The Superior Court of Justice recently declared an arbitration clause inserted into a franchise agreement null, as it did not meet the requirements set out under Article 4(2) of the Arbitration Act (9.307/96).

The grounds for this case were outlined in the opinion issued by Justice Nancy Andrighi, judge rapporteur of the appeal to the Superior Court of Justice (1.602.076-SP).

The appeal was analysed by the third panel, which ultimately ruled that although franchise agreements are common commercial contracts and therefore not subject to the Consumer Protection Code, they are still considered adhesion contracts. As such, any arbitration clause provided therein must comply with the formal requirements set out in Article 4(2) of the Arbitration Act.(1)

The case submitted to the Superior Court of Justice dealt with a company that intended to nullify or, alternatively, terminate a franchise agreement, seeking:

  • the devolution of the sums paid as franchise fees and royalties; and
  • payment of a fine in the event of termination.

During the legal proceedings, the existence of the arbitration clause was alleged as an objection to the proceedings. The court thus had to rule on the validity of the arbitration agreement.

On the one hand, the Superior Court of Justice reaffirmed its understanding that a franchise agreement is a typical commercial contract, subject to logic and executed at the heart of business relationships. Therefore, no consumer relationship exists in terms of the Consumer Protection Code. The majority's opinion in this regard was upheld in earlier Superior Court of Justice case law.(2)

On the other hand, Andrighi explained that a "franchise agreement is undeniably an adhesion contract" and that all adhesion contracts, "even those that do not substantiate consumer relations, such as franchise agreements, must comply with article 4, paragraph 2, of Law 9307/96".

This precedent reinforces the importance of carefully drafting arbitration clauses which – in franchise agreements in particular – must follow the formal requirements set out in Law 9307/96, including bolding the text of the clause and ensuring that the parties sign the clause separately, highlighting it as much as possible so that no doubt remains regarding the parties' agreement thereto.

For further information please contact Luciano Timm, Marcelo Richter or Isabela Popolizio Morales at Carvalho, Machado & Timm Advogados (+55 11 2872 4760) or email (ltimm@cmtlaw.com.br, mrichter@cmtlaw.com.br or ipopolizio@cmtlaw.com.br). The Carvalho, Machado & Timm Advogados website can be accessed at www.cmtlaw.com.br.

Endnotes

(1) According to Article 4, an arbitration clause is an agreement by which the parties to a contract undertake to submit to arbitration any disputes that may arise with respect to that contract. Paragraph 2 states that, in adhesion contracts, an arbitration clause will be valid only if the party that adheres to the agreement has the initiative to file an arbitral proceeding or expressly agrees with its institution, provided that it does so in writing in a document attached to the agreement or in bold letters within the agreement itself, as well as specifically executes or initials such clause.

(2) Appeal to the Superior Court of Justice, REsp 930.812-MT, REsp 632.958-AL and REsp 687.322-RJ.

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