Acting in good faith under the Franchising Code of Conduct

Racha Abboud

The Franchising Code of Conduct (Code) requires all parties who enter, or intend to enter a franchise agreement to act in good faith. Whilst most parties are aware of this obligation, the details regarding the duty to act in good faith remain unclear. Read on to discover what acting in good faith looks like, who it applies to and what penalties arise from failing to uphold this duty.

What is good faith?

The Code currently offers no clear definition of ‘good faith’. However, it is inferred that the duty to act in good faith is consistent with the expectations set at common law. Together, the Code and common law outline basic standards of good faith, in which a court must consider when determining if the obligation has been fulfilled. Courts will consider whether the parties:

How can I show that I have acted in good faith?

To demonstrate that you have acted in good faith, you should:

In addition to the above, franchisors should also demonstrate that their actions are of good faith by:

Failing to act in good faith is a mistake you can’t afford to make. Contraventions of this obligation are serious and attract penalties under the Code. If you’re concerned that your franchisee or franchisor may not be acting in good faith, contact our franchising expert for advice:

Racha Abboud, Senior Associate
Phone: +61 2 9895 9283
Email: rabboud@colemangreig.com.au 

Assistant Author - Emily Lucas, Legal Cadet