Breach of Contract
Franchise relationships depend on detailed legal agreements. When a franchisor or franchisee fails to uphold their obligations — whether related to royalties, advertising funds, territory protection, or operational requirements — it can jeopardize your business. We analyze every provision of your contract, assess good-faith obligations, and take action to enforce or defend your rights under the agreement.
What is a Contract?
A contract is simply a collection of mutual promises between the parties regarding future obligations. In the case of a franchise, the contract is almost always written, although it need not be. If the contract is not ambiguous, a court or arbitrator will interpret it based on the plain language used by the parties. If the contract is ambiguous, interpretation gets much more complicated.
What is a Breach?
Presumably, everyone who signs a contract understands it and intends to make their best efforts to perform their obligations fully. If someone fails to perform even one of their obligations, that is a breach. In a franchise context, a typical breach by a franchisee is failure to pay fees on time, failure to submit required information, or failure to operate in strict compliance with the operations manual. A typical breach by a franchisor would be failing to provide promised training or support, or allowing another outlet to open that encroaches on the franchisee’s territory if the franchisee has one.
What Are Your Rights if the Other Party Breaches?
Contracts do not enforce themselves. If you are the non-breaching party or if the other party accuses you of breach, you need to consult with experienced franchise counsel if it is a franchise agreement. If you are the franchisor and believe a franchisee is in breach, the franchisee’s state may have notice and opportunity to cure requirements before you can take specific enforcement actions. Likewise, if you are a franchisee, your state may have specific protections in place that benefit you in such situations. Either party will need to understand not only the statutory framework that governs the contract but also the common law of franchising in the state, as well as the recent trends in how various courts and arbitrators handle such disputes.
Is It Ever Okay To Intentionally Breach?
In some states and in a few limited circumstances, it may be permissible to breach a franchise agreement. Indeed, your experienced franchise attorney may advise you that you can only preserve your legal rights by deliberately breaching the contract. Intentionally breaching a contract is a very serious step to take and one you should not even consider trying to do without guidance from an experienced franchise attorney. Such a decision will seldom be simple, and you will need guidance in evaluating your best course of action.
You Need Experienced Legal Advice
The lawyers at Bundy & Fichter have been helping franchisees who have been accused of breach of contract for a combined total of more than half a century. The lawyers at Bundy & Fichter would be happy to help you. Please contact us.