New franchise law and what changes in contract translation

The new law regulates business status and reformulates franchise contracts

The new franchise law, as some experts on the subject say, came to provide maturity to a process that occurs very often among Brazilian entrepreneurs.

On December 27, 2019, the President of Brazil, Jair Bolsonaro, enacted Law No. 13,966/2019, which came into force after 90 days – the time necessary for the systems to adapt (between publication and effectiveness), which is called vacatio legis – and which revoked previous Law No. 8,955/1994.

Thus, the decree was renewed, which had many flaws and ended up demoralizing enterprises. The new law brings changes to previous franchise contracts, which will now be adapted according to the new provisions.

What has changed?

The Consumer Protection Code was removed from the franchisor and franchisee relationship, now the relationship is between entrepreneurs, that is, the consumer is not involved.

In the case of a business with parties able to relate legally, the arbitrary process has also been included in one of the clauses of the law, which means that the parties can resolve their legal disputes with the help of an intermediary, without the need for a legal procedure.

In addition, the franchisee also becomes more aware of the venture under contract. Now, the COF (Franchise Offering Letter) must be sent by the franchisor within a maximum period of ten days.

This means that no deal is signed without both parties having full knowledge of what is being done, so that there is no regret and the situation does not get out of control.

Also analyzed by the Brazilian Franchising Association, the new franchise law guarantees that, with well-regulated contracts, processes will occur more sharply.

Why has it changed?

Before, the franchisor was seen as a service provider and standard requirements, for example, could be seen as abusive, due to the franchisee being seen, in a way, as a consumer.

Some situations, such as marketing promoted by the brand, for example, make the company fully responsible for the image it transmits, together with its services. However, it is understood that the services are the responsibility of the franchisee.

Put this way, it is rather a business relationship than a product and service relationship, as in the case of consumption.

The franchisee must then understand its position in the enterprise so that it can act in accordance with the new contractual clauses established.

The changes occurred not only for private companies, which aim at private profit, but also for all organizations that, under the new franchise law, will be able to franchise, even if they do not exist for profit.

This means foundations, institutions, private-public companies, among others, may fall under this law, which can be confusing in terms of establishment, if contracts are not well formulated.

How can the new franchise law influence the translation of contracts?

According to the contractual changes, which will be seen in more detail, especially the Franchise Offering Letter (the code that regulates such relationship), the translation of contracts plays a fundamental role in this process.

This type of translation allows businesses like franchises to take place, even between companies from different countries that, consequently, will have specific economic regulations.

In this way, there is no sovereignty between the laws, only adaptations must be made so that business is made in the best possible way.

In this sense, contracts must be translated by an experienced translation agency, which will meet your demands and help your contract comply with the rules of the country where it will be used.

Previously drafted contracts should also undergo new translation. With some clauses being updated, everything else will have to be changed, including what was already in effect.

For this reason, companies must always be attentive to updates and not ignore the need for a new translation service by a qualified professional due to constant law changes.

And, for contracts to be legally valid, automatic translators should not be trusted, due to potential mistakes

It is important that, in addition to contracts being legal, your document be also in accordance with technical standards, so that there is no disagreement – especially when it comes to economic matters, where any detail can be crucial for the permanence of a business.

That is why ABF (Brazilian Franchising Association) plays a fundamental role in franchising processes. It has been operating for years – since 1987, more specifically – regulating a type of business that can seem overly complicated for those who do not understand it very well.

This is why changes to the law were so necessary, which apparently did not need to be changed – solving old legal problems caused by the previous franchise policy.

Thus, with the resolution of old conflicts and by keeping contracts compliant, the authorities will be able to focus on maintaining entities that have helped leverage Brazil’s economy.

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