The Danger of a Promissory Note in the Purchase of Franchise
Osler, a leading Canadian law firm, has an article on a recent case mine, entitled "Does the Arthur Wishart Act Change the Law of Set-off in Ontario?"
"This case could also potentially change the manner in which franchisors must allocate funds received from franchisees to various categories of debt.
Additionally, while not mentioned in the decision, the plaintiffs can be expected to raise the issue of whether the two-year rescission period had expired, as the note was dated July 31, 2002 and the notice of rescission delivered on August 13, 2004."
The Osler case brief unfortunately misses the key facts, and the grounds upon which the Judge denied summary judgment on promissory note.
Tupperware purported to revoke the franchise, and then calculated how much good will was owing according to a formula.
The good will was then allocated to the trade debt and not the promissory note.
The argument was that Tupperware never explained to the Court, for almost 3 years, why they set-off of the good will payment against the trade debt rather than the promissory note.
The legal issue in question was whether the promissory note had been paid - since a franchisor owes a duty of good faith in the performance of the contract to the franchisee.
That statutory duty might have required them to pay off the promissory note with the proceeds from the good will payment.
But there was no evidence before the Court about how and why Tupperware exercised their discretion.
No evidence - no summary judgment.
Tupperware has sought leave to appeal, will keep you posted.
Read More From BizOp News
April 23, 2008
Bakers Delight franchise off the ACCC hook -
The Australian Competition and Consumer Commission announced yesterday that it had concluded its investigations into allegations that Bakers Delight engaged in misleading and deceptive and unconscionable conduct towards franchisees in operating its franchise system.
Jaqui Walker reports that
"However, the ACCC is holding "continuing discussions with Bakers Delight with a view to ensuring its trade practices law compliance procedures and complaint handling processes are best placed to deal with issues that might arise in the future".A number of franchisees had alleged Bakers Delight had been churning (selling franchises destined to fail and then reselling them to others) and collusion with banks, including that Bakers Delight shared information about a franchisee with a bank which led to losses being suffered. "
Here is what the Australian Competition and Consumer Commission stated in their own press release:
Having conducted an in-depth investigation, including analysing a large amount of documentary evidence and conducting a number of detailed interviews with various witnesses the ACCC has decided not to take any further action. This position has been informed by a number of conclusions:* the evidence assessed - in the ACCC's view - did not demonstrate that Bakers Delight had engaged in unconscionable conduct or breached the Franchising Code.
* although there is no suggestion that the allegations made by the franchisees were made with any improper intent, in many cases, it was difficult to substantiate claims and in some cases information given was directly contradicted by documents and other evidence.
* there were a few circumstances where franchisees alleged that Bakers Delight representatives had made misleading verbal representations which investigations have neither substantiated nor dismissed. However in each of these cases, the ACCC considers steps taken by Bakers Delight to remedy the alleged wrongdoing were reasonable or other factors led to the losses suffered by the franchisees.
* there was no evidence produced to or obtained by the ACCC that - in its view - evidenced widespread or systematic problem of compliance within the Bakers Delight franchise system.
For an alternative view, please see the website Baker's Delight Lies.
