Franchising, relational contracts and the vibe

There is increasing recognition, academic and judicial, that traditional classical contract law granting primacy to the written agreement is inappropriate in the case of ongoing, interdependent and cooperative relationships such as business format franchising which exist in a world of "contractual incompleteness and relational complexity". It is suggested that, in contracts of a relational nature, obligations arise not only from the written contract but from the norms of the ongoing relationship which supplement the express contractual obligations. Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2002] 2 All ER (Comm) 849, an appeal to the Privy Council from the New Zealand Court of Appeal, has provided the first opportunity for judicial analysis at the highest level in Anglo- Australasian jurisdictions of the relational nature of franchising and its implications. Although the invitation to embrace the relational contract model was not accepted - the judgment does not refer to the literature or even use the term " relational" - the Privy Council acknowledges that franchise agreements are " not ordinary commercial contracts". This article argues that, despite the Privy Council's failure to expressly adopt relational theory, relational considerations clearly underlie and influence its judgment which supports the primacy not of the narrow contract provisions but of the wider franchising relationship. The relational vibe ("dominant quality, mood or atmosphere": Macquarie Dictionary) is likely to be increasingly influential in franchising litigation.