Franchisors and Franchisees alike would be well advised to keep an eye on developing case law and its possible impact on their contractual arrangements. The issue was recently considered by the Employment Appeal Tribunal (EAT) in the case of Mr M Stojsavljevic, M Turner v DPD UK Limited (2021).
The Covid-19 pandemic has had a significant impact on the recovery of rent and service charges for commercial premises. There is estimated to be around £7 billion of resulting commercial rent debt in the UK.
A guarantee is a contractual promise to pay the liabilities of another.
When a franchise agreement is entered into between a franchisor and a corporate franchisee, such as a limited company, it is usual for the franchisor to require at least one individual, such as a company director or key shareholder, to provide a personal guarantee that they will satisfy the obligations and liabilities of the franchisee, in the event that the franchisee fails to meet those obligations and liabilities under the franchise agreement.
The global coronavirus pandemic is going to make it difficult or impossible for franchisors and franchisees in a wide range of circumstances to fulfil their contractual obligations. It is likely that many such parties will seek to argue that they should be released from those obligations by virtue of a force majeure clause or under the doctrine of frustration.