Franchise agreements free from unfair contracts law

Franchisors facing substantial re-writes of their franchise agreements to comply with the upcoming unfair contracts legislation can breathe a sigh of relief. The Federal Government has introduced its new national consumer law legislation into Parliament but unexpectedly limited the application of the unfair contract terms law to standard form consumer contracts only.

This means that franchise agreements, retail leases and other business-to-business (B2B) contracts are not to be subject to the new laws, said Corinne Attard, Special Counsel for law firm HWL Ebsworth .

However Attard has a word of caution for the industry. While the new bill does not specifically address B2B contracts or franchising, the media release by the Minister Dr Craig Emerson states that:

In relation to business-to-business contracts, the Government is currently reviewing both the unconscionable conduct provisions of the Trade Practices Act and also the Franchising Code of Conduct. Since these reviews relate to business-to-business contracts, the Government will consider the issue of business-to-business standard form contracts when these reviews are complete.

“While it looks like franchisors can all breathe easy again about their franchise agreements being attacked by this new law for the moment at least, it looks as if the Government has decided to continue its inquiry into the review of the Code (referred to below) and unconscionable conduct,” said Attard.

“For those businesses who enter into standard form contracts with consumers however, the unfair contract terms laws remain something to watch and to consider in reviewing those contracts.”

HWL Ebsworth provide franchise legal advice to franchisors and franchisees

This article appears courtesy of 5 Minute Franchising Newsletter