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The Ontario Superior Court of Justice released a decision in January 2014, involving Cora Franchise Group, 2176693 Ontario Ltd. v. Cora Franchise Group Inc., 2014 ONSC 600 (CanLII), holding that a standard assignment release clause – requiring a franchisee to release a franchisor of all claims as a condition of assigning the franchise – is invalid.

The court ruled that such a general release condition is invalid because of s. 11 of the Arthur Wishart Act (Franchise Disclosure), 2000, which voids any purported release or waiver:

  • Rights cannot be waived
  • 11. Any purported waiver or release by a franchisee of a right given under this Act or of an obligation or requirement imposed on a franchisor or franchisor’s associate by or under this Act is void

This is an important decision to the franchise community because practically every modern franchise agreement contains a similar general release clause.  Many franchisees complain about being required to release a franchisor of all claims before being allowed to sell their franchise to a new purchaser (which typically requires an assignment their franchise agreement). Franchisees cannot be required to provide a blanket release of their rights under the Arthur Wishart Act.

Franchisors are not without options.  As a best practice, franchisors should deal with the issue of settlement without delay and more thoughtfully, proactively and more specifically in relation to a particular dispute they may have with a franchisee.

One of the cases discussed in the Cora decision is the very first Ontario decision on franchise settlements, called Tutor Time:1518628 Ontario Inc. v. Tutor Time Learning Centres LLC (2006), 150 A.C.W.S. (3d) 93 (Ont. Superior Court of Justice).  In the often-cited Tutor Time decision, Law Works’ Ben Hanuka acted as counsel.

For more information on this issue please visit Law Works’ Franchise Waivers and Releases page.

This article is provided for information purposes only. Law Works’ Franchise Law Blog does not provide legal advice.

For more information about Law Works’ expertise and how we may be able to help you, please contact Ben Hanuka at https://www.lawworks.ca/book-a-consultation or by phone at (855) 978-5293.

Law Works Dispute Resolution Law Firm

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Ben Hanuka
JD, LLM, CS (Civ Lit), FCIArb, of the Ontario and BC Bars

Highlights:

  • JD, LLM (Osgoode '96, '15), C.S. in Civ Lit (LSO), Fellow of CIArb, member of the Bars of Ontario ('98) and BC ('17)
  • Principal of Law Works PC (Ontario)/LC (British Columbia)
  • Acted as counsel in many leading franchise court decisions in Ontario over the past twenty-five years, including appellate decisions.
  • Provided expert opinions in and outside Ontario
  • Presented at and chaired numerous franchise and civil litigation CPD programs for over 20 years
  • Chair of OBA Professional Development (2005-2006) - overseeing all PD programs
  • Chair of Civil Litigation Section, OBA (2004-2005)

Notable Cases:

Mendoza v. Active Tire & Auto Inc., 2017 ONCA 471

1159607 Ontario v. Country Style Food Services, 2012 ONSC 881 (SCJ)

1518628 Ontario Inc. v. Tutor Time Learning Centres LLC (2006), 150 A.C.W.S. (3d) 93 (SCJ, Commercial List)

Bekah v. Three for One Pizza (2003), 67 O.R. (3d) 305, [2003] O.J. No. 4002 (SCJ)