Unfair Franchise Agreements

In determining whether unfair terms apply to franchise agreements, the following points should be taken into account. The quintessence of these principles, which I have just discussed, is that just because a provision of the treaty can or is considered economically unreasonable does not mean that it is not a violation of the law or the agreement. The Confederation of Good Faith and Fair Trade may not be used offensively by a franchisee to obtain rights that he did not obtain during the first negotiation of the contract. In essence, contract law, which governs most of the franchise right, does not require the franchisee to be reasonable or to act reasonably. The ACCC was concerned that the limitation clauses contained in the Back In Motion franchise agreement were unfair. The limitation clause provided that franchisees could not provide physiotherapeutic services in a competing business of Back In Motion in the “retention area” during the “restriction” period. The britt nature of the restriction clause meant that for 12 months, from each Back In Motion site in Australia up to 3 months, the restriction could be as little as the location of the former franchisee. Given the greater number of back-in-motion sites, the restriction would prevent franchisees from offering physiotherapy services in most Australian cities for 12 months after the end of their franchise agreement, including in places where their former clients did not reside. The ACCC found that this unfairly prevented franchisees from practicing physiotherapy because they were a field in which they had studied, acquired qualifications and gained experience. Franchisors should check whether their franchise agreement contains unfair contract terms and whether it is in full compliance with the Code. It is advisable that franchisors have their franchise agreement verified by a lawyer specializing in franchising.

2. STANDARD FORM CONTRACT A standard contract is a contract that has been prepared by one party and that the other party has little or no opportunity to negotiate the terms. In other words, the contract is usually in the form of a “take it or leave it” basis. Many franchise agreements are standard contracts. 3. THE TYPES OF TERMS THAT MAY BE UNFAIR Among the types of terms that may be unfair, where one party may, but not the other party: there have been many cases where there is talk of the enforceability of such restrictions a posteriori, and the law is quite framed. . . .