01
No Disclosure Provided
The franchisor never delivered the required disclosure document at all.
Rescission under the Arthur Wishart Act is a statutory remedy that may allow an Ontario franchisee to cancel a franchise agreement when the franchisor fails to meet prescribed disclosure requirements. The deadline may be 60 days or two years, depending on the disclosure problem.
Because these periods can affect whether the remedy remains available, franchisees should review the disclosure document, franchise agreement, delivery dates, and payment records as early as possible.
What Is Rescission Under the Arthur Wishart Act?
Rescission under Ontario's Arthur Wishart Act (Franchise Disclosure), 2000 allows a franchisee to cancel a franchise agreement without penalty or obligation when the requirements of section 6 are met.
The Act creates separate rescission rights for late or non-compliant disclosure and for cases where no disclosure document was provided. Because the analysis is technical, many franchisees ask a franchise lawyer in Canada to confirm which right applies before acting.
In general contract law, rescission means setting aside a contract. Under the Wishart Act, however, the remedy follows a specific statutory framework with defined deadlines, notice rules, and financial consequences. If you are still learning how Ontario franchise law works, it helps to read the disclosure rules alongside the rescission rules.
The right does not arise merely because a franchisee regrets the investment or the business performs poorly. The analysis centres on the franchisor's disclosure obligations and the requirements of section 6.
What Is the Difference Between the 60-Day and Two-Year Rescission Rights?
Ontario's Arthur Wishart Act provides a 60-day rescission period for certain late or non-compliant disclosure and a two-year period where the franchisor never provided the required disclosure document.
| Rescission right | When it may apply | Deadline |
|---|---|---|
| Section 6(1) | Disclosure was late, a required statement of material change was late, or the disclosure document did not meet section 5 requirements | No later than 60 days after receiving the disclosure document |
| Section 6(2) | The franchisor never provided the disclosure document | No later than two years after entering into the franchise agreement |
These periods should not be combined.
When Does the 60-Day Rescission Period Apply?
Section 6(1) applies when the franchisor delivered disclosure but failed to meet the timing or content requirements described in section 5.
This may include disclosure delivered too late, disclosure whose contents do not comply with section 5, or failure to provide a required statement of material change within the statutory timing rules.
When Does the Two-Year Rescission Period Apply?
Section 6(2) applies where the franchisor never provided a disclosure document.
Ontario courts have also considered whether a document can be so deficient that it does not legally amount to disclosure. The Court of Appeal has treated this as an objective analysis focused on the disclosure itself rather than the individual franchisee's reaction to it.
A defect does not automatically produce a two-year rescission right. The nature and seriousness of the disclosure problems must be reviewed against the Act and current case law.
What Disclosure Problems Can Support a Rescission Claim?
A rescission claim under section 6 is based on failure to satisfy the statutory franchise disclosure requirements that apply to the franchise transaction.
02
Delivered Late
The disclosure document was delivered outside the 14-day timing requirement.
03
Missing Material Facts
Facts material to the value or acquisition decision were left out of disclosure.
04
Non-Compliant Financials
Prescribed financial statements were missing or did not meet the standard.
05
Omitted Agreements
Proposed franchise or related agreements were not included in the disclosure package.
06
No Statement of Material Change
A required statement of material change was not delivered within the statutory timing.
The Act generally requires a franchisor to provide the disclosure document at least 14 days before the prospective franchisee signs a franchise-related agreement or pays consideration relating to the franchise, subject to statutory exceptions.
Multiple serious deficiencies may, in some cases, mean the package did not legally amount to disclosure. Whether that longer analysis is available depends on the facts and current case law.
What Are Material Facts and Material Changes?
Material facts are information about the franchisor, its business, operations, capital or control, or the franchise system that could reasonably be expected to affect the franchise's value or the decision to acquire it.
A material change concerns a change to that type of information that could reasonably be expected to have a significant adverse effect on the franchise's value, price, or acquisition decision.
These concepts matter because franchise disclosure obligations are not limited to filling in a standard form. The disclosure package must satisfy the statutory content requirements that apply to the transaction.
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Is Misrepresentation the Same as a Right to Rescind?
