INDUCTION MOOT 2015MOOT COURT SOCIETY, CAMPUS LAW CENTRE IN THE HON’BLE TRIAL COURT ORDINARY ORIGINAL JURISDICTION CIVIL SUIT NO. __ OF 2015 Medha …………….……………...….…..………………………... Plaintiff V. JustFalafs India Inc. ……………...……......……........................... Defendant MEMORANDUM ON BEHALF OF THE PLAINTIFF I ....... ................................................................................................................................................................................................................................................................................................................................................................................13 - II ........................................ ...................TABLE OF CONTENTS INDEX OF AUTHORITIES....................................... V Statement of Issues ........... ....................................................VI Summary of Arguments...................................8 Prayer .....................................................IV Statement of Facts...................................................................................... III Statement of Jurisdiction.................................................7 Arguments Advanced............................................. Ltd. 45 Mass. OECD.E. Channel Home Centers. Indian Contract Act. John M. V. 1986 U. American Honda Motor Company.C. Ct. Inc. 699 N. Chitty on Contracts. Ltd. Maxim Nordenfelt Guns and Ammunitions Co Ltd (1894) A. Grossman 795 F. Flintkote Company 593 F. Tata Engineering and Locomotive Co. Gujarat Bottling Co Pvt.INDEX OF AUTHORITIES Cases 1. 28th Edition Others 1. App. 1872 2.2d 291.K. 1908 III . Haviv Holdings Pty Limited v Howards Storage World Pty Ltd (2009) FCA 242 6. Coca Cola Company. R. (1995 )5 SCC 545 4.S.C. 535 3. Himachal Joint Venture vs Panilpina World Transport FAO (OS) 123/2008 9. Indian Contracts Act. Bangia. v. Competition Policy and Vertical Restraints: Franchising Agreements Statutes 1. 14th Edition 2. 2d 11 (1998) 5. v. Inc. Nordenfelt v. App.2d 1275 (D. 26657 Books 1. v. Richard Lundgren. Division of Grace Retail Corp. Agribrands Purina Canada Inc. 415. 1979) 8. Kasamekas (2011) ONCA 460 7. Cir. Lee et al. 410. The Registrar of Restrictive Trade Agreemen (1977) 3 SCC 227 2. Code of Civil Procdure. v. v. Rule 2 of Civil Procedure Code empowering the honourable court to grant an injunction in civil matters.STATEMENT OF JURISDICTION The Plaintiff humbly submits this memorandum before this Honourable Court. invoking its civil jurisdiction under Section 9 of Civil Procedure Code. IV . The Plaintiff also invokes Order 39. Medha has knocked the door of this Hon’ble Court. which primarily sells Falafels. JFIC replied to this letter insisting that the 5 Km area means 5 Km by driving distance and not by radius. pleading that it enjoin JFIC from granting the franchise to Shalini and to get a declaratory judgement that she has a 10 Km right of first refusal on future franchises. Whereas if one were to drive form one restaurant to another. bringing the distance to 5.STATEMENT OF FACTS JustFalafs India Inc. JFIC cannot grant a license for another “JustFalafs” restaurant within direct radius of 5 Km. JFIC pointed to a franchise brochure which it had sent to Medha during negotiations. Later. we will give you a right of first refusal on any new franchises within 10 kilometres of your store”. . one has to travel more. Medha wrote to JFIC stating that as per the agreement. as if they were two points joined by a straight line. JustFalafs India Inc. There is a straight road connecting both the restaurants.2 Km. but due to this road being oneway. the distance comes to 5. (from here on. JFIC awarded a franchise to a Shalini. referred to as ‘JFIC’) is a company which licenses “JustFalafs”. after becoming a popular and established brand. Medha signed the agreement to own a “JustFalafs” franchise. A customer would have to drive at least 5 Km away from your restaurant before they can find another JustFalafs”. to own a “JustFalafs” restaurant franchise in Delhi. and specifically invoked this text from the brochure “Every franchise is protected by our ‘5 Km guarantee’. wrote a letter to Medha.2 Km just mentioned. During this period. This had become a point of contention between Medha and JFIC. Now. One part of this agreement required JFIC