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Implied Term Of Good Faith And Fair Dealing

The plaintiff in Far Horizons Pty Ltd v McDonald’s Australia Ltd [2000] VSC 310 (18 August 2000) operated two McDonald’s restaurants. The franchisee’s relationship with the franchisor deteriorated over a number of years. Correspondence from the franchisor evidenced this and suggested that the franchisor ‘felt uneasy about growing…’ with the franchisee. The franchisor commenced to develop a new store close to the franchisee’s existing restaurant without first offering the site to the franchisee.

The Court acknowledged the decision in Renard Constructions v Minister for Public Works (1992) 26 NSWLR 234 that there exists implied in every franchise agreement a mutual duty of good faith and fair dealing which may deem the use of power (even that which is constituted in a clause) “unfair” and beyond that of the agreement However, in this case, there was no breach of such a duty, nor any unconscionable conduct found. The Court did, however, quantify the loss to the franchisee of the loss of opportunity to acquire the new business as the value of that business.

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