BT20403 COMMERCIAL LAW

SEMESTER 2, 2019/2020

FACULTY OF BUSINESS, ECONOMICS AND ACCOUNTANCY, UMS

GROUP ASSIGNMENT 2
MOVIE - BASED CASE STUDIES ( TASK 1 )

Name of Tutor: Madam Sharija Che Shaari

Tutorial Class:

TG 4 - Durian Tree’s Group ( Thursday, 12:00 - 1:00 pm )

Group members: 1. Cristy Crisleay Chiew (BB18110592)

2. Peng Fang Ling (BB17170900)

3. Fatin Izwani Shakirah Binti Mat Desa

(BB18110672)

4. Nur Hidayah Binti Katman

(BB18161046)

Date of Submission: 11 JUNE 2020 ( THURSDAY )

Task 1

a. Signing the franchise contract (3 marks)

1. Who made the offer to McDonald’s brother (Mac and Dick) for turning their
business into a franchise?(1 mark)

According to Contract Act 1950 (CA 1950), McDonald’s brother is the offerer
while Ray is the Acceptor. This is due to the fact that Ray is bound by the
contract the moment he signed the contract with the McDonald’s brother.
Any changes to the contract can be deemed as breach of contract which
results of sue to any party that breach the contract. Based on contract
Section 9, contract can happen in be in words like oral or writing in this
case base on movie Ray Croc are the one that suggested to McDonald’s
brothers to turn their business into franchise.

2. Initially,Mac and Dick were not keen on entering a franchise contract with
Ray Kroc because they have previously encountered absentee franchisees
who were lackadaisical in upholding their system. However, Ray was very
persistent and eventually managed to convince them. The brothers agreed
to do on certain term. What is the term?(2 marks)

Pursuant to the contract of section 2 (a) which means that a person who is
willing to be bound by an agreement can enter into force. Based on the
movie I see the brothers suggested a few terms for Ray. The terms are,
there must be a signed contract between Ray and the brothers; the
brothers going to oversee the whole operation of the company and any
changes made must go through with the brothers.

b. Pioneers in McDonald’s franchise business

 1. During the initial stage of the McDonald’s franchise business initiated by
Ray, he was caught by surprise during his visits to the outlets. He noted
that the franchisee (movie at 49:37 to 50:40) had deviated from
McDonald’s business terms. Explain any two terms had not been complied
by the franchise. (3 marks)

Pursuance to the Contract Law Section (5) whereby the accepter breaches
the contract by changing the standard of burger that has been set by the
offerer. The first terms that is not in compliance with the franchisee is the
standard of the burger. They supposed to have only 2 pickles instead of
three. Another terms is that the kitchen is dirty. The kitchen supposed to be
clean and tidy place for franchisee to operate. This is

c. The McDonald’s Corporation

1. Ray renames his company to The McDonald’s Corporation and demands to

be released from his contract and buy the brothers out. How did 1.Ray
manage to end the contract with the brothers?(2 marks)

Ray ended up the contract by paying the brothers 2.7 million. He also
agrees to give San Bernardino to the brothers as a compensation to them.
He also patent the McDonalds name as the property of Mr Raymond A.
Kroc. This is based on the Act 135, Section 6.C. whereby the acceptor fail to
fulfil the condition precedent by the offerer.

2. The brother had proposed a 1% annual royalty in perpetuity,but when the

time comes to finalise the agreement,Ray refuses to include the royalty in
the settlement and instead offers it as a handshake deal. 2.Does a
handshake deal amount to a binding agreement? (2 marks)

Yes, it is deals to a binding agreement. So long as the terms are agreed by

both parties and there’s a witness of the agreement. It is still called a
binding agreement based on those 2 mentioned criteria. This is also based
on the Act 136, Section 9 which mentioned that “So far as the proposal or
acceptance of any promise is made in words, the promise is said to be
express. So far as the proposal or acceptance is made otherwise than in
words, the promise is said to be implied”. The deals also considered as
binding agreement because there’s an acceptor and offerer. This is
pursuance to Contract Act 1950, Section (4) (2) which mentioned “the deal
is considered as an agreement when there is acceptance of terms and
conditions by the offerer”.