Recently, the Supreme Court ruled that the franchisor is liable for the acts committed by the franchisee. Such liability arises from the lack of supervision that the franchisor must perform as required by this type of contract.

On August 4, 2023, the Supreme Court (Rol No. 39.863-2022) resolved an interesting case, ruling on the civil liability that a franchisor must assume with respect to the conduct of a franchisee.

The case involved a franchisee of a well-known real estate brokerage firm who, while intermediating in the purchase and sale of a property, misappropriated the sums of money that the buyer gave him for the payment of the price of said property.  

Faced with this situation, the seller brought an action for damages for tort against the franchisor since the franchisee at all times acted with the image and taking advantage of the reputation of the well-known real estate brokerage firm. Then, the discussion revolved around the extent of the franchisor's civil liability with respect to the franchisee's conduct, and even whether it should be liable for its own or another's act.

The Supreme Court confirmed the criteria previously used by the 13th Civil Court of Santiago and the Court of Appeals, in the sense that after examining the franchise agreement, it was clear that the franchisor had undertaken to control and supervise the work of the franchisee with respect to the use of the image, service, compliance, contracting, advertising and everything related to the correct exercise of the franchise, for which it had reserved broad powers. 

Likewise, in light of the facts of the case, the Supreme Court ratified that the franchisor had acted negligently, since it failed in its duty of supervision and vigilance in the correct execution of the franchisee's brokerage operations. Therefore, the existence of a causal relationship between the franchisor's negligent conduct and the damages suffered by the plaintiff was proven.

In view of this ruling, it is especially relevant to review all franchise agreements. The above, in order to analyze the obligations assumed by the franchisor in consideration of the real and effective scope of control exercised over the franchisees. In this way, the extent of the franchisor's civil liability will be delimited and the possibility of being sanctioned for the acts committed by the franchisees will be significantly reduced.