Legal Updates

Unclear concepts in the agreement will be interpreted according to its purpose, business objective, its content and legal and economic logic

February 26, 2019
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The legal update was published in Afik News 278 13.03.2019

ת.א. (ת"א) 15550-10-16 רשת החקלאי פירות ירקות ועוד בע"מ נ' שי יוחננוב, בית משפט השלום בתל אביב - יפו, 26.02.2019, כב' השופטת הבכירה אושרי פרוסט-פרנקל

Franchisees of a chain of fruit and vegetable sales, which called for a direct purchase from farmers to reduce costs, announced the cancellation of the franchise agreement after discovering that the prices of products offered by the chain were not competitive, partly because some of the products were purchased from wholesalers and not directly from farmers.

The Court rejected the chain’s claim to the franchisees and rejected the claim that the franchisees violated the franchise agreements by canceling the agreement. When the wording of the agreement does not represent the parties’ intentions, the spirit of the contract is examined, its purpose, its business objective, its content and its legal and economic logic. In this case, the chain promised the franchisees a “competitive price” by purchasing directly from farmers, and in effect purchased it from wholesalers, and the price was higher and damaged the economic value of the agreement, even though the term “competitive price” was not defined in the agreement. Since the agreement was drafted by the chain, a meaning that works against the drafter will be chosen. Thus, the agreement was violated by the chain and the franchisees were entitled to cancel it.