Interference with contractual relations

December 23, 2013

in Corporate & Business

Corporate & BusinessA recent decision of the High Court has highlighted the risks to parties taking action that interferes with contractual arrangements between other parties.

In the case in question a Franchisor and Franchisee had entered into a contractual arrangement to effectively transfer the franchise business back to the Franchisor.

Problems started to arise between the Franchisor and Franchisee which resulted in litigation whereby the Franchisor claimed that the Franchisee was deliberately frustrating the arrangements to enable third parties to take advantage of the situation and set up in opposition.

The Franchisor sued all relevant parties including the Franchisee and the other third parties who were approaching various franchise clients to inform them of their intention to establish a competing operation.

The Court found that the other third parties were aware of the contractual arrangements between the Franchisor and Franchisee as they were already in close business relationship with the Franchisee and that the Franchisor had shown sufficient arguable causes of action that constituted interference with contractual relations and Fair Trading Act breaches.  The High Court granted an injunction in favour of the Franchisor preventing the Franchisee and the other parties contacting clients of the Franchisee to give the Franchisor sufficient time to contact those parties and secure their business.

We have a number of clients who have consulted us in respect to claims that third parties are taking steps to interfere with contractual arrangements.  This often happens where a former employee or director of a business departs and attempts to disrupt existing contractual arrangements particularly provisions relating to restraint on competition i.e. exclusivity or restraints of trade.

There are protections available for commercial businesses in such circumstances and Farry and Co. can provide legal support for you in the event that you find yourself in this situation.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Paul Farry

09 379 0055 or 03 477 8870


The information contained in this publication is intended as a guide only.  It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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