• Issue with contract execution & not performing as per commitment

I have a propertership firm registered in Punjab

In Jun 2018 i got into an agreement to start a store at pune, the franchise(pvt ltd comp ) paid me 12.5 lakhs to start the store .As per agrement we have 50-50 share in store for operation expenses and profit.Due to some reason, i could not start the store like delay in my ice cream procurement,my personal issue, all other reason which led to delay.

I signed an agreement with the mall where the store has to come up , the franchisor wanted to exit the business as the store was getting delay due to reason beyond my control. 

So i proposed a new deal where the franchise will invest 100% , i will be responsible for all operating expenses , taxes and i guaranteed franchisor a minimum of 50,000 regardless of the store made profit or loss.

I also promised in the mail to the franchisor that i will start within 30 days i.e before june 2019 and regardless that minimum payment will start on june 5 2019 .

So a new agreement was made in may 2019, for security have given 6 cheques for 50,000 as part of the minimum guarantee that i promised and also some cheque for 22 lakhs dated June 2020 just ensure confidence in the franchisor, i orally mentioned he could encash the 22 Lakhs cheque if i don't start the store . In the agreement i have mentioned they own all the equipment and also the store deposit belongs to them .

Now my problem is the franchise has paid me 82 % of the total funds needed to start the store , but the store is not ready yet . I may need another 15 days to start. The other party is not ready to pay me till they see the store is ready for launch as they waited for one year and no longer have confidence in me .
They encashed the first cheque but it bounced due to lack of funds, now i am in a situation where the mall is asking me for rent and the franchisor is not ready to pay me till the store is ready.

Just to cool the other party i paid 42k(first month minimum guarantee) and asked them to pay the balance 18% , but they are not ready to pay .despite i paid them 42k

My question is :

1. i transferred them 42k without them having paid me the full amount, can i file a case against them for not paying 100% of the money to start the store .

2. I have given them 6 cheques and one cheque dated for next year, so can they file a recovery suite on these cheques. Can they prove to the court that i owe them this money ?

3.my part i delayed 1 year but i need fund to start the business ?can i deny them ownership in store and the minimum guarante post the store is started? 

4. the actual store opening cost has shot up ,i have invested more than what franchise has paid me , so if they dont pay me now . once the store starts can i deny the ownership in the store and also not pay them the minimum guarantee and also the capital they invested.

if i exit venture complety without startng store , who has stronger case here and can they recover money from me ?
Asked 3 years ago in Business Law

8 answers received in 1 day.

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11 Answers

Dear Client

you have landed yourself in a situation from where you are going to suffer losses only.

  1. you cant file the case on them as you have guaranteed them minimum earnings of 50k per month even if store doesn't make profits
  2. yes they can prove in court that you owe them money as you have agreement with them that too was a compensation of previous agreement which you haven't fulfilled.
  3. you cannot deny them ownership and minimum guarantee if you clauses for this in new agreement.
  4. no you cannot deny ownership of franchisee in the store at any time but you can claim the extra investment done by you for opening the store by providing bills of the same.

if at this stage you left the venture the franchisee will have a strong case of Breach of contract against you.

 

Mohit Kapoor
Advocate, Rohtak
10687 Answers
7 Consultations

5.0 on 5.0

It is necessary to peruse agreement signed by you to advice 

 

2) if franchiser  has failed to invest 100 per cent as agreed upon you can sue them 

 

3) cheque’s can be presented for payment and recovery proceedings taken by them 

 

4) you cannot deny them minimum guarantee amount nor ownership of store 

 

5) franchiser has stronger case on merits 

Ajay Sethi
Advocate, Mumbai
87895 Answers
6207 Consultations

5.0 on 5.0

1. You can file a suit for breach of contract. 

2. If they say that they need to prove it in court. 

3. It should not be in breach of any terms.  If yes then you should have your defense. 

4.you need for explain with evidence why you deny the same

5 I don't think it's easy to recover

Prashant Nayak
Advocate, Mumbai
27224 Answers
88 Consultations

4.4 on 5.0

Dear Sir,

I understand your concern and try to reply your questions:

1.i transferred them 42k without them having paid me the full amount, can i file a case against them for not paying 100% of the money to start the store .

Ans: Yes, you can file civil suit to claim 100 percent money.

2.I have given them 6 cheques and one cheque dated for next year, so can they file a recovery suite on these cheques. Can they prove to the court that i owe them this money ?

Ans: You are in danger because they may even file cheque bounce cases where in you are required to deposit 20 per cent of the face value the cheque if you wish to contest, this is as per amended law. You  must get back the cheque immediately or file a police complaint to get back.

3. my part i delayed 1 year but i need fund to start the business ?can i deny them ownership in store and the minimum guarante post the store is started?

Ans: You must give sufficient reasons for the delay and then claim the ownership of the store.

4. the actual store opening cost has shot up ,i have invested more than what franchise has paid me , so if they dont pay me now . once the store starts can i deny the ownership in the store and also not pay them the minimum guarantee and also the capital they invested.

Ans: It all depends on various factors and cannot be answered without going through all the documents.

 

5. if i exit venture complety without startng store , who has stronger case here and can they recover money from me ?

Ans: Recovering is more harder, expensive and time taking, it  may take years together.

Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

HI,

The complete guidance and advice can be given only after going through the contract, but from your input here, it seems that you have a weaker case because the franchiser may accuse you for delaying his business and thus causing intentional loss and also for non performance of contract on your part as there is delay in execution of contract. It is suggested that you go through that portion of contract, where relevant clauses might be available and those things will definitely have material proof in your favour and taking advantage of those things, you may make your case stronger.   

Ganesh Singh
Advocate, New Delhi
6646 Answers
16 Consultations

4.5 on 5.0

Hi,

The recovery of cheque dated next year can't be filed now (before time). They may file recovery for remaining amount. You are suggested to put your all possible efforts and make the business and success. You need to co-ordinate with Mall and franchiser at all the levels  and get the needful done.  

Ganesh Singh
Advocate, New Delhi
6646 Answers
16 Consultations

4.5 on 5.0

suit can be filed to recover Rs 22 lakhs next year 

 

2) since you paid 42k they can only claim balance Rs 13 k 

 

 

3)  cheque bouncing cases take 6 years to be disposed of 

 

4) civil suits around 10 years at least 

 

 

 

Ajay Sethi
Advocate, Mumbai
87895 Answers
6207 Consultations

5.0 on 5.0

If they use then they have to prove in court that they had legally enforceable liability and the said cheque was issued for the same

Prashant Nayak
Advocate, Mumbai
27224 Answers
88 Consultations

4.4 on 5.0

1. Until there is a written agreement in this regard, no such case may be maintainable.

2. Legally liable debts only are maintainable in the cheque bounce case, there is no legally liable debts between you both, hence no case may be maintainable.

3. It depends on what was greed between you both.

4.In my opinion you are complicating simple things , instead you can take legal steps by consulting an advocate in the local for proper guidance and steps.

T Kalaiselvan
Advocate, Vellore
78050 Answers
1543 Consultations

5.0 on 5.0

The cheque is post dated hence they cannot initiate any step now on this .

2. There is no legally liable debt hence their case may not be maintainable.

3. 

T Kalaiselvan
Advocate, Vellore
78050 Answers
1543 Consultations

5.0 on 5.0

Yes they can sue you for 22 lakhs in future also 

If you have transferred the fund through online transaction then they cannot sue you for total 55 k

The case be dragged from three to four years

Mohit Kapoor
Advocate, Rohtak
10687 Answers
7 Consultations

5.0 on 5.0

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