Good afternoon. I wish to know that if there is no agreement between a franchise and franchisor, and business is stopped by the franchise, before the mutually decided time, then the franchisor has to pay back the deposit . is it the entire security deposit or is their any adjustment done on the profits taken by the franchise from that business ? kindly assist regards. Deepak
1. ell, agreement is valid if it is made verbally and no worten document is there.
2. So in this case refer to what you had agreed at the time of starting the business.
3. So you will have to do whatever agreed verbally.
4. if there was no agreement on this issue then security deposit is to be returned without interest.
1) you have to refund the entire security deposit
2) you can only deduct any amounts from security deposit as provided in the contract
Hi
In the absence of any agreement between the franchisee and franchisor, the money paid by the franchisee should be construed as a refundable trade advance only.
It is not to be construed as a franchise fee (as there is no franchise agreement).
if the business relationship between the franchisee and franchisor has been terminated unilaterally by the franchisee, then the franchisor in absence of agreement is required to refund the balance of money so received by him as advance after deduction of his (franchisor investments which can be in the form of either branding, supply of materials, providing man power, training man power etc
However in absence of agreement, franchisor cannot claim royalty and or franchisee fee.
Hope this information is useful.
1. in commercial relations it is immaterial that a formal agreement is executed or not.
2. law always presumes that there is formal agreement between the parties and relation is established for getting profit form commercial relations.
3. in absence of formal agreement the right and liability shall be adjudicated on the basis of prevalent customs in concerned business.
4. if in common course of business franchisor pay back all the security deposit then franchisor is bound to return all the deposit. if there is prevalent customs that some deduction shall be made by the franchisor the he can deduct.
5. you should query about the prevalent commercial customs in your business, thereafter take proper legal proceeding if any illegal deduction is made by the franchisor.
The refundable security deposit has to be refunded without any deductions provided the pre-mature conditions permit the same.
