II. Legal information

A. Legal information directly related to the franchising

 
- Applicable legislation
 

The legal regime governing franchises falls within the legislative jurisdiction of the federated States. The provinces of British Columbia, Alberta, Manitoba, New Brunswick, Ontario and Prince Edward Island have passed legislation regulating franchise agreements[32].
 
The province of Quebec has its own Civil Code and a Code of Ethics and Sound Franchising Practices drafted by the Quebec Franchise Council[33].
 
A distinction must be made between Quebec and the other provinces of Canada.
 
The six provinces mentioned above have similar franchise contract laws. The general aim is to regulate the market and protect potential franchisees and those already in a franchise relationship[33]. Each of these laws provides for the right of franchisees to form partnerships. Franchisees may not, in their agreements, evade the rights granted to them, nor waive the obligations imposed on franchisors.
 
In Quebec, the Code of Ethics and Sound Franchising Practices is mandatory for every member of the Quebec Franchise Council.
 
Point 8 of the Code of Ethics and Sound Practices specifies that all important elements of the franchisor-franchisee relationship must be set out in writing, clearly stating the conditions under which the franchise is granted, as well as the main rights and obligations of the parties.
 
The Charter of the French Language[35], applicable to Quebec franchise agreements, imposes French as the language of business relations. As of June 1, 2023, standard form contracts, including franchise agreements, must be drawn up in French. Any standard form contract drawn up in a language other than French is not binding on the parties[36].

- Contract performance

Franchise agreements are governed by contract law, which in most provinces is based on common law and, in the case of Quebec, on the Civil Code of Quebec.
 
The laws of the six above-mentioned provinces specify that the parties to a franchise agreement have a duty of good faith in the performance and application of the agreement. A breach of the duty of good faith (fair dealing) by one party entitles the other to claim damages[40].
 
In Quebec, the Civil Code and the Code of Ethics and Sound Franchising Practices specify that good faith must characterize the relationship between franchisors and franchisees throughout their relationship, and that franchisors must give notice of any contractual breach and allow franchisees a reasonable time to remedy it. As for franchisees, they must inform their franchisors as soon as possible of any difficulties, problems or disputes relating to the operation of their franchised businesses, or to their relationships with their franchisors or with other franchisees.
 
- Jurisdiction and applicable law
 
Canada has signed and ratified the 1980 Vienna Convention on Contracts for the International Sale of Goods[41]. This Convention applies exclusively to contracts for the sale of goods for professional use (article 2 of the Convention). The Vienna Convention governs exclusively the formation of international sales contracts, and the rights and obligations of seller and buyer. However, the validity of the contract and its effects on the ownership of the goods sold are not governed by the Vienna Convention. This Convention supersedes national law when the parties have their place of business in States party to the Convention.
 
In 1986, Canada ratified the 1958 New York Convention[42] facilitating the recognition and enforcement of foreign arbitral awards.
 
- Pre-contractual information

 
The laws of the six above-mentioned provinces require franchisors to provide franchisees with information at least 14 days before the signing of the franchise agreement or payment of any consideration by the potential franchisee relating to the franchise[37].
 
In particular, the disclosure document must contain information on the franchisor's financial statements, the business, operations, capital and control of the franchisor or franchise system. Each disclosure document must be certified, i.e., it must include a signed and dated certificate attesting to the fullness of the disclosure document. The disclosure document will be deemed never to have been provided to the franchisee[38] if this is not done.
 
If any disclosure document delivered to the franchisee is incomplete, the latter is entitled to terminate the franchise agreement, no later than 60 days after receipt of the disclosure document. If the franchisor never provided the disclosure document, the franchisee has two years from the date of conclusion of the franchise agreement to terminate the franchise agreement[39].
 
In Quebec, the Code of Ethics and Sound Franchising Practices specifies that franchisors must disclose important and relevant facts and information about the proposed franchise to any prospective franchisee before the contract is concluded. The Code of Ethics and Sound Practices specifies that this information should preferably be disclosed in writing.
 
The Code of Ethics and Sound Practices also states that franchisors should encourage prospective franchisees to contact existing franchisees before entering into any franchise agreement.
 
Finally, the Code of Ethics and Sound Business Practices specifies that franchisors must ask their prospective franchisees to consult independent, qualified legal and accounting advisors before entering into a contract.
 
Franchisees are entitled to a reasonable period of time between receiving pre-contractual documentation and signing the franchise agreement.

- Trademarks
 

While the franchise system falls under provincial jurisdiction, trademark protection is subject to federal law, the Trademarks Act[43] .
 
In Canada, trademarks are not required to be registered. However, registering your trademark gives you greater rights and protection. In particular, only registered trademarks can be registered with the Canada Border Services Agency to prevent the importation of counterfeit goods into Canada[44] . Registering a trademark gives you the right to use it exclusively throughout Canada[45] .
 
Registration is with the Canadian Intellectual Property Office.
 
Registered trademarks are protected for ten years and are renewable. However, the period of lapse for a trademark is three years. Thus, if the trademark has not been used for three years, it is no longer protected.
 
An unregistered trademark may still be protected under the Common Law doctrine of passing off, but this protection will be limited to the geographical extent of the customer base.
 
In Quebec, under the Charter of the French Language, trademarks must be translated into French on public signage and commercial advertising. An exception exists for so-called recognized brands, but this exception will be restricted as of January 1er 2025. The following conditions must be met in order not to display a trademark in French:

• non-French trademark registration in Canada ;

• French translation compulsory for the generic term or product description if contained in the trademark;

• the French language must be predominant on exterior and interior signs and posters visible from outside the premises.

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To go further by MIIP

In Canada, trademark applications can be filed nationally or through the WIPO system. Examination is required. Canada allows multi-class trademark registrations. Use of the trademark is necessary to defend a registration against a non-use action after the third anniversary of registration. To develop a franchise in this country, it is advisable to cover "Business assistance relating to franchising" that will be accepted by the trademark office. As for "Retail services", they are accepted with a general listing of the goods provided, such as “retail clothing store services.” Recording a franchising agreement is not compulsory though it might be advisable for legal advantages.

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