The Ontario courts are continuing to recognize the purpose and policy goals of the Arthur Wishart Act. This is to avoid the perceived inequities of powers within the contractual relationship and to narrowly construe the exceptions set out in the Act. Franchisors should bear this in mind when preparing their documentation.
Two 2015 decisions of the Ontario Court of Appeal in particular provide importance guidance to franchisors concerned about how they may wish to handle an assignment of a franchise.
In the first decision, 2147191 Ontario Inc. v. Springdale Pizza Depot Ltd., the Ontario court determined that because a franchisor’s extent of involvement in an assignment “went beyond a mere passive role limited to the specific requirements required for its consent under the franchise agreement,” the assignee was entitled to rescission. In the second, MEDIchair LP v. DME Medequip Inc. et al., the court considered a restrictive covenant in a franchise agreement in the context of the current business of the franchisor and determined that it was unreasonable to enforce it.