On December 7, 2005, the Minister of Justice for the Province of New Brunswick introduced Bill 6, known as the Franchises Act. At this time, Bill 6 has only received first reading and a date for actual enactment of the proposed legislation is unknown.
New Brunswick’s proposed Franchises Act is very similar to franchise legislation currently in force in the provinces of Alberta and Ontario. By way of summary, New Brunswick’s proposed Franchises Act contains the following key provisions:
- a franchisor is required to provide a prospective franchisee in New Brunswick with a disclosure document not less than 14 days before the signing of a franchise agreement or the payment of any money by the prospective franchisee to the franchisor. The disclosure document must disclose all material facts, including the franchisor’s financial statements, copies of all proposed agreements to be signed by the franchisee and other information that will be required by a regulation that has not yet been drafted;
- a franchisee who has entered into a franchise agreement for a franchise in New Brunswick without having received a disclosure document may rescind the franchise agreement up to the earlier of:
- 60 days after receiving a disclosure document; or
- two years after entering into the franchise agreement if the franchisor failed to provide a disclosure document.
- If a franchise agreement is rescinded, the franchisor must refund to the franchisee any money that it received from the franchisee, purchase from the franchisee any inventory that it purchased pursuant to the franchise agreement and compensate the franchisee for any losses the franchisee incurred in acquiring, setting up and operating the franchise;
- a franchisee has a right of action for damages against the franchisor if the franchisee suffered a loss because of misrepresentations contained in the disclosure document;
- any attempt to limit the application of the laws of New Brunswick or to require that claims be resolved outside of the province of New Brunswick are void where such claims would otherwise be enforceable under the proposed legislation; and
- a duty of fair dealing in the performance and enforcement of franchise agreements and a right of action for damages against another party to a franchise agreement who breaches the duty of fair dealing.
A unique feature of New Brunswick’s proposed Franchises Act is the ability of one party to a franchise agreement to deliver a notice to the other party requiring that a dispute be mediated. Although the proposed legislation permits one party to a franchise agreement to require that the other party mediate a dispute, the proposed legislation confirms that this procedure does not preclude either party from taking other steps in relation to the dispute.
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.