to not license a “JustFalafs” franchise within 5 Km of the “JustFalafs” restaurant that Medha owned. two years earlier. expressly stating “If you sign a franchise agreement with us. This new restaurant is at a distance of 4 Km from Medha’s restaurant if one is to consider direct distance between these two restaurants. in the vicinity of Medha’s restaurant. after 2 years. a fast food of Middle Eastern origin. a chain of fast food restaurants. Medha Kumar started negotiating with JustFalafs India Inc. and without first offering it to Medha. AND IF SO.1. WHETHER THE DEFENDANT WAS IN BREACH OF THE CONTRACT 2. WHETHER THE TERRITORIAL EXCLUSIVITY GRANTED TO THE PLAINTIFF WAS IN TERMS OF RADIUS. WAS IT BINDING 3. WHETHER THE PLAINTIFF ENTERED INTO A VALID CONTRACT 2.2. WHETHER THE LETTER SENT BY THE DEFENDANT PROMISING RIGHT OF REFUSAL WAS A LETTER OF INTENT. OR DRIVING DISTANCE 2. WHETHER THE PLAINTIFF SHOULD BE GRANTED INJUNCTION AGAINST THE AWARDING OF NEW FRANCHISE VI .STATEMENT OF ISSUES The following issues are presented before the court in the instant matter- 1. SUMMARY OF ARGUMENTS 1. the letter sent by the Defendant to the Plaintiff promising right of first refusal had all the elements of a letter of intent. by acting against the said intent. had paid for the franchise license and expected certain assistance from the Defendant. . THE DEFENDANT WAS IN BREACH OF CONTRACT: It is humbly submitted that the Defendant is in breach of the contract through awarding of franchise to Shalini. which is arbitrary and illogical at best. the Defendant violated the terms of the contract. 2. This submission is twofold: Firstly. The Defendant acted on its own whim by interpreting the territorial exclusivity meant to be as per driving distance. Secondly. THE PLAINTIFF ENTERED INTO A VALID CONTRACT: The Plaintiff submits that the agreement between the Plaintiff and the Defendant was not an agreement in restraint of trade and falls very well within the limits of Section 27 of the Indian Contract Act. THE PLAINTIFF SHOULD BE GRANTED INJUNCTION AGAINST THE AWARDING OF FRANCHISE TO SHALINI: It is submitted to the Hon’ble Court that the Petitioner’s circumstances and Defendant’s actions are enough to satisfy the court to grant the Petitioner a temporary injunction under Order 39 Rule 2 of the Civil Procedure Code. Accordingly. Thus. the Hon’ble Court should give a declaratory judgement granting the Petitioner the right of first refusal around 10 Km. against awarding of the franchise to Shalini by the Defendant. 3. in the future. and the exclusivity guaranteed to Medha was reasonable in reference to the interests of the parties concerned and also to the interests of the public. Thus. 1872. This assertion is true considering the fact that the Petitioner’s restaurant is in danger of being alienated by a new competitor in the vicinity. the franchise agreement between the two parties was a valid contract. as the Plaintiff who was selling Falafels. One issue that comes forth is the one. trade or business of any kind. Competition Policy and Vertical Restraints: Franchising Agreements 2 R. The clauses which restrict competition by giving the franchisee territorial exclusivity. THE PLAINTIFF ENTERED INTO A VALID CONTRACT: The Plaintiff submits that the agreement signed between the Plaintiff and the Defendant was valid. is to that extent void”2. the Supreme Court observed that exclusive dealership agreements did not restrict distribution in any area or prevent competition – and in this regard. 14th edition 3 Tata Engineering and Locomotive Co. v. there was no evidence that the Agreement had restricted. Indian Contracts Act. The Registrar of Restrictive Trade Agreement3. Ltd. requiring the Defendant to not grant a license to anyone. in the circumstances.K. the agreement will not be void4. within 5 Km of the Petitioner’s restaurant. which would protect their interest. ----------------------------------1 OECD. can be considered. Franchise owners paying generous sums to own a franchise receive certain considerations from Franchisors. It has been held that when the restraint is reasonable in reference to the interests of the parties concerned and also to the interests of the public. Bangia. in terms of profitability and value. Maxim Nordenfelt Guns and Ammunitions Co Ltd (1894) A.C. 535 -8- . distorted or prevented competition. v. Ltd. This