Where the franchisor has effectively used phrases in your agreement such as “non-representation” or “non – reliance” will often form one of the best defences in favour of the franchisors in the event that dispute might arise by minimising legal liability of any representations that have been made prior to entering the franchise agreement. Just like in the construction of any disclaimer, the construction of non-reliance or non-representation clauses need to be treated seriously rather than as an afterthought.
For a successful claim for damages caused by any franchisor, the franchisee will need to show that the franchisor contravened the provisions of the Australian Competition and Consumer Law by doing such things that amounted to misleading and deceptive conduct.
A link will need to be established that shows the relationship between the representation that was misleading and the direct loss that the representation caused the franchisee.
When the clauses are used effectively, they can cause big problems for a franchisee seeking damages from a franchisor for alleged misleading or deceptive representations.
They can create a serious credibility problem for a franchisee and raise doubts as to whether their evidence that they relied on the alleged representations should be accepted by the Court.
They can also make it difficult for the Court to find that any representation made caused any loss or damage. In other words, given a situation that the franchisee has signed a franchise agreement that contains non-representation and non-reliance’s clauses, their credibility will be easily diminished by the court when the franchisee claims that a certain representation was made by the franchisor which made them act in the manner that they did.
Our franchise lawyers advise that non-representation or non-reliance clauses need to be used in conjunction with other strategies that minimise the risk of liability for representational conduct that occurs before a Franchise Agreement is signed. Franchisors must ensure that they
- Make a genuine effort to educate and avoid misleading and deceptive conduct to their potential franchisees.
- have the franchisee sign documents that contain a non-representation clause or non-reliance clause at the time that the Franchise agreement is signed.
