The concept of a franchise arrangement is not recognised under a separate law in Egypt. There is no legal definition or specific law governing franchising.  There are no legal requirements or compliance procedures imposed on the franchisor prior to offering franchises in Egypt. There are no disclosure requirements under Egyptian Law for franchisors.  There is no specific government agency which regulates the offer and sale of a franchise.

 

All agreements, including franchise agreements, are governed by the Egyptian Civil Code of 1948 ("Civil Code") and/or the Commercial Law 17/1999 (“Commercial Code”).  In general terms, these laws recognize the right of parties to contract with each other on such terms as they may agree.  Certain aspects of a franchise agreement are also governed by the Intellectual Property Rights Law 82/2002 as in most cases the main elements of franchise agreement involve the transfer of know how and intellectual property rights such as trademarks, logos, business processes, etc.

 

In addition, if a franchise agreement involves the transfer of technology, it must be governed by Egyptian Law and any disputes in connection with that agreement must be resolved by the Egyptian courts or by arbitration in Egypt under the Egyptian Arbitration Law No. 27 of 1994.

 

While there are no disclosure laws, franchisors need to be mindful of information provided to franchisees as pursuant to the Civil Code, as a franchisee may be able to nullify the contract based on misrepresentation.  Misrepresentation occurs when one of the parties "deceives the other by means of fraud, by word or deed, which leads the other to consent to what he would not otherwise have consented to". Omission may also constitute misrepresentation where it is deliberate. It does not include statements made innocently or negligently. 

 

The concept of "good faith" is further applicable under the Egyptian Civil Code. It is, in effect, a requirement not to use the terms of a contract to abuse the rights of the other contracting party, not to cause unjustified damage to that other party and to act reasonably and moderately.  It is implied into contracts (pursuant to the Civil Code) that "a contract must be performed in accordance with its contents, and in a manner consistent with the requirements of good faith". The effect of good faith on the terms of a contract may have a significant impact on the outcome of a dispute.