The Regulation of Franchising in the New Global Economy
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The Regulation of Franchising in the New Global Economy

Elizabeth Crawford Spencer

While franchising promotes economic and social welfare objectives, Elizabeth Crawford Spencer argues that monitoring and regulation are needed to address potential areas of abuse of the form that can result in costly market inefficiencies.
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Chapter 7: Legislation Impacting Upon Negotiation and Formation of Franchise Contracts

Elizabeth Crawford Spencer


Following on from the summaries and overview of legislation in Chapters 5 and 6, the next two chapters analyse and discuss patterns of franchisespecific legislation globally. The two separate chapters reflect a significant point of delineation in the substance of the legislation as franchise-specific legislative measures fall into two categories, those that are directed towards the formation of the contract, and those that are directed toward performance of the terms of the contract and the end of the relationship. The current chapter is devoted to legislation impacting upon negotiation and formation of franchise contracts. Regulation of franchising is regulation of the contractual agreement. Contract law is generally concerned with entry into the contract and procedural fairness. The assumption is that, where proper procedures ensure that parties enter into contracts voluntarily and with full understanding, the contract can be assumed to be fair and that the government’s role thereafter is principally to ensure performance and to provide remedies where parties do not meet their obligations. Pre-sales regulation focuses on the parties’ capacity to regulate their own interactions and in this way it ensures market efficiency. Consistent with the traditional attitude toward the role of government in contract, such legislation addresses contract formation. The regulatory tools used typically include procedural measures such as disclosure and registration, as well as, though less commonly, cooling off, advice requirements and risk statements. Such legislation can also involve prescriptive standards such as qualifications and/or accreditation of participants in the transaction. This chapter describes both procedural and...

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