The defendants complain that Mr. Max did not conduct an inquiry with Mr. Shimshon before proceeding to issue the cancellation letters, but at the same time they do not give any explanation as to why Mr. Shimshon did not contact Mr. Max and inform him of his involvement in his brother's investment. This established that Mr. Shimshon acted in the dark, showing that he had something to hide.
- Max reiterated that the counter-plaintiffs did not prove the amount of compensation they claim, and that the expert opinion on their behalf should not be relied upon. Thus, alongside the failure to analyze the true data, it is clear that the formulation of the scope of compensation on the basis of a period of ten years cannot stand. It should also be taken into account that there is no basis for the counter-plaintiffs' assumption that the franchise agreements that were signed cannot be canceled, but only for a breach, and therefore they are not limited in time.
- With regard to the separation mechanism in relation to Max-Ashdod, the defendants in the Ashdod lawsuit did not present an alternative mechanism for conducting the accounting. The mechanism set forth in the agreement is logical and is not discriminatory or punitive, given that the branch operating there enjoys the reputation of the Max Stock chain.
- Max referred to various arguments raised in the summaries of the defendants and the counter-plaintiffs. Thus, as to M.'s claim that there was room to give the defendants the right of way in opening new branches, this is brazen. How can it be granted a first right in a reality in which we are dealing with competitors of the Max-Stock chain? In any event, since the franchises were lawfully canceled, they do not have the right of way as aforesaid.
- So far the corridor and from here to the lounge.
Discussion
- The focus of the discussion is the cancellation of the franchise agreements made by Max. The cancellation of such agreements cannot be a trivial matter. It has implications for the weighty interests of the franchisees themselves, who relied on the possibility of operating the chain's stores for a significant period of time. In these circumstances, the duty of a party to the agreement to exercise the power of cancellation at its disposal in good faith carries increased weight.
48. It is therefore necessary to examine first whether the cancellation of the agreements was lawful or not. Whether he met the increased duty of good faith that applies to the Max Stock Company in the circumstances of the case; whether the pretentious fraudulent activity on the part of Mr. Shimshon, according to which he became the shareholder of a competing company, and tried to disguise his tracks, by placing his brother as the shareholder who is in fact a "straw man". A decision on this matter will, naturally, have an impact on the question of whether the defendants could have competed with Max Stock by establishing the new chain of Big Stock after the cancellation of the franchises. We must then examine whether the plaintiff on the one hand and the other plaintiffs on the other were able to establish the monetary compensation to which they petition. Finally, it is necessary to examine whether a separation between the parties in Max Ashdod should be forced, given the totality of the circumstances, and whether this should be done through the contractual mechanism established by the Ashdod Agreement.
- The work is great, and we will approach it.
The duty to exercise the power of contractual cancellation in good faith in franchise agreements of the type at issue
- Max cancelled the franchise agreements with the defendants. In order to assess the parties' arguments in this matter, we must understand the nature of the relationship between the parties, and the limitations it imposes on the power to cancel the contract. We will then turn to examine whether it was indeed justified to cancel the agreements in the circumstances of the case.
The nature of the agreements at issue - contracts that impose an increased duty of good faith on the parties
- We have before us long-term franchise contracts. As we have seen, clause 4 of the Bat Yam Agreement and the Sderot Agreement stipulated that the period of the license to operate the stores will continue "as long as this agreement is not cancelled [...] provided that the franchisee has fulfilled all of its obligations under this agreement as well as all the company's instructions, both those specified in this agreement and those that will be delivered to it after the signing of this agreement." Further in the provisions of the section, it was determined that Max Stock could shorten the license period, inthe event that the franchisees violated its terms, "provided that written notice has been given to the franchisee." Later on, clause 19.1 of the agreementsdefines the cases in which the agreement can be canceled, each case and its detailed circumstances.
The defendants stated that even though they were not represented by lawyers at the negotiation stage, it was important for them to ensure that it was a long-term agreement. Therefore, they made sure that this was how the contract would be drafted. I accept their argument. It is consistent with the evidence before me. Thus, the draft agreements originally included a determination of the duration of the agreement for five years with the possibility of an extension for an additional five years (see the wording of clause 4 of the draft; Appendix 8 to Mr. Shimshon's affidavit in the concession claim). The defendants refused such a limitation, and it did not enter into the final agreements.
- From this it is clear that the intention of the parties was to embark on a joint journey for a period of many years. In this framework, the franchisees expressed their willingness to invest everything necessary in operating the branches, while undertaking to accept the instructions of the Max Stock Company, and thus both parties were supposed to benefit and bless. Max would have been able to expand its business activity, and increase its economic success and reputation. As far as the franchisees were concerned, the success of the chain was also their own success. They expected to see a blessing in their labor, and to profit from it.
- At the same time, it is clear that the franchisees relied on the fact that the commercial relationship with them would be many years old. In this regard, the defendants presented testimonies that are fully acceptable to me. Take the testimony of Mr. Yaniv Zevichi, who is the one who actually operated the branch in Bat Yam. In his affidavit, he testified that he agreed to enter into the franchise agreement, when it was expected to last for a long period of time, and after the franchisees were given the right of way to operate additional branches of the Max-Stock chain that would open in the city (for this section see above in paragraph 3(f)).
He added that "in order for things to be possible and for the store to be able to maximize profits for all the partners, it was clear that I had to leave my previous occupation and devote all my time and energy to the success of the store, and so I did. I completely abandoned my previous job and invested considerable sums of money in a fundamental decision in my life - a decision of a career change. I made the store in Bat Yam the center of my life, against the background of the understandings and agreements between the parties, in order to establish a stable and lucrative business, a business from which I could retire and bequeath it to my children" (paragraphs 12-14 of his affidavit). This testimony was not concealed.