The Federal Government is still considering the nature and extent of the changes necessary to the Franchising Code of Conduct. It is understood that the Government is under pressure to introduce into the Code an explicit good faith obligation to address what is painted as "franchisor opportunism", a vague new term that appears to have surfaced in recent times. This is despite almost universal acceptance of the view that the introduction of an express good faith obligation into the Code would create significant contractual uncertainty.
At a well attended session during the Legal Symposium at the Franchise Council of Australia Convention a debate on good faith was conducted between Professor Andrew Terry of the University of New South Wales, and Bond University academic Dr Elizabeth Spencer. Prof Terry argued that the introduction of a statutory duty of good faith was totally inappropriate, providing specific examples of the legal problems that would arise. On the other hand the essence of Dr Spencer's argument was that ethically franchisors and franchisees should act in good faith in all dealings, and therefore the inclusion of such an obligation into the Code was appropriate.
Prof Terry commented that "the concept of "good faith" has gained traction as the solution to all real and imagined ills within the franchising sector. The perception that "good faith" is the universal solvent is both misleading and dangerous but is given life by the equating of good faith with good ethics. A principle of good faith must presumably accord with ethical standards and community values, but this is not, and should not be, a concept the content of which is defined by them. While an understanding of good faith as requiring "a fair go" would be enthusiastically perceived as a panacea for both the real and imagined ills of the sector, the reality of good faith as a legal concept is quite different. If franchisor opportunism is a problem warranting legislative intervention this should be by carefully crafted legislative responses rather than by defaulting to an undefined and overreaching standard of indeterminate scope and application."
The logic of this view is compelling, and consistent with the Government's own view when considering the effectiveness of the law prohibiting unconscionable conduct. It will be interesting to see if the Government is able to resist the political pressure for the inclusion of a statutory duty of good faith.
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