Franchise Agreement Unfair Contract Terms

Just because a franchise agreement contains a term that may meet the criteria of an “unfair” clause does not mean that the term is automatically unenforceable. It must be declared unenforceable by a court. Most franchise agreements provide for a weekly or monthly payment or royalties as a percentage of revenue. Royalties on sales are not included in the pre-price, but if a minimum amount is not based on sales, this may be included in the calculation of the pre-contract price. “This year, the ACCC has conducted a series of thorough investigations and taken steps to ensure that small businesses benefit from the protection of the Abusive Contract Clauses Between Business Act, introduced by the Australian government in 2016.” In determining whether the abusive clause provisions apply to franchise agreements, the following issues should be considered. The Committee received notices of deficiencies in the application and application of the abusive contractual clauses regime and concluded that the franchising industry had not been sufficiently deterred from not doing so. A standard form contract is a contract that is usually developed by one party and in which the other party is unable to actually negotiate the terms of the contract. A franchise agreement will more than likely be a standard form contract, because a franchisor has a standard agreement that it offers to all franchisees and generally does not negotiate on terms that go beyond some of the basic conditions. In this ACCC centre of gravity, it is important that franchisors re-examine and verify their standard franchise agreements to ensure full compliance if they have not yet done so. Of particular note is the regime of abusive contractual clauses between companies and businesses under the ACL. Franchisors should remember that the ACCC can require it to provide ACCC documents that the franchisor must produce or retain under the Code containing franchise agreements and disclosure documents.

The small business is duly informed before any changes to the contract. Give the small business the right to terminate the contract before the contract expires, subject to payment of a reasonable amount to compensate the service provider or supplier for having to terminate the contract prematurely. Instead of having a clause requiring a small business to grant unlimited compensation to a service provider or service provider, a better clause would be to compensate the small business that would compensate the claimant or supplier for its loss equal to the loss incurred or to the cost of the goods provided or services provided by the provider. The exclusion or limitation of the claimant or supplier for the damage suffered is subject to the maximum amount permitted by law and to the supplier or supplier who reimburses, repairs or delivers the goods or services. Small business owners should consider conducting a legal risk assessment of their existing standard form contracts without delay. The term is also considered abusive if it is not transparent, i.e. it is not expressed in a single language, it is illegible, it is not clearly presented and it is not easily accessible to the other party. However, under the Australian Consumer Law (“ACL”), a clause in a contract may be struck down for small businesses if the clause is abusive and the contract is a standard contract.

Before making their binding commitment available, most of Back in Motion Physiotherapy`s franchise agreements included a commercial clause that prevented franchisees from working for or otherwise participating in a competing physiotherapy practice, located within 10 km of a Back in Motion Physiotherapy franchise, for a period of 12 months after the network was abandoned.