statement has to be taken in the light of landmark SC Judgement on the case Tata Engineering and Locomotive Co.ARGUMENTS ADVANCED 1. The Registrar of Restrictive Trade Agreemen (1977) 3 SCC 227 4 Nordenfelt v. to be indispensable in that prospective franchisees would probably be unwilling to undertake the necessary investment and to pay a substantial initial fee to enter the franchise system if they were not provided with some protection against competition from other franchisees and from the franchisor in the allotted territory1 Restraint was reasonable:- The Section 27 of the Indian Contract Act states that “every agreement by which anyone is restrained from exercising a lawful profession. stretched the driving distance beyond 5 Km is preposterous and mocks the spirit of the contract. USA gave due consideration to the issue between selection of radius or drive time. v. 699 N. Inc. The same agreement that the Defendant has so clearly violated. Coca Cola Company. V. The fact that a direct road from the Plaintiff’s restaurant to the new restaurant being one way for the time being. Ltd. This is a general informative statement just to give an indication to the franchise owners that territorial protection is part of the agreement. after gaining foothold in the market in two years. The Hon’ble Supreme Court observed that since the negative restriction is operative only during the period of franchise. 2. Ltd. negative restriction on trade has been pacified. presumed that the exclusive territory guaranteed to the plaintiff was 5 Kms driving distance.1 THE TERRITORIAL EXCLUSIVITY GRANTED WAS IN TERMS OF RADIUS: The Defendant has. 45 Mass. Inc. Richard Lundgren.6 is a case where the Court of Appeals for the First Circuit. Ct. Coca Cola Company5. In Gujarat Bottling Co Pvt. THE DEFENDANT WAS IN BREACH OF CONTRACT: It has been submitted before the Court that the Plaintiff and the Defendant entered into a valid contract. 2. (1995 )5 SCC 545 6 American Honda Motor Company. Moreover. it is not hit by section 27 of the Indian Contract Act so as to be termed in restraint of trade. v. is shady and unclear at best.Further.E. American Honda Motor Company. This presumption on part of the Defendant is illogical and arbitrary. Richard Lundgren. in Massachussets. Inc. Inc. Nowhere does it express what ‘would have to drive at least 5 Kms’ means. App. A customer would have to drive at least 5 Kms away from your restaurant before they can find another JustFalafs”. 2d 11 (1998) -9- . 410. V. The Hon’ble Court observed that in the ---------------------------------------------------------5 Gujarat Bottling Co Pvt. the brochure presented by the Defendant where it is written that “Every franchise is protected by our ‘5 Km guarantee’. 415. v. before finding radius a more reasonable option. v. The Court of Appeals for the District of Columbia Circuit. Lee et al. season and commuter patterns. and even more so the driving time. Cir. were found liable.”. debatable calculation. Haviv Holdings Pty Limited v Howards Storage World Pty Ltd7. consideration (the 'price' paid under the contract in return for performance by the other party of its obligations). may vary with weather. in John M.2 THE LETTER SENT BY THE DEFENDANT PROMISING RIGHT OF REFUSAL WAS A LETTER OF INTENT AND WAS BINDING: There are a number of elements that must be in place in order for a letter of intent to be legally binding.C. the petitioner would plead the Court to note several foreign judgements where the party violating the territorial exclusivity clause in the franchise agreement. Kasamekas (2011) ONCA 460 9 John M. Agribrands Purina Canada Inc. Further. if for the sake of argument. Kasamekas8. and each customer becomes a separate. we believe it specified driving distance as a measure of territorial exclusivity. it added that the same drive time may translate to different geographic distances.absence of any clear criteria for calculating the RMA (Relevant Market Area). “…the best driving route. This negates the relevance of brochure sent to the Plaintiff by the Defendant. v. 1979) . v.2d 1275 (D. 2. Having established the violation of territorial exclusivity by the Defendant. Flintkote Company 593 F. Lee et al. These include: certainty as to key terms. -----------------------------------------7 Haviv Holdings Pty Limited v Howards Storage World Pty