UTGB Vol 5.pdf - Robson Hall Faculty of Law

In contrast to all Canadian franchise legislation, Australia's legislation requires
that a franchisee attain independent legal advice prior to entering into a
franchise agreement. Under s. 11(2) of the Trade Practices Act 1974, a
franchisor must receive the following from the prospective franchisee prior to
entering into the franchise agreement:
(a) Signed statements, that the prospective franchisee has been given advice about the
proposed franchise agreement or franchise business, by any of: (i) an independent legal
adviser; (ii) an independent business adviser; (iii) an independent accountant; or
(b) For each kind of statement not received under paragraph (a), a signed statement by
the prospective franchisee that the prospective franchisee: (i) has been given that kind
of advice about the proposed franchise agreement or franchised business; or {ii) has
been told that that kind of advice should be sought but has decided not to seek it. 185
The subsequent section qualifies subsection 2 by stating that its does not apply
to the renewal or extension of a franchise agreement and that it does not
prevent that franchisor from requiring any or all of the statements mentioned in
paragraph 2(a). 186
In formulating its own independent legal advice provision, Manitoba should
follow Australia's example. A similar provision to the Reverse Mortgage
Regulation would not go far enough to ensure that franchisees seek legal advice.
In contrast, Australia's Act, by forcing franchisees to either seek advice or
waive it, ensures that franchisees will seriously consider the possibility of
consulting an expert. In adopting the Australian clause, Manitoba should limit
the qualified experts for consultation requirement to lawyers and accountants,
since these are the two parties who are best suited to provide the necessary
advice.
In addition, Manitoba should introduce a cooling..off period (in case the general
cooling..off period is not adopted) that applies only to those franchisees that
waived attaining professional consultation. Doing so will allow more time for
franchisees left with the task of understanding the franchise agreement on their
own to actually do so.
Overall, Manitoba should introduce a provision forcing franchisees to seek
independent legal advice prior to signing the franchise agreement to ensure that
they make a well..informed decision. This will counter the power imbalance
between franchisors and franchisees as well as reducing litigation arising out of
misunderstandings. This requirement will, however, be limited by a waiver, with
which franchisees will be able to forego attaining independent legal advice.
Furthermore, a cooling off period should be granted to those franchisees who
185
Australia, Trade Practices (Industry Codes Franchising) Regulations 1998, supra note 50 at s.
11(2).
186
Ibid. at s. 11(3) .