PEI Becomes Third Province To Enact Franchise Legislation

On July 1, 2006, the Prince Edward Island Franchises Act will come into force, making PEI the third Canadian province, after Alberta and Ontario, to regulate the relationship between franchisors and franchisees.

The PEI Act is substantially similar to the existing Ontario legislation, as well as the Alberta legislation. Like the Ontario Act, it requires a franchisor to provide a prospective franchisee with a disclosure document at least 14 days before the franchisee enters into an agreement related to the franchise or makes any payment to the franchisor.

The disclosure document must contain all material facts, including all material facts prescribed by accompanying regulations. If the franchisor fails to provide the disclosure document on time (or at all), the franchisee may rescind the franchise agreement. Also, similar to the Ontario legislation, the PEI Act imposes a duty of fair dealing on parties to a franchise agreement and also grants franchisees a right to associate and