Statutory right of action for misrepresentation (franchise)

Ontario’s Arthur Wishart Act, s. 7(1), gives the right of action against the franchisor, its agent, its broker, its associate and every person who signed the disclosure document or a statement of material change. Under s. 7(2), a franchisee who acquired the franchise is deemed to have relied on a misrepresentation in those documents. Section 7(4) removes liability if the person proves the franchisee acquired the franchise with knowledge of the misrepresentation, and s. 7(5) gives persons other than the franchisor further defences.

Other provinces

British Columbia’s ss. 7–8 and Manitoba’s s. 7 follow a similar shape, each with its own defences, and British Columbia’s s. 11(2) says a franchisee is not required to choose between rescission and this action, though s. 11(3) bars damages for a loss already recovered through rescission. The remedy is separate from the rescission notice. This entry covers Ontario, British Columbia and Manitoba only; check the rules in the province where the business is.

What to ask

• Which statements in the disclosure document or a material change statement were wrong
• Who signed the document, found on the certificate
• What the buyer knew before acquiring the franchise
• What time limit the Act sets for starting an action

For a resale, see how the Arthur Wishart Act applies.