Franchising Disputes

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Disputes may arise from a franchising agreement where the terms and conditions of such agreement are found to be misleading, false and unacceptable or in breach of the Franchising Code of Conduct under the Competition and Consumer Act 2010. Disputes may also arise if there is breach of any of the terms or conditions of the franchising agreement by the parties to the agreement.

Therefore it is imperative for the parties to go through the franchising agreement carefully and understand each and every term of the agreement properly. Expert legal advice should be sought before they agree to sign and conclude the agreement.

Franchising Code of Conduct and Steps to Resolve a Dispute

The Franchising Code of Conduct (the FCC) is a mandatory Code and people in the franchising business must comply with the provisions of the Code. Under the FCC, parties to a franchising agreement can refer a dispute to a mediator of their choice or to the Office of the Franchising Mediation Adviser (OFMA).However, at OFMA, the parties cannot appoint a mediator of their choice.

The steps to resolve a dispute is outlined as follows:

(a) the complainant shall send a ‘Dispute Notice’ describing the nature of dispute to the other party;

(b) the complainant and the other party are required to settle the disputes through direct negotiation;

(c) if the dispute remains unresolved even after 21 days, either party may refer the dispute to the mediator. They may either appoint a mediator of their choice or make a request to the OFMA to appoint a mediator on their behalf. A mediator must be appointed within 14 days from the receipt of such request from the parties to the dispute. It is mandatory for both the parties to attend the mediation proceeding for resolving the dispute;

(d) the mediator shall choose a time and a place to hold a joint mediation session. Private mediation sessions can also be held with each of the parties to the dispute in the event the joint mediation session fails to resolve the dispute;

(e) Further negotiations will be held if the common objective of the parties can be found during the private mediation sessions;

(f) The mediator will assist to make written records of the agreed outcome of the mediation by both the parties. This written record will be binding on both the parties;

(g) However, if the mediator is of the opinion that the dispute cannot be resolved, the mediator may terminate the mediation. The mediator may also terminate the mediation if:

(i) A minimum period of 30 days have elapsed since the mediation proceeding started; or

(ii) Either party to the dispute requests the mediator to terminate the same.

Upon termination of the mediation, the mediator will issue a Certificate of Termination, copies whereof shall be given to each of the parties and also to OFMA.

Court Proceedings

Where the dispute cannot be resolved through mediation, Court proceedings may be initiated. The Court may issue an injunction debarring one or both the parties either from doing something or requiring them to comply with the terms of the agreement. Any party deciding to bring a legal action against the other party should seek necessary legal guidance before resorting to Court proceedings since the party initiating the action might be liable to bear some or all costs of the proceedings if the Court passes a contrary Order.

When there is a breach of the FCC, the Australian Competition and Consumer Commission (the ACCC) or any party to or a person connected with the franchising agreement may take Court action for enforcing the Code. The Court may Order for remedies including Order of injunction, damages and setting aside or varying relevant portions of the agreement.

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