN (Article 1,522, Sub-article b). The CCCN does not bring any specific regulation for breach of the franchise contract. The general regimen for breach of contracts applies to franchise agreements and so the contract may be terminated in case any of the parties fails to comply with its obligations, as long as the event of non-compliance is essential (CCCN, Article 1,084) and previous request to meet the unfulfilled obligation for a term of no less than fifteen days has been served (CCCN, Article 1,088). The innocent party may also seek indemnity for damages or payment of the non-compliance penalties provided for in the franchise agreement.

c) Expiration of its term

Under the CCCN´s provisions, the expiration of the contract of franchise´s term does not terminate the agreement by itself unless the interested party denounces the contract, serving the counterparty with a termination notice at least thirty days in advance of the expiration date (CCCN, Article 1,516). In the absence of said prior notice, the contract is tacitly extended by operation of law for a one-year period; by means of a second renewal, the term becomes indefinite (CCCN, Article 1,516, last paragraph). Contracts entered into for a period shorter than three years – based upon special circumstances as defined by Article 1,516 - are not tacitly extended and consequently terminate on the expiration date (CCCN, Article 1,522, Sub-Article c).

Irrespective of the length of the term of the franchise contract and further to the above explained denounce of the agreement, the party willing to terminate it by the expiration of the original term or any of its extensions, must serve its counterparty with a prior notice of no less than one month per year of duration, up to a maximum of six months. In no case will just cause be required. Failure to give the required prior notice, give the counterparty right to claim compensation for loss of profits. In this case, the indemnification should be calculated as an estimation of the profits the innocent party would have made during the length the anticipation period should have had (CCCN, Article 1,522, Sub-Article d) and Article 1,493).

6. Non-competition

Non-competition is a contractual obligation, both during the contract´s effectiveness and after its termination. Non-competition covenants to be effective after termination of the contract, irrespective of the cause, are valid for up to one year within a reasonable territory (CCCN, Article 1,522, last paragraph).

7. Tax considerations

Provided franchise agreements are registered when appropriate before the INPI and according to the regulations applicable to the transfer of technology´s contracts, the franchisor will benefit from a lower legally presumed net income for income tax withholding regime purposes and the franchisee will be allowed to the deduct the payments as expenses with certain limits (Transfer of Technology Law Number 22,426 (Ley de Transferencia de Tecnología) and its Regulatory Decree Number 580/91; Foreign Investment Law Number 21,382 (Ley de Inversiones Extranjeras) and its Regulatory Decree Number 1,853/93; Income Tax Law Number 20,628 (Ley de Impuesto a las Ganancias and its Regulatory Decree Number 1,344/98; INPI´s Resolution Number P-328/2005).

8. Conclusion

Any piece of legislation may always be improved to cover better the needs weighed when enacted. The franchise agreement´s provisions are not the exception. However, the regulation of the franchise contract in the CCCN is a positive step bringing more predictability for this field and improving the business environment for all the interests at play in the franchise business.

For an introduction to the franchise´s regulation by the Civil and Commercial Code of Argentina and read about the contract´s definition and key features and the franchisor and franchisee´s obligations, you are welcome to visit the relevant article in our Legal Blog.


1. Case law has admitted the resolution of franchise agreements when the franchisor has authorized the opening of new business within the exclusive area of the franchisee. In these cases, compensation for loss of earnings from setting up of the new franchisee to the end of the term of duration of the agreement has been acknowledged (National Chamber of Commerce, Court B, 30/6/2003).

2. The franchisee must clearly show its independence in its invoices, contracts and other commercial documents, without interfering with the common identity of the franchise network, in particular with its names, common signs and uniform display of its premises, goods or means of transport. (Article 1,520, final paragraph).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Mario Eduardo Castro Sammartino
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions