Parties to South Australian franchise agreements will have a duty to deal with each other in good faith if a Bill introduced into the South Australian Assembly is adopted when Parliament resumes next year.

The Bill, introduced by franchise law reform advocate and Labor member, Tony Piccolo, requires parties to a franchise agreement to at all times act in good faith. This means acting fairly, honestly, reasonably and in a co-operative manner.

It also provides for pecuniary penalties to be applied against parties who the courts find have breached the code.

Piccolo told Parliament that, in his opinion, the Bill will foster a more ethical approach to business in the franchise sector. He also advised that good faith dealing was opposed by the Franchise Council of Australia (FCA) because it believes the provision will lead to widespread litigation.

Piccolo then used a number of Canadian provinces as examples of how good faith dealing provisions in franchising codes can exist without a flood of litigation occurring.

The Bill also creates a commissioner for franchising, who would have the power to mediate, conciliate and arbitrate.

According to Piccolo the commissioner would overcome the deficiencies in the existing mediation provision provided for by the current franchising code of conduct.