Franchising in the Philippines: Put Promises in the Contract

When choosing a franchise in the Philippines, the extras offered during meetings or in messages can be appealing. But what happens if they are missing from the contract you are about to sign? Trust matters in franchising, but so do clear, written obligations. Before paying or signing, make sure the promises that persuaded you to buy are included in the final agreement.

1. Distinguish specific promises from general descriptions

Not every positive statement about a brand amounts to a specific obligation. “Easy to run” is a general description; “the fee includes the two machines listed in the schedule” is easier to verify and enforce.

Make a list of the offers that matter to your decision. These might include free equipment, a temporary deferral of a charge, or the right to use a facility. For each offer, record:

• Exactly what was promised and who made the promise.
• The date and method of communication.
• Any conditions that must be met before you receive it.
• The document in which the obligation should appear.

Keep messages, letters, proposals and versions of documents. After a meeting, send a written summary and ask for confirmation. This can help prevent misunderstandings, but it is no substitute for including the promise in the signed agreement.

Also check that the person making the offer is authorised to do so. A promise made by an intermediary may be disputed if the franchisor itself has not acknowledged it.

2. Look for clauses stating that the written contract is the entire agreement

Some agreements state that the signed document constitutes the entire agreement and supersedes all previous discussions, letters and proposals. They may also include a statement that the buyer has not relied on any representations outside the contract.

These clauses are not inherently problematic. They help establish which obligations the parties have actually agreed to. However, signing is risky if an important offer exists only in a message while the contract also states that you have not relied on any promises outside it.

Check whether changes require both parties’ signatures to be valid. If they do, do not assume that verbal approval from a member of staff is enough.

If you are told, “That is just standard wording; do not worry about it,” bring the discussion back to the document. Ask for the agreed terms to be included in the contract or in a signed schedule expressly recognised as part of it. Check the order of precedence: which document takes priority if the main contract and a schedule conflict?

3. Understand the law’s protections and limits

The Philippines has no single comprehensive law covering every aspect of franchising. There are, however, specific rules, including Executive Order No. 169, which provides protections for micro, small and medium-sized enterprises entering into franchises. These include minimum content requirements for agreements within its scope and their registration with the Department of Trade and Industry (DTI).

The Civil Code is also important. Under Article 1306, the parties may set their own terms, provided these do not contravene the law, morals, good customs, public order or public policy.

Clauses limiting the agreement to the written document are generally recognised. However, they cannot be used to escape liability for fraud used to obtain your consent. Under Article 1390, consent obtained through fraud or other recognised defects in consent may provide grounds for annulment of the contract.

This does not mean a contract is automatically invalid whenever a promise goes unfulfilled. A simple failure to perform is different from fraud that influenced your decision to sign. Evidence and a lawyer’s assessment are important.

4. Make every agreed commitment measurable

Rather than simply stating “free equipment included”, specify the quantity, model or specifications, condition, delivery date and ownership. Also state who will pay for delivery and what happens if the equipment is not supplied.

Before signing, compare your list of promises with the final contract. Make sure all schedules are complete, no important fields are left blank, and both parties hold identical copies. Ask your own lawyer to review any conflicts or wording that does not reflect what was actually agreed.

Practical takeaway: If a promise matters to your decision to buy, make it a clear obligation in the signed agreement—do not leave it to memory or messages alone.