NEW ZEALAND Law and Practice Contributed by: Christopher Young, MinterEllisonRuddWatts
chisee out as having authority to act, or make rep - resentations, on the franchisor’s behalf. Similarly, a franchisor may incur liability directly, for example for negligent misstatements, misleading or deceptive conduct, or breach of a duty of care it has separately assumed (such as in relation to systems, training, or supply arrangements it controls), rather than liability attributed to it for the franchisee’s conduct as such. The franchisor/franchisee relationship has been held not to be inherently fiduciary in nature. In the absence of features of control, the relationship is treated as an arm’s length contractual one rather than one from which extended liability for the other party’s conduct will readily be inferred. A franchisor cannot be held vicariously liable for a breach of the HSWA. A PCBU (Person Conducting a Business or Undertaking) that breaches the HSWA is directly and personally liable for that breach and that liability cannot be transferred to another PCBU. 8. Choice of Governing Law 8.1 Possibility of a Franchisor Stipulating Non-Local Law The parties are free to select the governing law. It is important that the franchise agreement clearly identi - fies the governing law. 8.2 Local Law Requirements See 8.1 Possibility of a Franchisor Stipulating Non- Local Law . 8.3 Mandatory Content There is no mandatory content for franchise agree - ments under New Zealand law. If a franchisor is a member of FANZ, they are required to comply with the FANZ Code, which includes requirements that franchise agreements contain pro - visions requiring: • a cooling-off period of not less than seven days from the date of entry into the franchise agreement (or preliminary agreement, as the case may be) during which the franchisee may, by formal notice
to the franchisor (or master franchisee/sub-fran - chisor, as the case may be) elect to withdraw from the agreement at its discretion; • both the franchisor (and/each master franchisee/ sub-franchisor) and the franchisee to use reason - able endeavours to comply with the provisions of the FANZ Code; • that the franchisee comply with the laws of New Zealand including all laws relating to employment, health and safety, fair trading and tax; and • each franchisee to use reasonable endeavours to clearly identify that the franchisee’s business is being operated under franchise from the franchisor, including in all written contracts entered into with customers of the franchisee. 8.4 Prohibited Provisions in Local Law There is no franchise-specific law in New Zealand. However, under New Zealand’s Fair Trading Act 1986 the use of unfair contract terms in certain types of contracts is prohibited. This includes “standard form” contracts where the expected annual value of the trading relationship is less than NZD250,000 (includ - ing GST) at the time the contract is formed. A term may be declared unfair by the court if it meets all three of the following criteria: • it creates a significant imbalance in the parties’ rights and obligations; • it is not reasonably necessary to protect the legiti - mate interests of the advantaged party; and • it would cause detriment (financial or otherwise) to a party if enforced or relied upon. In assessing fairness, New Zealand courts must con - sider the contract as a whole and the transparency of the term. The Fair Trading Act 1986 also provides examples of potentially unfair terms, such as clauses
that allow only one party to: • vary the contract unilaterally; • avoid or limit performance; • terminate the agreement; and • impose penalties.
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