Burger King v Hungry Jack

Subject: Consumer Behavior

Paper Model: APA

Paper Type: Research Paper

Total Words: 1873

Document Outline

Introduction

Background

Case study


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Introduction

This case was decided in June 2001 in New South Wales Court of Appeal. This case was between Burger King Corporation and Hungry Jack Pty Ltd. Burger King was chain of fast food based in United States. Hungry jack is Australian Franchise. I this case Hungry Jack was plaintiff, which claimed breach of contract by Burger king. The court decided case in favor of Hungry Jack and said that termination of contract is prohibited. Court explains reason of not terminating contract. One was implied faith. By breaching, this contract there was breach of good faith’s implied term. (austlii.edu.au, 2014)

Background

            In 1970, Hungry Jack was made by Burger King as its Australian Franchise. It was operating 150 restaurants and 13 third-party franchises in the United States in 1996. After increasing interest in Hungry Jack by Burger King, there came many disputes. These resulted in alternation of contracts in 1986, 1989 and 1990. Under clause 2.1 of development agreement, it was permitted by Hungry King to open four new restaurants in South Australia, West Australia and Queensland each year directly. Cause 4.1 of this agreement states that franchise should be open after taking approval from Burger King.  

In early 1990, other disputes were arisen. Burger King wants to directly enter into Australian market. In 1992 when Burger King attempts to purchase stores of Hungry Jack through contract of third party, this offering was rejected by Hungry Jack. In 1933, Burger King make negotiation with Shell and offered it to open its outlet in service stores. Hungry king was not included in this discussion. One of executive in the Hungry King was trying to leak secret information of Hungry King to Burger King. He was also included in giving ideas that how to purchase business of Hungry Jack. (Comben, 2014)

Later in 1995, Burger king was not giving approval to Hungry Jack for opening of new restaurants. It also terminated approval of third party. This was termination of clause 2.1 of the development agreement. Without these approvals, it was not possible for Hungry Jack too open new restaurant each year, which was required by clause 2.1. After expiry of initial agreement, it was denied by Burger King to renew these agreements. In 1996, it terminated contract with Hungry Jack and clause 2.1 of agreement was totally ignored. (Buchanan & Hulmes, 2013)

 After this termination, Hungry Jack used right of court and suit against action of Burger King. He claimed that Burger King was having no right to breach this contract. He also claimed that new agreements are not related with good faith. Court made decision in favor of hungry Jacks and said that there is breach of contract by Burger King. It was also decided by court that it is breach of fiduciary duty. Fiduciary duty is related with the duty of care and trust towards other person. It requires that there should not exist conflict of duty and trust. Breaching fiduciary duty is fraud. It was decided by court that 71 million Australian dollar is required by Burger King to pay Hungry Jack for his damages. Burger King appealed in Supreme Court against this decision. (wikijuris.net, 2011)

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