Franchising in Portugal: checking who signs the contract

When turning an existing business into a franchise network, it is easy to focus on the brand and commercial terms. But there is something to check first: who is legally responsible for each obligation? A prospective franchisee may negotiate in a personal capacity but intend to operate through a company; the founder may present the brand without having authority to represent the company offering it. Resolving these differences before signing avoids ambiguous commitments and payments to the wrong entity.

1. Identify the parties, not just the people you deal with

Start with the franchisor. Confirm which company will grant the rights to operate the franchise and assume the obligations towards franchisees. Simply naming the trading brand displayed above the door is not enough: the contract must identify the person or entity that will actually be legally bound.

Then do the same for the prospective franchisee. Ask explicitly whether they intend to enter into the contract as an individual, through an existing company or through a company yet to be incorporated. These are different situations, even if the same person attends every meeting.

Prepare a record of the parties’ details, including:

• Each party’s registered company name or full name;
• Tax identification or corporate identification number, as applicable;
• Registered office or home address, and contact details for contractual notices;
• The identity of any representatives and the capacity in which they act;
• The entity that will make payments and receive invoices.

If the company that owns the trade mark is not the franchisor, also confirm the legal basis on which the franchisor can grant rights to use it. This check is no substitute for trade mark protection: its purpose is to ensure that the contracting party can deliver what it promises.

2. Check the signatory’s authority

Being a founder, shareholder or sales manager does not, in itself, confer authority to bind a company. Before sending out the final version of the contract, consult up-to-date commercial register information and check who represents the company and how it can be legally bound.

Portugal’s online commercial registration certificate, known as the certidão permanente do registo comercial, provides access to relevant company information. Review it alongside any documents needed to clarify authority to represent the company, including its articles of association or a power of attorney, where applicable.

The practical question is simple: is one signature enough, or are several required? If the company can only be bound by specified managers or directors acting jointly, obtaining just one signature may create a problem that a company stamp alone will not resolve.

Where there is a power of attorney, check its scope and whether it authorises the representative to enter into that contract and assume the obligations it contains. If there is any doubt about internal approvals or limits on authority, seek legal advice before accepting the signature.

Apply the same rigour to both sides. A franchise network built on trust benefits from reciprocal checks, rather than requirements imposed solely on the prospective franchisee.

3. Treat a future company as an unresolved issue

A prospective franchisee may want to secure the opportunity before incorporating the company that will operate the business. Do not treat that future company as though it already exists, or assume that it will automatically replace the person who signed.

Before accepting payments or making binding commitments, choose an appropriate arrangement with legal advice. It may make sense to wait until the company has been incorporated, or to prepare a preliminary agreement clearly identifying who is bound at that stage and the conditions for proceeding.

If the contract is intended to transfer to another entity later, clarify:

• Which documents must be provided;
• Which consents and formalities will be required;
• Who is liable for obligations assumed in the meantime;
• How any amounts already paid will be treated;
• What happens if the company is not incorporated or the replacement does not go ahead.

Also distinguish the company’s obligations from any personal guarantee. Being a shareholder or signing as a representative does not, in itself, make someone a guarantor of the company’s debts. Any proposed guarantee needs to be addressed separately, with a clear understanding of its consequences.

4. Follow the Portuguese legal framework

Portugal has no specific franchising law and no mandatory register dedicated to franchise agreements. This does not remove the need to comply with the general rules.

The Portuguese Civil Code provides for freedom of contract, notably in Article 405, and requires good faith in negotiations under Article 227. The Commercial Companies Code is relevant to company representation and the authority to bind companies. Where pre-drafted standard terms are used, the rules on standard contract terms set out in Decree-Law No. 446/85 also apply.

Portuguese law does not require delivery of the Brazilian franchise disclosure document, the Circular de Oferta de Franquia, nor does it impose an equivalent general statutory ten-day period. However, duties to provide information arising from good faith still apply. The European Code of Ethics for Franchising is a self-regulatory reference, not Portuguese law.

Practical conclusion: before signing, gather a record of the parties’ details, evidence of their representatives’ authority and an explicit decision on how to handle any company yet to be incorporated. Only proceed when the names, signatures, payments and responsibilities all reflect the same legal position.