Comlaw 304 Report, Essay Example

Hey Joe has asked you (their advisor) for advice regarding what claims they could bring in Court against Anne. In advising Hey Joe, describe the claims (causes of action) that Hey Joe could or might bring against Anne. In your answer, discuss the relevant issues the court will consider and take into account when it hears these claims and what you think the outcome might be. Also discuss what remedy should Hey Joe seek from the Court?

At the beginning of her employment with “Hey Joe”, Anne signed a contract that clearly stated that she would agree not to work in the lunch run business for six months after her employment. It is apparent that Anne breached this contract by starting a business after terminating her contract with the company, even though the business was placed under the name of her husband. Ultimately, it can be considered that since Anne and her husband share their assets, the organization belongs to the family, and therefore to her as well. Furthermore, it is clear that Anne breached the contract in another manner. It appears that she has used the orientation manual provided to her by “Hey Joe” to start her operations in a new territory. The restraint agreement that Anne signed restricts her from opening up a similar business in the entirety of New Zealand for up to six months after her employment, so this change of location for her business still clearly breaches the contract that she has signed.

It is important for individuals who wish to purchase a franchise to understand that there is an inherent risk associated with running a franchise. Therefore, before engaging in this type of business opportunity, they must carefully assess whether they will make profits. The franchiser can be consulted for projections of profit, but it is the responsibility of the franchisee to ultimately gather this data from them in order to make his or her own projection calculations. Furthermore, it is generally recommended that these individuals seek counsel from third parties if they lack the necessary skills to analyze this situation. When Anne had noticed that business was not good, she could have cancelled the contract under the Cooling Off Provision, which states “The franchisee may terminate this agreement by written notice served on the franchisor within 7 days from signing the agreement.” However, because wished to cancel the contract after this period, this particular law did not apply to her.

On the other hand, the Franchise Agreement Clause explicitly states “This agreement constitutes the whole agreement between the parties to the exclusion of any and all other agreements, representations or warranties” and “The franchisee acknowledges that it has not relied upon any express or implied warranties or verbal representations by the franchisor prior to entering into the agreement”. On Anne’s behalf, it does appear that the franchiser made promises to her that have been deemed as false and these rights have therefore been violated by “Hey Joe”. However, this false information was conveyed over a phone call, so it would be challenging of Anne to contest the company’s contract on this basis. If she had asked for a transcript of these promises before signing the agreement, it is possible that this case would weigh in her favour. The Contractual Remedies Act could come into effect in this manner, but only if Anne is able to provide evidence for such a contract breach.

In this particular case, it is also necessary to question whether the advice given to Anne by “Hey Joe” can be considered misrepresentation. According to company statistics, all franchisees have been able to make at least $5000 a month. Furthermore, based on Turanga’s demographic data, it appeared that Anne would be able to do even better in this territory. The company’s defense for Anne’s failure can therefore be that she embarked on this business transaction with a knowledge of the industry but without adequate knowledge regarding how to conduct business. While she has had experience with preparing food over a number of years, she did not seem ready to complete the marketing aspect that is necessary for success in this business. Based on the provided information, it therefore appears that Anne is at fault. She wishes to blame the company for the failure, but in reality, she entered into this agreement with no foresight. As the franchisee, it was her responsibility to gain a greater understanding of this information prior to becoming involved in the business transaction.

Ultimately, it appears that the court will weigh in favour of “Hey Joe” because it appears that Anne’s business failure was due to her own ability rather than the promises made by the company. The information provided by the company appeared to be realistic at the time, and is unfortunately what Anne based her purchase of the franchise on because she did not have the ability to analyze these projections on her own. Furthermore, since Anne has begun her own competitive business in New Zealand, she is violating the contract that had been established between her and “Hey Joe”. Therefore, “Hey Joe” has the right to sue her with damages, and it would be appropriate for these damages to be proportional to the profit she is earning with her new business. Furthermore, she should be required to cease this business until the six month mark has been reached. Anne should not signed the contract if she was not willing to agree to these terms.

Describe the counter claims (causes of action) that Anne could or might bring against Hey Joe. In your answer, discuss the relevant issues the court will consider and take into account when it hears these claims and what you think the outcome might be. Also discuss the remedy you believe Anne would be seeking.

Anne’s main case in this trial is the fact that the profitability of “Hey Joe” was misrepresented to her. According to the case study, the franchise representative, Derek Quicksell, stated that “all existing 20 franchisees were meeting targets and were turning over around $5000 a week on average, producing net profit of $2000 per week” on average. Because these are attractive figures, Anne signed the contract quickly because she was excited about earning these profits, however, this profitability turned out to not be profitable for Turanga. Furthermore, after her failure, she had learned that the company had a previous franchise in this area that failed. She felt mislead because this information was withheld from her, and she was provided a projected success rate, indicating that the company had only told her positive information in order to get her to buy in. Last, Anne feels misled because she did not gain any accounting or business advice prior to signing the contract, which would have been reasonable if the company truly wished to support her in this venture. Overall, Anne’s agreement to sign the contract can be said to be an example of Inducement. According to this term, “the misrepresentation need not be the sole inducement to the contract but it must be a significant factor which influenced a person to enter the contract”. While Anne had expressed interest in entering the contract prior to being told the projected sales for Turanga, she was heavily influenced by this information. It is possible that she would have chosen another location to conduct business in if she had been aware of the previous failure in this territory.

According to the Smith v Land & House Property Corporation trial, when facts are not equally known to both sides, then a “statement of opinion by one who knows the facts best often involves often a statement of material fact, for he impliedly states that he knows facts which justify his opinion”. Under this case law, one could conclude that Anne was misled because she was under the power of an individual who knew all of the facts, when she did not. As a result, she was coerced into making a poor financial choice. However, the franchiser should have acted responsibly by disclosing all information related to her area of choice to her prior to allowing her to sign the contract.

Misrepresentations typically occur due to how facts or opinions are stated. In this situation a proper defense for “Hey Joe” would not be that the information provided to Anne is not valid because it was Derek’s opinion. This opinion is meant to represent the opinion of the entire franchise, which causes it to be liable. Furthermore, while Derek provided Anne with information that was mostly true based on the current business conducted by the company, he stated this information in a manner that convinced Anne to sign the contract. Therefore, the contract was signed under false pretenses.

The type of claims that Anne might be seeking is a reimbursement for her expenses that she incurred for opening the franchise. According to the case study, “Franchisees pay $50,000 to buy a franchise in a territory.  On top of that, they are required to purchase the purpose built refrigerated van, at an additional cost of $60,000”. Anne opened up her own business in an attempt to reimburse these costs, which is why she would justify this action in court. Furthermore, she would attempt to claim that the contract she signed is not valid due to the misrepresentation and that the clause that requires her to not open up a similar business for six months therefore does not apply to her.

It is unlikely that the court will weigh in Anne’s favour because according to the information of the case, it appears that Anne is more likely to have failed as a “Hey Joe” franchisee due to her lack knowledge of the business world. Even though a franchise in Turanga has failed previously, the company could have believed that it would do well in this area now due to changes that have occurred in the territory since this failure. Therefore, it is not possible to prove that “Hey Joe” misrepresented Anne conclusively, and favour will likely fall to the company as a result.