Franchising in Guatemala: avoid late payments

A bank transfer sent on time can arrive late. A payment request received by email may not match the contract. Before buying a franchise in Guatemala, it is worth establishing how payments must be made, not just how much they will cost. In franchise relationships, clear rules on due dates and when funds are credited help prevent disputes that can start as simple administrative errors.

1. Understand when late-payment default begins in Guatemala

Guatemala has no specific franchise law or mandatory pre-contractual disclosure regime equivalent to those found in some other countries. The relationship is governed by the Commercial Code, Decree 2-70; the Civil Code, Decree-Law 106, where it applies on a supplementary basis; and the Industrial Property Law, Decree 57-2000, for matters such as trade mark licensing.

One rule is particularly important when organising payments: Article 677 of the Commercial Code provides that, unless otherwise agreed, default on commercial obligations begins on the day after the due date, without any formal demand being required.

You should therefore not assume that the franchisor must send you a reminder first. Nor should you assume that receiving an invoice late automatically changes the contractual payment date.

Default does not mean that any penalty or termination is automatically valid. Its consequences must be assessed under the contract and applicable law. Before signing, ask your lawyer to distinguish between three issues: when the obligation falls due, when default begins and what consequences may follow.

2. Turn each obligation into a verifiable payment schedule

Ask for a payment schedule that clearly identifies each obligation, without having to piece it together from emails and scattered clauses. The aim is not to renegotiate the basis for calculating royalties, but to remove uncertainty about paying them on time.

For each payment, document:

• Due date: a specific date or a rule that allows it to be calculated.
• Supporting documentation: which invoice, payment calculation or report must be provided, who prepares it and when.
• Authorised payment method: bank transfer or another expressly accepted method.
• When payment is deemed to have been made: whether this is when the bank instruction is submitted, the account is debited or the funds are credited to the recipient.
• Non-business days: what happens when the due date falls on a public holiday or a day when banks are closed.
• Proof of payment: which receipt or confirmation you must send and who acknowledges receiving it.

Do not assume that a due date moves to the next working day: ask for the rule to be expressly agreed.

If you will be making payments abroad, also check cut-off times, intermediary banks and fees. A bank deduction may leave an outstanding balance even if you instructed your bank to transfer the stated amount.

Ask for an example showing the full payment process: issuing the payment request, checking it, transferring the funds and confirming receipt. If the parties cannot describe that process in the same way, further clarification is needed.

3. Agree how to remedy errors without confusing the deadlines

A period allowed for remedying a breach does not necessarily mean a period free from default. For example, the contract might allow you to remedy a late payment before termination proceedings begin, while also providing for interest to run from the due date.

Ask separately which deadline allows you to avoid default and which allows you to remedy the breach before further consequences follow. If you want an initial grace period without interest or late-payment charges, this must be clearly agreed; a promise of flexibility is not enough.

Propose that the contract also address these situations:

• The franchisor is late in providing the calculation needed to make the payment.
• A documented banking failure prevents the transfer from being completed.
• The amount charged includes a discrepancy that you dispute in good faith.
• The receiving account or payment instructions change.

For disputed amounts, negotiate a review procedure and agree how the undisputed portion will be handled. Do not assume that raising an objection entitles you to withhold the entire payment.

Changes to bank details should be communicated through agreed channels and verified with a known contact. An instruction received by email alone should not replace security checks.

4. Put payment controls in place before opening

Appoint someone to prepare each payment and someone else who can cover for them. Set reminders ahead of the due date and keep the payment request, review, authorisation and bank confirmation together.

Request regular account statements to identify payments that have not been allocated or outstanding discrepancies. If you find a discrepancy, report it in writing and ask for confirmation of how it was resolved. Keep that response: a bank confirmation proves that a transaction took place, but may not explain which obligation it was allocated to.

Before signing, run through a test scenario with your accountant and lawyer. Check that the schedule is workable and that the clauses on due dates, default and remedying breaches are consistent.

Practical takeaway: do not rely on reminders or informal flexibility. Agree when each obligation is considered paid, what happens if an error occurs and how you will prove compliance.