A franchisor must be registered to validly grant a franchise; failure to register invalidates the franchise agreement, allowing the franchisee to terminate and seek damages.

Headnote:(A) Law on Franchising - Franchise Act 1998 - Section 6(1) - Education Act 1996 - Section 20(1) and 79 - Franchise agreement invalid due to lack of registration of franchisor - Defendant failed to provide necessary registration to grant plaintiff the right to operate a franchise business; thus, the plaintiff was justified in terminating the agreement and seeking a refund. (Paras 72, 44)

(B) Contract Law - Interpretation of contract - Courts must consider the factual matrix and intended purpose of the parties when determining contractual obligations to assess compliance. (Paras 40, 69)

Facts of the case:
The defendant, seeking to operate a franchise named Children Islamic Center (CIC), entered into a licensing agreement with the plaintiff, who could not commence operations due to the defendant's lack of necessary licensing and registration with the relevant education authorities. (Paras 1-20)

Findings of Court:
The court held that the franchisor's inability to register disallowed the plaintiff from legally operating the business, validating the plaintiff's termination of the agreement. (Paras 72, 73)

Issues: Whether the plaintiff was responsible for obtaining licenses; if the defendant could grant a franchise; whether the plaintiff breached the agreement by not opening the business; and if the termination of the agreement was premature. (Paras 61, 66)

Ratio Decidendi: The court interpreted the contract based on objective principles, concluding that since the defendant was unregistered, they could not grant a valid franchise, thereby legitimizing the plaintiff's termination of the contract. (Paras 39, 72)

Result: The court ruled in favor of the plaintiff, granting damages and costs; the defendant’s counterclaims were dismissed. (Paras 73)

Table of Content
1. defendant's ownership and franchising of cic. (Para 1 , 2 , 3)
2. definition and stipulations of the licensing agreement. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10)
3. franchisee's duties and obligations outlined in clauses. (Para 11 , 12 , 13)
4. plaintiff's actions and lack of necessary licensing. (Para 14 , 15 , 16)
5. plaintiff's notice of termination due to licensing issues. (Para 17 , 18 , 19)
6. requirement for educational licenses and regulations (Para 21 , 22 , 23 , 24 , 25)
7. educational center licenses and compliance (Para 26 , 27 , 28 , 29 , 30 , 31)
8. court's interpretation of contractual obligations. (Para 39 , 40)
9. interpretation principles of contracts (Para 41)
10. plaintiff's responsibilities to obtain licenses (Para 44 , 46 , 48 , 50)
11. defendant's obligations and interpretations of the contract (Para 59 , 61 , 62)

[1] Defendan adalah pemilik satu tanda dan sistem atau syllabus pendidikan Islam yang komprehensif untuk kanak-kanak pra-sekolah di bawah nama Children Islamic Center (CIC). Defendan berhasrat menjadi francaisor dan telah menjalani program pembangunan francais serta telah juga menyertai Pameran Franchise International Malaysia 2009.

[2] Defendan mendapat status francaisor setelah mendaftar dengan Kementerian Dalam Negeri, Kepenggunaan dan Koperasi sekitar Mei tahun 2010. Perniagaan 'Pusat Pembelajaran & Asuhan Kanak-Kanak CIC' didaftarkan pada 18 Jun 2010 dengan Kementerian Pelajaran Malaysia sebagai perniagaan francais berkuatkuasa 17 Mei 2010 dan sijil pendaftaran tanda niaga CIC Where leaders are born diperolehi oleh defendan daripada Perbadanan Harta Intelek Malaysia pada 18 Mac 2011.

[3] Sebelum defendan mendapat status francaisor, defendan telah memasuki suatu perjanjian dengan plaintif bertarikh 9 Oktober 2009. Perjanjian tersebut yang dinamakan perjanjian perlesenan mengandungi antara lain, terma-terma berikut.

[4] Preamble perjanjian tersebut menyatakan:-

"A. Licensor and its Affiliates have developed, and are in the process of further developing, a System identified by the service mark, "CIC" relating to the establishment and operation of a chain of children educational enrichment centers offering pre-school and supplemental primary education services aiming to provide comprehensive Islamic and mainstream education to children between the age of 2 years old to 12 years old with special emphasize on the English language proficiency (hereinafter referred to as "CIC BUSINESS"); and

B. In addition to the service mark "CIC" and certain other marks, the distinguishing characteristics of the System include, without limitation, uniform standards and procedures for business operations; distinctive interior and exterior design, layout and decor; procedures and strategies for marketing, advertising and promotion; customer service and development techniques; other strategies, techniques, Trade Secrets and other Confidential Information and Manual;"

[5] Definisi beberapa istilah yang relevan adalah:

"License" means the right granted to Licensee by Licensor to use the System and the Marks;

"Licensed Business" means CIC Business to be established and operated by the Licensee in accordance with the System and using the Marks pursuant to this Agreement;

"Marks" means the trademark "CIC" along with other trade names, trademarks, service marks, designs, graphics, logos and other commercial symbols as Licensor may designate;

"System" means the uniform standards, methods, procedures, Proprietary Products and specifications developed by Licensor and as may be added to, changed, modified, withdrawn or otherwise revised by Licensor, in its sole discretion for the operation of a Licensed Business."

[6] Klausa 2.1 perjanjian perlesenan memperuntukkan:-

"Licensor hereby grants to Licensee, and Licensee undertakes and accepts, upon the terms and conditions herein contained, the right, license and privilege to operate one (1) CIC Business under the Marks and to use in connection therewith the System at the Approved Locatio

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2012 MarsdenLR 1099

MAHKAMAH TINGGI MALAYA SHAH ALAMMUNAFSYA SDN BHD LWN. PROQUAZ SDN BHD[Guaman Sivil No: 22NCVC-10-01/2012]

A franchisor must be registered to validly grant a franchise; failure to register invalidates the franchise agreement, allowing the franchisee to terminate and seek damages.

Cases Referred (2)

MAHKAMAH TINGGI MALAYA SHAH ALAM
MUNAFSYA SDN BHD LWN. PROQUAZ SDN BHD
[Guaman Sivil No: 22NCVC-10-01/2012]