Scheck owns a Burger Queen fast food restaurant franchise in the middle of Smallville (pop. 5,943). The franchise is held under a highly detailed "Franchise Agreement." One term of the Agreement gives Scheck the right to operate a BQ franchise restaurant at the corner of Main and Elm in Smallville. The Agreement specifically goes on to provide, however, that "nothing contained herein shall be read to grant or imply that [Scheck] shall have any area, market, or territorial rights in such geographic area."

Scheck has learned that BQ has just negotiated an agreement with Marryat Corp., a major national food services company, to build a brand-new Burger Queen franchise right at the point where Main Street meets the Interstate, only a few blocks from Scheck's store. Some Burger Queen employees tell Scheck that the company is hoping that Marryat ultimately acquire a substantial number of its outlets and that it will help the company get rid of older stores owned by small-town business people and increase the professionalism of the ultimate product.

When the sparkling new building opens in its prime location, it quickly picks up a huge share of the market. Scheck's business plummets. The relatively few customers he gets, in fact, tell him that they came to his store because the lines at the one on the Interstate were too long. He sues, arguing that Burger Queen opened the new store knowing that it would drive him out of business, and thus violated its obligation of good faith. BQ points to the explicit language of the Agreement. What should each side argue, and who has the better argument?

Answer rating: 100% (QA)

Schecks ArgumentScheck can argue that Burger Queen violated its obligation of good faith by intentionally opening a new franchise location in close pr... View the full answer