essentials of the legal environment

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question 10-9 page 287
excell lodge entered into a contract with host inn, inc. to operate a host inn franchise west of a major city’s airport. because another host inn, named “host east” already served the market near the airport, the franchisor (host inn, inc.) named excell’s facility “host west.” three years later, the franchisor bought a hyatt hotel in the vicinity of the same airport and called it “host gateway.” the presence of three host properties in the same market caused some customer confusion. also, host west and the new host gateway competed for the same customers, which caused host west to suffer a decrease in growth of its business. host west sued the franchisor, alleging that by establishing gateway, the franchisor had denied host west the fruits of its contract in breach of the implied covenant of good faith and fair dealing. assume that you are the judge in the trial court hearing this case, and answer the following questions:
1. assume that the franchisor has made a motion for summary judgment in its favor, claiming that its actions were perfectly legal because the franchise contract itself was silent as to whether, and where, the franchisor could authorize a franchise to compete with host west. would you grant this motion? why or why not?
2. does a franchisor violate the implied covenant of good faith and fair dealing if it competes against one of its franchises in the same geographic market, as host west alleged? how would you rule on this issue, and why?
3. suppose that instead of purchasing a hotel in the area and operating it itself in direct competition with its franchise, the franchisor instead contracted with another company to serve as a franchisee in the same area. would this change in the factual situation affect your decision as to whether the franchisor had violated the implied covenant of good faith and fair dealing?
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