A franchisee of a sister chain to the "Agadir" food chain, sued the franchiser for unlawfully termination of the franchise agreement, and this, following the franchiser informing him that it would stop supplying him with goods, thus effectively unduly terminating the agreement on the same day the franchiser gave him an extension to correct his fundamental breaches of the agreement.
The claim was rejected and it was determined that the cessation of the supply of goods does not constitute termination of the agreement. Notification of an intention not to fulfill a certain obligation of a party to the agreement does not constitute termination, especially when the behavior of the notifier indicates an intention to have the agreement remain in effect. Here, it is a franchisee who committed a number of material breaches, including non-payment for goods. The franchiser was entitled to terminate the agreement immediately, but instead gave the franchisee a grace period to correct the breaches. During the grace period, the franchiser was not allowed to go back and terminate the agreement, but as the cessation of supply of the goods was due to the existing debt (created by non-payment for the goods supplied), while the issuing of the warning letter and the time to correct the breaches indicate that the franchiser’s intention was not to cancel the agreement through this notice and hence the notice does not constitute an unlawful termination of the agreement.