On June 10, 2010, approximately three years after its
Franchises Act (the Act) received royal assent, New
Brunswick published two franchising regulations. The first
regulation sets out disclosure requirements similar to the
requirements found in the other provinces that regulate franchising
(Ontario, Alberta and Prince Edward Island). However, the second
regulation sets out a mediation procedure originally proposed by
the Uniform Law Conference of Canada in 2005, the first of its kind
among regulated provinces.
The provisions of the Act are largely consistent with those in
Ontario's Arthur Wishart Act (Franchise Disclosure),
2000 (the Ontario Act); however, there are some important
differences. For example, the Act explicitly states that the duty
of good faith and fair dealing extends to the performance and
enforcement of the franchise agreement, which includes the exercise
of a right under the franchise; as opposed to the Ontario Act,
which does not specifically state that the duty extends to the
exercise of a right under the agreement. Similar to the legislation
in Alberta and PEI, but unlike the Ontario Act, the Act
specifically states that a confidentiality agreement does not
qualify as a "franchise agreement" for the purposes of
the timing of the 14-day disclosure period. This permits
franchisors to enter into limited confidentiality agreements with
franchisees within this period (though franchisors should be aware
that including any other obligations in such agreements may change
the nature of the agreements so that they qualify as
"franchise agreements"). The Act also provides an
expanded due diligence defence to directors, officers, brokers and
franchisor's associates in respect of misrepresentations within
the disclosure document.
The most unique feature of the Act is the prescribed
party-initiated dispute resolution process. The Act states that if
there is a dispute, one party may notify the other of the
nature of the dispute and the desired outcome. If such a notice is
delivered the parties must attempt to resolve the dispute
within 15 days of receiving the notice. If the parties are unable
to resolve the dispute a notice to mediate may be delivered,
and upon delivery of such notice, the parties must follow
the rules relating to mediation as set out in the mediation
regulation. However, the mediation regulation permits the party
that received the notice of mediation to decline mediation by
providing a notice declining mediation.
The disclosure regulation generally requires disclosure similar
to that in other regulated provinces; however, there are some
noteworthy differences, for example:
Delivery by courier or electronic means is specifically
Disclosure documents prepared for use in other jurisdictions
can be used in New Brunswick provided additional disclosure is
provided as required by the Act;
The disclosure document must include the table of contents of
any manual or a statement specifying where in New Brunswick the
manual, if any, is available for inspection.
A description of the franchisor's policies and practices
regarding internet or distance sales must be provided; and
In addition to a list of current franchisees, the franchisor
must provide a list of current businesses of the same type as the
franchise being offered that the franchisor currently operates in
There are other differences which must be addressed in the
disclosure document, or franchisors risk a claim for rescission or
Franchisors must prepare documents specific to New Brunswick
– either a wrap-around or a standalone document
– or risk being offside the legislation. Alternately,
franchisors with a national disclosure document can modify that
document to comply with New Brunswick's unique requirements. It
is anticipated that the Act will be proclaimed into force sometime
in early 2011. However, once the Act does come into force
franchisors will be expected to comply immediately.
Manitoba Franchises Act Receives Royal
In our May 2010 edition of the Osler Franchise Review we discussed the introduction of Bill
15, The Franchises Act (the Act) in the Province of
Manitoba's legislature. The Act received royal assent on June
17, 2010, with some minor changes from the original version of the
Bill, including that the payment of consideration for the purposes
of the Act does not include the payment of a fully refundable
deposit. Regulations to the Act are expected to be published
sometime within the next year.
Dominic Mochrie is a partner in the Franchise
and Distribution, Privacy Law, Product Marketing Law and Trade
Practice Law. Jordan Toye is an associate and his
practice focuses on assisting Canadian and International
franchisors on all aspects of Canadian Franchise Law.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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After several months of consultation and deliberations, the Organisation for Economic Co-operation and Development rendered public a revised draft Guidance on Due Diligence for Responsible Business Conduct.
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