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Can varied renewal terms be unconscionable?

Posted on 20 August 2014

This blog considers the case of Civic Video Pty Limited v Yogies Pty Limited [2011] NSWSC 1107 (29 September, 2011).

The Franchisee claimed that Civic Video acted unconscionably because the terms of the new franchise agreement were less advantageous to the Franchise than the old agreement.

The court held there was nothing unconscionable in the way the new agreement became binding on the Franchisee.  The Franchise was not put under pressure to agree to the new terms of the new franchise agreement and the Franchisee had ample time to consider them.  The Franchisee was an experienced businessman and was clearly able to make decisions about what was best for the Franchisee. 

It was held at para[50] that the Franchisee “..was given the choice to agree to the new terms or to terminate the franchise.  But there was nothing unconscionable in that.  Nor was there anything unconscionable in the substance of the new terms.  Those terms reflected the standard terms offered by Civic Video to all its Franchisees.” 

The fees payable under the new agreement had increased however that was as a result of changes in the market.  The market had changed so that previously where video stores would obtain its income from the rental of videos the majority of income now came from the sale of videos, drinks and confectionery.

Further, the introduction of an advertising fee could be seen as a response to changes in the market also and in particular the increased competition.

It is important to note that in this case the franchise agreement stated that the terms of the renewal agreement would be "in the Franchisor's current form used at the time the notice ...is given".  In such cases it is clear the courts will look at all of the surrounding circumstances in deciding if the franchisor has acted unconscionably. 

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