NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
• 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. • 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 FANZ 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. In addition, laws and regula - tions relevant to the particular industry of the fran - chise should be assessed for any requirements of this nature.
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 • it will make the benefit or burden of the contract substantially different 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 up to NZD200,000. It is possible to contract out of some statutory rem - edies through disclaimers or exclusion clauses. The enforceability of such clauses depends on whether they were clearly communicated before or at the time of contracting. Courts interpret exclusion clauses strictly, and any ambiguity is typically resolved against the party relying on the clause. Notably, clauses attempting to exclude liability for fraudulent misrep - resentation are always unenforceable. In addition, for FANZ members, FANZ has a com - plaints procedure for breaches of the FANZ Code. Sanctions which may be issued include: • written censure of the member (confidential); • suspension or removal from FANZ membership; • a direction to undertake remedial action in respect of the conduct; • a written apology to the complainant; and • the recovery of reasonable costs incurred by FANZ. 2.3 Franchise Disclosure Exemptions In New Zealand, there are no statutory franchise dis - closure obligations under general law. If a franchisor is a member of FANZ, they are required to comply with
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