Misrepresentation is not automatically the same as a section 6 rescission right because the Arthur Wishart Act separately provides a damages remedy under section 7.
Section 7 gives a franchisee a right of action for loss caused by certain misrepresentations in a disclosure document or statement of material change, or by a failure to comply with section 5.
A misleading earnings statement, for example, may be relevant to a disclosure analysis and may support a damages claim. Our explanation of how earnings and financial disclosure are treated under the Act sets out why these representations need close review. It should not be described as automatically creating rescission without reviewing whether the requirements of section 6 are also met.
Section 6 vs. section 7Section 6 addresses statutory rescission. Section 7 addresses damages for specified disclosure failures and misrepresentation. They are different remedies and are analyzed separately.
How Do You Give a Notice of Rescission?
A notice of rescission must be in writing and delivered to the franchisor in accordance with section 6(3) of the Arthur Wishart Act.
The Act permits delivery personally, by registered mail, by fax, or by another prescribed method. Ontario's regulation also permits delivery by prepaid courier to the franchisor's address for service in the franchise agreement.
The effective date depends on the delivery method, so timing should be checked carefully where a statutory deadline is approaching.
The Ontario Court of Appeal has held that a pleading can satisfy the statutory notice requirements in some circumstances when it is written, delivered, and clearly communicates the exercise of the rescission right. Even so, using a separate written notice is a cleaner practical approach.
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What Happens After a Valid Rescission?
Section 6(6) requires the franchisor or franchisor's associate, as applicable, to take specified financial steps within 60 days after the effective date of rescission. This can go well beyond helping the franchisee recover the franchise fee.
- Refund qualifying money received from the franchiseeOther than money for inventory, supplies, or equipment.
- Purchase remaining qualifying inventoryAt the price the franchisee paid.
- Purchase qualifying supplies and equipmentAt the price the franchisee paid.
- Compensate qualifying lossesLosses incurred in acquiring, setting up, and operating the franchise, less the amounts addressed above.
These categories can include more than the initial franchise fee. Depending on the facts and evidence, franchise fees, deposits, royalties, advertising payments, operating losses, equipment, inventory, and other qualifying expenditures may need to be examined.
The exact value of a rescission claim is evidence-dependent. Complicated claims may require financial records or forensic accounting, particularly where operating losses or disputed asset values are involved.
Is Rescission the Same as Restitution?
Rescission and restitution are related concepts but are not identical.
Rescission addresses cancellation of the franchise agreement under the statutory framework. The financial obligations in section 6(6) address what must happen after valid rescission and are intended to unwind specified financial consequences of the franchise relationship.
For an Ontario franchise claim, the statutory wording of section 6(6) matters more than relying on a general definition of restitution.
What Can Bar or Affect a Rescission Claim?
A rescission claim can fail if the statutory requirements are not met, including where the applicable notice deadline has expired. Where rescission is not available, franchisees sometimes turn to other ways to get out of a franchise agreement, such as negotiation or a contractual exit.
Issues that may affect entitlement include
- Whether the transaction is subject to the Arthur Wishart Act.
- Whether a disclosure exemption applies.
- What disclosure was actually delivered.
- When the disclosure was received.
- When the franchise agreement was entered into.
- Whether the alleged defects meet the applicable legal threshold.
- Whether written notice was delivered within the correct statutory period.
What Records Should a Franchisee Preserve?
A franchisee considering rescission should preserve the documents that establish what was disclosed, when it was disclosed, what was signed, and what money was spent.
Useful records to keep
- The complete Franchise Disclosure Document.
- Proof showing when it was received.
- The franchise agreement and related agreements.
- Any statement of material change.
- Emails and other communications about disclosure.
- Initial franchise fee and deposit records.
- Royalty and advertising fee records.
- Invoices for inventory, supplies, equipment, and setup costs.
- Financial statements and operating records.
- Lease or sublease documents where relevant.
- Bank and payment records supporting claimed losses.
These documents can affect both entitlement to rescission and the amount claimed under section 6(6).
Practical pointIf a deadline may be approaching, checking the dates should come before trying to quantify every loss.
