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Once this is accepted, the notion that termination of the franchise agreement 'the franchise' automatically leads to the termination of the sale, can only be founded, as is accepted by Lewis AJA, on a tacit or implied term. This must be so. In the absence of an express term to that effect in either contract I can see no other way.
My difficulty lies with Lewis AJA's conclusion that 'there must surely be a tacit term that if the business sold is taken back by Cash Converters there would be a rescission and restitution' of the purchase price. With regard to this conclusion the complications are threefold. First, no such tacit term is referred to in the papers and in argument before this Court Rosebud's counsel expressly disavowed any reliance on any such tacit term.
Secondly, the hypothesis of the tacit term relied upon by Lewis AJA for conclusion militates against the express provision in clause Thirdly, I am satisfied that the tacit term contended for will not meet the requirements of the so-called bystander test regularly applied by this Court. According to this test the inference of such a term would only be justified if, at the time when the contracts were entered into, the bystander's question as to what would happen to the purchase price upon termination of the franchise, would have elicited the prompt and unanimous response from both parties that, in that event, the whole of the purchase price will be repaid.
I have no doubt that, whatever Rosebud's response might have been, that would not have been the response of Cash Converters.
No doubt there were good reasons for deciding to regulate the different aspects of the transaction through the use of separate contracts. The sale agreement, although executory in the sense that the purchase price was to be paid in instalments over a period, is essentially one of limited duration. Once the price was paid in full, the obligations of the parties would have been performed. This does not mean, of course, that the contract could not be rescinded, and restitution effected, even after performance had been completed, if it were found, for example, that the sale had been induced by misrepresentation, or was the result of a material and actionable mistake.
The franchise agreement, on the other hand, would have continued to operate for the initial term, and possibly for longer if extended. The franchise agreement was probably modeled on the contract between Cash Converters and the Australian company that had licensed it to grant franchises.
No doubt certain terms were required to be included by the latter, and were non-negotiable.
The agreement would have been in virtually standard terms, leaving little opportunity for either Cash Converters or Rosebud to negotiate any changes. It would thus probably have been both convenient and cost-effective to embody the terms governing one aspect of the legal relationship between the parties in one contract, and the sale of the rights and other assets to Rosebud in another. However, even if it be accepted that the contracts are divisible, this does not mean that they are not inter-dependent, and that the termination of the one does not lead automatically to the termination of the other.
I do not propose to traverse all the relevant terms since Navsa JA has done so.
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However, the following terms seem to me to be particularly significant. It follows from this that if Rosebud is deprived of the right to promote franchises then it is deprived of the merx itself.
Industrial property includes marketing and operations manuals, the name, logos, trademarks and other intellectual property rights. Each gives substance to the other. Without the franchise agreement, the business sold is an empty shell. Without the sale, there can be no franchise agreement. Thus, while I agree that each contract is a separate legal transaction, it is my view that if the one fails the other must too.
The first is that if one accepts that the contracts are inter-dependent, breach of one amounts to a breach of the other. That is clearly not so. Each contract sets out forms of breach and the steps and remedies that may follow. But termination is different from breach: Certain forms of breach may result in cancellation. And some other vitiating factor might result in rescission and restitution.
In my view, where cancellation is the remedy for the victim of the breach, this must, because of the nature of the contracts and their inter-dependence, result in the termination of the other. If the sale were breached and cancelled then surely the franchise agreement would necessarily fall away. Its entire reason for being would cease.
What would the franchise agreement regulate? Is there any purpose in its continued existence? The answer must surely be No.
If, on the other hand, the franchise agreement is terminated then the sale, whether fully executed or not, must also terminate because Rosebud is left with no merx. I cannot therefore agree with the conclusion of Navsa JA that the sale agreement was no more than a springboard for the franchise agreement. Rosebud purchased rights as part of a business that was defined as a going concern.
It did not purchase a spes: Of course the acquisition of the rights might have given rise to opportunities that Rosebud may or may not have exploited.
But the rights to franchise others to run businesses were more than opportunities. One would be hard-pressed to argue that such rights were unenforceable. But how does one enforce an opportunity? This is not necessarily so. The sale would, in my view, have terminated because its entire reason for existence would have ceased to exist. There must surely be a tacit term that if the business sold were taken back by Cash Converters, there would be a rescission of the sale and restitution to the status quo ante.
So too, the absence of the term renders the contracts ineffective: And equally, if the franchise agreement is terminated, what content does the sale agreement have? The general principle is that a tacit term will not be imported if it is in conflict with an express provision of the contract: These and other cases deal, however, with terms sought to be implied which are in conflict or inconsistent with terms of substance in the written contract. Both express terms make it clear that no other written or verbal agreement will have any effect: But what of terms to which the parties did not apply their minds?
That does not mean, in my view, that the parties must consciously have visualized the situation in which the term would come into operation. It does not matter, therefore, if the negotiating parties fail to think of the situation in which the term would be required, provided that their common intention was such that a reference to such a possible situation would have evoked from them a prompt and unanimous assertion of the term which was to govern it. A term is imputed if the parties would have agreed if only they had thought about the matter. It is an imputed term.
The parties may not actually have discussed and agreed what the consequences of termination of contract would be for the other agreement. But if they had applied their minds to the situation they would, on a balance of probabilities, have said that the other must inevitably terminate.
This would be an unexpressed term, or an imputed term, the implication of which would not be precluded by either of the clauses in the contracts that exclude reliance on other agreements. The position should be the same whether ownership had passed or not. If they had done so then clearly Rosebud would have been taking the risk that it might pay for a business whether or not it were able to retain it.
However, restitution is reciprocal. The parties are required to restore each other to the position they were in prior to the conclusion of the contract. If complete restoration cannot be made where the merx has deteriorated in the hands of the buyer, then it is possible for an adjustment to be made to the amount repaid by the seller. The principles would, however, be the same where the contract is set aside or rescinded on another basis: A party who has benefited by a contract must, therefore, tender to return what he has gained, if he seeks to rescind the contract upon a ground recognized by law.
Similarly he is required to tender return of what he has received into his possession. If the business purchased deteriorates as a result of the failure of the buyer to run it properly, or to perform his obligations under a franchise agreement, and the buyer nonetheless claims restitution of the purchase price, it seems obvious that he cannot claim the full price. The amount to which the buyer is entitled must be determined having regard to the value of the business when restitution is made.
With an underlying principle that it is unjust for a man to retain a benefit he has obtained by his misrepresentation,. The general rule that the person seeking restitution must himself make restitution always governs, but relief should not be denied when substantially that restitution can be made and, in so far as it falls short of complete restitution, compensation in money can make good the deficiency.
That was the manner in which justice was done in the action redhibitoria -- see the authorities earlier referred to, especially Voet And there seems to be no reason, in applying an equitable principle to a case where the seller has actually made representations, not to allow the same latitude to a purchaser. And in the English and Scots system of law, in which the matter is dealt with under the same equitable principle, relief is given to the purchaser to this extent. If Rosebud were to have followed such a course, it would hardly be entitled, on the equitable principles discussed, to restitution of the full price.
The absurdity adverted to by Navsa JA and Josman J , that Rosebud could return worthless franchise rights at the end of the franchise agreement or indeed at any time after the conclusion of the sale , yet still be entitled to recover the purchase price, is therefore not one that arises. Equally, the absurdity and injustice that would follow if Cash Converters were entitled to take back the franchise rights, yet keep the money, is avoided by allowing restitution subject to appropriate compensation or adjustment.
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