On October 5th, British Columbia introduced franchise legislation for the first time in the province.
Bill 38, The Franchises Act, was introduced in the B.C. Legislature on October 5th. It received second reading on October 7th. Amendments to the bill will now be considered before it becomes law.
B.C.’s new franchise legislation was modelled very closely on franchise legislation in other provinces. The Franchises Act is very similar to Ontario’s Arthur Wishart Act (Franchise Disclosure), which has been in effect in Ontario since 2001.
Similar to Ontario’s Act, B.C.’s Franchises Act imposes the following requirements:
- An obligation of good faith and fair dealing on both parties to a franchise agreement;
- Protections for franchisee rights to associate;
- Obligation to provide a disclosure document with all prescribed information and all material facts about the franchise at least 14 days before signing of the franchise agreement or payment of money;
- Franchisee right to rescind franchise agreement for failure to disclose;
- Right to claim damages for misrepresentations contained in a disclosure document;
- Joint and several liability for persons who sign a disclosure document containing a misrepresentation;
- No waiver of rights under the Act.
A significant substantive difference between the Ontario Act and the B.C. Act is that the proposed B.C. legislation contains a “substantial compliance” provision regarding the disclosure document. In Ontario, even technical errors in a disclosure document can lead to potentially significant liability and rescission remedies.
By contrast, under the new proposed B.C. law, the new Act would excuse errors in the disclosure document that are mere “defects in form, a technical irregularity or an error,” so long as the error “does not affect the substance of the disclosure document” and the disclosure document is otherwise “substantially in compliance with the Act.”
Once The Franchises Act is enacted, B.C. will become the sixth province in Canada with franchise legislation (the other provinces are Ontario, Alberta, Manitoba, PEI, and New Brunswick).