2026 MarsdenLR 96334

HIGH COURT SABAH & SARAWAK SIBU
TOP LEADER SDN BHD – Appellant
Versus
REVENUE EXPERT SDN BHD – Respondent
[Suit No: SBW-22NCvC-12-7/2024]

An unsigned franchise agreement is enforceable through conduct, and 'repeated breaches' under the Franchise Act allow for immediate termination without prior notice. Non-waiver clauses prevent the continued collection of payments during disputes from being interpreted as consent to contractual breaches.

Headnote:(A) Franchise Act 1998 - Sections 18(1), 28, 30 and 31 - Franchise Agreement - Termination of agreement - Requirement for written agreement - Validity of unsigned agreement - Requirement for notice to remedy breach - “Good cause” for termination - Repeated failure to comply with terms - Application of non-waiver clauses. An agreement does not necessarily require signatures for validity if parties' conduct demonstrates adoption of terms (Paras 32-35). Termination requires good cause under the Act, and contractual provisions purporting to bypass statutory notice requirements are void (Paras 49-52). Repeated breaches allow termination without notice under the Act, regardless of whether individual breaches were previously remedied (Paras 56-59, 71).

(B) Damages - Breach of contract - Exclusionary clauses - Non-competition covenants - Breach of restrictive covenants - Assessment of damages - Exemplary damages - Principles for awarding exemplary damages. Damages for breach of contract, including loss of profit from unauthorised outsourcing, must be compensatory (Paras 128, 149). General damages may be awarded for breach of non-competition clauses even if proof of specific pecuniary loss is difficult (Para 144). Exemplary damages are only granted for oppressive or contumelious conduct and are not recoverable for simple breaches of contract (Paras 148-152).

Facts of the case:
The parties entered into a franchise relationship without a signed formal agreement, operating for several years under standard terms. The franchisor terminated the agreement, citing payment arrears, unauthorised menu items, usage of expired ingredients, and outsourcing of controlled supplies. The franchisee challenged the termination and counterclaimed for damages, while the franchisor counterclaimed for unpaid fees, lost profits due to outsourcing, and breach of restrictive non-competition covenants.

Findings of Court:
The court found that the unsigned agreement was enforceable due to the parties' conduct. The franchisee's ongoing breaches, including late payments, unauthorised product sales, and the use of expired ingredients, constituted "repeated failures" under the statute, justifying immediate termination. The non-waiver clause prevented the franchisor's acceptance of previous payments from being construed as acquiescence to breaches. The court upheld the claim for lost profits and awarded general damages for the breach of the non-competition covenant, though it declined to issue an injunction due to the expiry of the restraint period.

Issues: Whether the unsigned franchise agreement was enforceable, whether the termination was lawful under statutory requirements, and whether the franchisor was entitled to damages for the breach of restrictive covenants and unauthorised outsourcing.

Ratio Decidendi: A written document remains an enforceable contract if parties adopt its terms through conduct, irrespective of signatures. Statutory requirements for notice before termination can be waived only in circumstances of "repeated failure" to comply with contractual terms. Breaches of restrictive covenants, even if the limitation period has expired, support awards for general damages to vindicate the protection of business goodwill, even when specific loss is hard to quantify.

Result: Judgment for the plaintiff in the sum of RM10,203.79 (outstanding sum) and RM18,894.54 (further damages), with interest and costs. Defendant's counterclaim dismissed.