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
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
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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