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Franchise Agreements: It's all in the words

Thursday 30th August 2018

How should franchise agreements be worded? It is important to use the correct words in a franchise agreement.

A recent franchising case in the English High Court (MMP GmbH v Antal International Network Ltd) has thrown up some interesting questions and underlined the importance of using the correct words in a franchise agreement.

Antal franchises a recruitment business. MMP was a franchisee in Switzerland. Miss Bosshard whilst working as an employee of MMP entered into a relationship with a male candidate that she was assisting to find employment. When the relationship ended Miss B used personal data about the candidate obtained from her assignment to pursue and harass him. He complained to Antal. They terminated the franchise of MMP.

The termination was on the grounds that MMP was in breach of a clause in the franchise agreement that they must not “at any time do anything to prejudice the operation or reputation of the Business”.

MMP argued (amongst other things) that as Miss B was not acting in the course of her employment, and was in serious breach of her contract of employment in using personal data obtained in her work to harass a former candidate they had not done anything. I would have thought that quite a good argument but the court disagreed.

The court however agreed with MMP that the words “at any time do anything to prejudice the operation or reputation of the Business” meant that the operation or reputation had to actually be damaged. It was not sufficient that they might be damaged.

As Antal was unable to produce evidence of actual damage their termination of MMP was held to be wrongful and MMP were entitled to the payment of damages.

Had the relevant clause said “may damage the reputation….” or “is likely to damage the goodwill, brand, reputation….” it is probable that the result would have been different.

For more information, you can contact Geoffrey at Warner Goodman Commercial on 023 8071 7422 or email franchising@warnergoodman.co.uk