Ltd (2009) FCA 242 8 Agribrands Purina Canada Inc. depending on topography. Flintkote Company9 held that “extra-contractual evidence proffered by appellants in an effort to support their position was either irrelevant or barred by the parol evidence rule”.10 - . and a mutual intention to enter into a binding legal contract. Anyway. Division of Grace Retail Corp. The wording of the Defendant’s letter clearly expressed intention to enter into a contract. it is open to the courts to hold that the parties are bound by the document. if otherwise meeting the requisites of a contract. v. S. Letter of intent was prior to the signing of the contract. be inclined to do so where the parties have acted on the document for a long period of time or have expended considerable sums of money in reliance on it. Hence. even amounting to fraud. clearly specified what it was offering (Right of First Refusal around 10 Kms of Plaintiff’s restaurant).2d 291. observes the that terms where of parties to such letters may. throws the Defendant in a very bad light. Chitty on Contracts12 exchanged letters of intent." As in this case. in the case of Himachal Joint Venture vs Panilpina World Transport10. Sistani adjudged that “Execution commences when claimant took steps which ultimately led to signing of the contract. Hon’ble Justice G. the letter of intention has a binding force. negative contractual intention. 1986 U. in its letter.S. 26657 12 Chitty on Contracts (para 2.) . and let the Plaintiff believe she was holding the Right of First Refusal. there was no negative contractual intention. contract would relate back to the date of letter of intent”. Be that as it may. The Plaintiff had paid the consideration in way of franchise fee for the contract to take effect. and the courts will. the jurisdictions that have considered the issue have held that an agreement to negotiate in good faith. -----------------------10 Himachal Joint Venture vs Panilpina World Transport FAO (OS) 123/2008 11 Channel Home Centers. Even if we assume for a second that the Defendant never intended to give the Plaintiff. the Right of First Refusal. App. the fact that it let the matter sit idle for 2 years. in particular.115 in Vol. Further. Grossman 795 F. where the language does not negative contractual intention. Thus. a transaction of course.The Defendant. but. 28th Edn.11 - . the Plaintiff should get a declaratory judgement that she has a 10 Kms Right of First Refusal on future franchises. 1. is an enforceable contract11. on the other hand. as the new. that temporary injunction be granted to the Plaintiff. the Petitioner has established earlier that the Defendant is in breach of contract.12 - . against the new franchise. Secondly. the impending loss of revenue that the Petitioner is likely to suffer as a result of the Defendant’s conduct is going to be considerable.3. This assertion is true considering the fact that the Petitioner’s restaurant is in danger of being alienated by a new competitor in the vicinity. . franchise has been awarded in close vicinity of Medha’s. THE PLAINTIFF SHOULD BE GRANTED INJUNCTION AGAINST THE AWARDING OF FRANCHISE TO SHALINI: It is well within the power of the Hon’ble Court to grant the Petitioner a temporary injunction under Order 39 Rule 2 of the Civil Procedure Code. Thirdly. and liable to damages for encroaching territorial exclusivity as is generally held. against awarding of the franchise to Shalini by the Defendant. Shalini is also not in a great position. In light of these assertions. The assertion is threefold: Firstly. it is the petitioner’s humble request to the Hon’ble Court. The Defendant was in breach of contract by violating territorial exclusivity of Medha’s restaurant.13 - . the Petitioner Shall Duty Bound Forever Pray. justice and good conscience. The Defendant should rescind the awarding of franchise to Shalini 3. Sd/(Counsel for the Plaintiff) . The Petitioner should be given a 10 Km Right of First Refusal from here on till expiry of franchise agreement Any other order as it deems fit in the interest of equity. and not giving her the Right of First Refusal 2. the Plaintiff humbly submits that the Hon’ble Court may be pleased to adjudge and declare that: 1.PRAYER In the light of arguments advanced and authorities cited. For This Act of Kindness.
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