NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
with New Zealand’s general laws on commercial con - tracting and dealings, including the Fair Trading Act 1986. This Act prohibits unconscionable conduct in trade, misleading or deceptive conduct (which may include omissions) and unsubstantiated represen - tations. Franchisors must ensure that all disclosed material information is accurate. If the franchisor is a member of FANZ, mandatory dis - closure obligations apply under the FANZ Code. The Code contains a list of required content in disclosure documents, including: • franchisor details; • a resume of the business experience of the fran - chisor and key directors/executives/managers; • a current franchisor solvency certificate (the con - tents of which are prescribed in the Code); • details of any bankruptcies, receiverships, liquida - tions, etc, of the franchisor or its directors/execu - tive officers/principals from the past five years; • a summary of the main particulars and features of the franchise; • a list of components making up the franchise pur - chase; • details of financial requirements of franchisees; • information about current franchisees, recent terminations or non-renewal of franchisees, and litigation with existing or former franchisees; • financial projections (or a statement that financial projections are not provided); • a statement as to whether the territory or site to be franchised has been subject to any trading activity – particularly a previous franchise in the same fran - chise system within the previous five years – and if so, the history and details, including the circum - stance of any cessation of the franchise; and • a statement indicating that the prospective franchisee should seek independent legal and accountancy advice and, if the prospective fran - chisee declines to obtain that independent advice, that it will need to sign a statement to that effect. Under the Code, the disclosure document must be updated at least annually. The disclosure document must be provided to pro - spective franchisees at least 14 days before signing
a franchise agreement, or before becoming bound by a preliminary agreement. Existing franchisees are entitled to receive an updated disclosure document within one month of requesting it when renewing their franchise agreement. If the franchisor or franchisee is a publicly listed enti - ty in New Zealand, additional disclosure obligations may apply due to continuous disclosure requirements imposed by the stock exchange. 2.2 Consequences of a Failure to Disclose If a franchisor fails to provide disclosure and this fail - ure leads to a misinformed decision, the franchisee may be able to terminate the agreement and/or claim damages against the franchisor. As New Zealand does not have specific franchise laws, a franchisee claim would be pursuant to New Zealand’s general commercial laws, including under the Contract and Commercial Law Act 2017 and the Fair Trading Act 1986. Under the Contract and Commercial Law Act 2017, a franchisee may be entitled to damages from the franchisor or be able to cancel a contract with a fran - chisor if the franchisor makes a misrepresentation. For example, a franchisee may be able to cancel a franchise agreement if: • the truth of the representation is essential; • the effect of the misrepresentation will substantially reduce the benefit, or substantially increase the burden, of the contract; or • the effect of the misrepresentation will make the benefit or burden of the contract substantially dif - ferent from that represented or contracted for. Franchisees may also pursue claims under the Fair Trading Act 1986 if the franchisor engages in mislead - ing, deceptive or unfair practices. In addition to rem - edies such as injunctions and awards of damages, companies can be liable for fines of up to NZD600,000 and individuals for fines of up to NZD200,000. Disclaimers or Exclusion Clauses It is possible to contract out of some statutory rem - edies through disclaimers or exclusion clauses. The
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