Rescission right

In a province with a franchise disclosure Act, a franchisee whose franchisor gave late, deficient or no disclosure may be able to rescind the franchise agreement, which means cancel it. The term comes up when someone buys a new franchise, and when a resale buyer asks whether a deal could later be unwound. When can I cancel a franchise purchase? covers the practical side.

How the statutes frame it

Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000 lets a franchisee rescind, without penalty or obligation, no later than 60 days after receiving the disclosure document if the franchisor failed to provide it, or a statement of material change, within the time required by section 5, or if its contents did not meet section 5. If the franchisor never provided the disclosure document, the franchisee may rescind no later than two years after entering into the agreement (section 6). British Columbia’s Franchises Act and Manitoba’s Franchises Act have similar provisions in their own section 6. Alberta’s Franchises Act (section 13) lets a prospective franchisee who did not get the disclosure document by the time in section 4 rescind by giving a notice of cancellation to the franchisor or its associate. Each province sets its own wording and periods.

What to ask

• Which province’s Act governs this franchise?
• Was a disclosure document delivered, and on what date?
• Does an exemption from disclosure apply to this sale?
• Has any notice of rescission already been given?