Business Law BUS2010: Examining Contract Law in a Franchise Case

This case study examines the contract between Charlie Martin and PHOCCI, focusing on the validity of the agreement and potential issues arising from it. It highlights the importance of consulting with legal and accounting experts before entering into franchise agreements, referencing the Franchising Code of Conduct and Ontario’s Arthur Wishart (Franchise Disclosure) Act. The analysis considers the elements of a valid contract, including offer, acceptance, consent, and capacity, to determine whether the contract between Charlie and PHOCCI is legally sound. The discussion also touches on standard form contracts and their potential for unconscionability, alongside the importance of disclosure documents and fair agreement drafting. Desklib provides access to similar case studies and solutions for students seeking to enhance their understanding of business law concepts.

Running Head: CONTRACT LAW
Business Law
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Contract Law 2
Contracts
Specific Suggestions before entering into the Franchise agreement
The first step that Charlie should have taken was to consult with a franchising lawyer
and an accounting expert so that he could assist him to go through the franchise agreement
and the printouts provided by Nell. This act could have helped him in making a clear and
informed decision. Secondly, Charlie should have looked at the Franchising Code of Conduct
before entering into the agreement. Also, written disclosure of all information and material
facts must be provided during disclosure, (Walter, Pederson & Webb, 2017, 973). Printouts
should not be allowed. He should also understand that these documents must be provided
within a period of fourteen days before any binding agreement is executed, as stipulated by
the Canadian Franchise Association Code of Ethics. It is paramount for Charlie to undertake
his own research so that he is satisfied with the research and statistics provided by Nell. As
stated earlier, disclosure documents are essential, (Monestier, 2018, 177). Under the
Ontario’s Arthur Wishart (Franchise Disclosure) Act, a disclosure document must contain
material facts, financial statements, copies of proposed agreements, statements relating to
the making of informed investment decisions and any copy of documents mentioned. Also,
drafting of agreements should be between the two parties involved so that there is fairness.
Standard Form Contracts and why it may be used in this case
Standard form contracts are drafted by one party thus raising the scenario of “take it
or leave it”. the party being subjected to the contract does not have any room to negotiate.

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This kind of contract can cause unconscionability (terms can be unjust or one-sided favoring
the drafting party) and in case there is a disagreement, the terms are resolved contra
proferentum- against the one who drafted the contract. This form of contract can be used
because its main aim is to boost economic efficiency. Transaction costs are reduced because
a lot of negotiations are avoided especially when one party wants to reduce the pricing,
(Amine, 2018, 17).
Whether there was a valid contract between Charlie Martin and PHOCCI
For a valid contract to exist, offer and acceptance between the contracting parties
have to exist. In this case, Charlie sought to start his own business and sought help from Nell
and PHOCCI. The offer, in this case, arises from the idea of being assisted to get a franchise
from PHOCCI. As such, Charlie accepts the offer after considering the different statistics and
surveys done by Nelly. Charlie also signed an agreement with the company without being
coerced thus showing that there was free consent by all parties, (Tucker & Stromdahl, 2017,
47). It is also essential to note that mutual consent exists between the two parties-
consensus ad idem. Lastly, both parties had the intention to create and have a legal
obligation towards each other. This relates to taking any party that does not adhere to the
agreement, to court. Aspects of consideration and capacity are also essential. The
agreement stipulates for payments and royalties to be paid. Similarly, Charlie is above 18
years hence making him have the capacity to sign agreements and form contracts. From
these elements, The contract between Charlie and PHOCCI is valid.

Contract Law 4
References
Amine, S., & Montreuil, V. L. (2018). The indicator of employment protection legislation for
Canada. The European Journal of Applied Economics, 15(1), 1-19.
Monestier, T. J. (2018). Forum Selection Clauses and Consumer Contracts in Canada. BU Int'l
LJ, 36, 177.
Tucker, E. M., & Stromdahl, A. (2017). Fixed-Term Contracts and Principle of Equal
Treatment in Canada. IUSLabor. 22, 47
Walter, F., Pedersen, C. B., & Webb, R. T. (2017). The Importance of a Valid Comparison
Group—Reply. JAMA psychiatry, 74(9), 973-974.