How Does Rescission Affect Franchisors?
Rescission can create substantial statutory compensation exposure for a franchisor when a franchisee establishes a valid section 6 claim.
Franchisors can reduce that exposure by maintaining a compliant disclosure process, including accurate disclosure documents, prescribed financial statements, copies of required agreements, material facts, and statements of material change when required.
Disclosure procedures should also record when and how each package was delivered. Good records can become central evidence if the parties later disagree about timing or content.
Franchisors should also review disclosure when material facts change rather than relying on an older disclosure package that no longer reflects the franchise offering.
When Should You Get Legal Advice About Rescission?
Legal advice is particularly useful when a franchisee may be approaching the 60-day or two-year statutory deadline, or when the parties disagree about whether disclosure was legally sufficient. A franchise litigation lawyer can also assess how a rescission position may hold up if the dispute proceeds.
A franchise lawyer can review
- Which rescission period may apply.
- Whether the disclosure package meets the statutory requirements.
- Whether a notice of rescission is timely.
- How notice should be delivered.
- Which section 6(6) compensation categories may be relevant.
- Whether section 7 damages should also be examined.
Cloudhaus Law advises franchisees and franchisors on Franchise Disclosure Documents, franchise agreements, termination matters, and Ontario franchise law. As a franchise disclosure lawyer serving Ontario, the firm also offers fixed-fee legal services and direct access to Irbaz Wahab for applicable matters.
Frequently Asked Questions
Answers to the most common questions.
Can I rescind a franchise agreement within two years?
A franchisee may rescind within two years after entering into the franchise agreement where section 6(2) applies because the franchisor never provided the required disclosure document. A franchisee should not assume that every disclosure defect creates the two-year right.
Can I rescind if I received an incomplete disclosure document?
An incomplete disclosure document may support rescission, but the applicable section and deadline depend on the nature of the deficiencies. Section 6(1) expressly covers disclosure whose contents did not meet section 5 requirements. A two-year section 6(2) claim requires a different analysis where disclosure was provided but is alleged to be so deficient that it did not legally amount to disclosure.
What is the right to rescind?
The right to rescind under the Arthur Wishart Act is the statutory right created by section 6 to cancel a franchise agreement without penalty or obligation when the applicable statutory requirements are met. The full framework, including the notice and compensation rules, appears in the Arthur Wishart Act (Franchise Disclosure), 2000 on Ontario's e-Laws site. The right is subject to the applicable 60-day or two-year deadline.
Can a franchisee keep operating after giving notice?
Giving notice of rescission does not by itself answer every question about when the franchisee should stop operations or how third-party obligations should be handled. Lease obligations, employees, lenders, inventory, and other contracts may require separate steps. A franchisee should obtain advice before assuming that notice automatically ends every related business obligation, and the Law Society of Ontario's guidance on finding a lawyer or paralegal can help you locate qualified counsel.
Final Thoughts on Rescission Under the Arthur Wishart Act
Rescission under the Arthur Wishart Act is a specific Ontario statutory remedy tied to franchise disclosure. The most important questions are what disclosure was provided, when it was received, whether section 5 was satisfied, and whether notice can still be delivered within the applicable statutory period.
The 60-day and two-year rights should be analyzed separately, and section 6 rescission should not be confused with section 7 damages for misrepresentation or other disclosure failures.
If you are reviewing a possible rescission claim or responding to a notice of rescission, Cloudhaus Law can review the disclosure documents, agreement, dates, and statutory issues relevant to the matter.
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This article provides general legal information and does not constitute individualized legal advice. Rescission rights depend on the applicable legislation, documents, dates, disclosure history, and facts of the franchise relationship.
About the Author
Irbaz Wahab
Founder, Cloudhaus Law · Dual-licensed lawyer, Canada & U.S.
I'm Irbaz, a dual-licensed lawyer in Canada and the U.S., and founder of Cloudhaus Law. With a background in tech law from the City of Toronto, I've helped launch 70+ franchises in the GTA, advised Web3 projects with $22.5M+ in token market cap, and supported over 100 businesses across 10+ industries. At Cloudhaus Law, we turn legal expertise into strategic success.