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Regulating the Franchise Relationship: Franchisor Opportunism, Commercial Morality and Good Faith

  • Andrew Terry
  • Cary Di Lernia
Chapter
Part of the Contributions to Management Science book series (MANAGEMENT SC.)

Abstract

As franchising increases its influence internationally, regulators increasingly face the challenge of the appropriate manner of its regulation. A recent Australian report has focussed attention on an obligation of good faith as an appropriate regulatory strategy to address opportunistic conduct and has concluded that while the prior disclosure obligations of Australia’s regulatory instrument for franchising (the Franchising Code of Conduct) are for the most part adequately addressed, there remain concerns because of the ‘continuing absence of an explicit overarching standard of conduct for parties entering a franchise agreement’. The Opportunity not opportunism report of the Parliamentary Joint Committee on Corporations and Financial Services (December 2008) recommended that the optimal way to provide a deterrent against opportunistic conduct in the franchising sector was ‘to explicitly incorporate, in its simplest form, the existing and widely accepted implied duty of parties to a franchise agreement to act in good faith’. In November 2009 the Australian Government rejected this recommendation on the basis that it would ‘increase uncertainty in franchising’. This paper explores the challenges faced in grafting the civil law concept of good faith onto a common law system. It suggests that in Australia and other common law jurisdictions – and even in civil law jurisdictions – good faith is more an elusive ideal than a well settled commercial standard and that issues of definition, scope and application may frustrate its intended application in the franchising context.

Keywords

Good Faith Fair Dealing Franchise System Commercial Contract Franchise Contract 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  1. 1.Faculty of Economics and BusinessThe University of SydneySydneyAustralia

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