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Manitoba’s new franchise legislation

Manitoba is the fifth and latest common law province to enact franchise legislation, joining Ontario, Alberta, New Brunswick and Prince Edward Island in this still somewhat exclusive club. The Franchises Act (C.C.S.M. c. F156) (the “Act”) and its associated regulation (Reg. 29/2012) will come into force on October 1, 2012. The process has been slow going. The Act itself received royal assent in June of 2010. And although the comment period for the draft regulation ended on December 15, 2011, the Manitoba legislature has seen fit to put off the law’s commencement for a further nine months. Nonetheless, the legislation will provide franchisors and franchisees some clarity going forward.

The Act is similar in form and structure to the other provincial franchise statutes, including Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000. However, if differs from the Ontario law in several important respects. For example, the Act excludes from its application agreements for the purchase of reasonable amounts of goods or services at reasonable prices. Many of these types of agreements would arguably fall within the ambit of the Ontario legislation.

As is the case in the other four provinces, the Act imposes substantial disclosure obligations on franchisors. Unlike Ontario however, where disclosure must be made in one document at one time and where the courts have stated that disclosure not meeting these criteria amounts to no disclosure at all, Manitoba has taken a somewhat more relaxed position. There, a franchisor will comply with its disclosure obligations if the disclosure document “substantially complies” with the statute so long as any “technical irregularity or mistake” does not affect the substance of the document. Furthermore, the Act provides that if the disclosure document is not delivered as one document, the 14-day period during which no franchise agreement or related documentation can be signed or any consideration paid, begins when the last part of the document is received. The regulation imposes additional requirements designed to prevent unscrupulous franchisors from taking advantage of piecemeal disclosure.

The Act imposes a duty of fair dealing in the performance and enforcement of franchise agreements, which is defined to include a duty to act in good faith and in accordance with reasonable commercial standards. That duty expressly extends to the exercise of a right under the agreement, which is not the case in Ontario. In keeping with the other four provinces, the Manitoba legislation affords a party to a franchise agreement a right of action in damages against any other party that breaches the duty of fair dealing.
The Act also entrenches the right of franchisees to associate and bars franchisors and their associates from interfering with that right or penalizing franchisees who choose to exercise it. These provisions are backstopped with a right of action in damages against franchisors who interfere with the right to associate.

As is the case in the other four provinces, the content of these rights has yet to be judicially defined. Even so, the similarities in the legislation should allow for the development of a consistent jurisprudence across the country.
By David Kornhauser (BA, MBA, LLB), Corporate Counsel, Macdonald Sager Manis, LLP

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