1) Strauss, an experienced business administrator, became unemployed six years ago when his firm "downsized." He decided to set up his own business. He was interested in the lawn care business and thought that a franchised operation provided the best chance for quick success.

After examining a number of lawn care franchises, Strauss concluded that a firm called Sodmaster Inc. was the franchisor best suited to his requirements. Strauss contacted Sodmaster and had several discussions with the area manager for Eastern Ontario. Strauss was provided with a vast amount of information about Sodmaster's operations, including various projections of costs and profits based on the operation of other Sodmaster franchises. Strauss also visited other franchisees and talked with them about their experiences.

According to the financial projections in the booklet given to him by Sodmaster, a franchise with gross annual revenue of $200 000 would normally make a small loss (after allowing for a modest management fee); one with revenue of $400 000 would show a reasonable profit, and one with revenue of $800 000 or more would show an excellent profit. Potential franchisees were warned that it was unusual to break even in the first year of operation. The projections were essentially accurate, based on the actual experience of Sodmaster franchises, though the booklet failed to say that only one of the franchises actually grossed more than $800 000 per year.

Strauss also made his own projections of his probable revenues and decided to go ahead and purchase a franchise for Frontenac County, Ontario. He agreed to pay a franchise fee of $40 000 ($25 000 payable immediately and the balance after two years) and to pay royalties of 6 percent on gross revenues. He also entered into the usual restrictive covenants not to carry on a competing business within 30 km of the franchise area for a period of five years after termination of the franchise. In order to get started, Strauss borrowed money on the security of his home and, in all, invested about $100 000 of his own money.

The business did not work out nearly as well as Strauss had expected. In his first year, he had sales of only $60 000 (when he had anticipated twice that figure), and he made a loss of $75 000. The second year's sales reached $100 000 (with a loss of $12 000); by the third year, sales had risen to $180 000, still with a small loss; in the fourth and fifth years, Strauss's sales leveled out at a little more than $200 000, and he was still making a loss.

Because of his financial problems, Strauss never paid the remaining $15 000 owing on the franchise fee, and he also fell behind early on in the payment of the royalties. Eventually, Sodmaster informed Strauss that they would not be prepared to renew the franchise at the end of its five-year term. Strauss then abandoned the franchise and set up his own lawn care business in the same area.

Sodmaster brought an action against Strauss, claiming payment of the balance of the franchise fee, the unpaid royalties, and an injunction to restrain the breach of the restrictive covenant. Strauss counterclaimed for damages, alleging he had been misled into entering into the franchise agreement in the first place. Who should succeed? Would your answer change if only 18 months had passed?

2) Firth contracted with Dave the Mover Inc. to have her furniture and household effects moved from her house, stored for a week (until she moved into her new home), and then delivered to the new home. Firth told Dave's manager that she was particularly concerned about security since the effects included some rare and valuable antiques and artifacts. She was told there was nothing to worry about. The articles would remain in the trailer until delivery at her new home, and the trailer would be locked at all times and parked in their yard, which was securely fenced, locked at night, and kept under regular supervision.

The trailer was kept in the yard as promised for several days, but one night, after a heavy snowfall, it was moved and parked, unattended, on a public street while the yard was being plowed. While it was parked on the street, the trailer was stolen.

Firth claimed damages for the full value of the goods lost. Dave's admitted liability but pointed out that the bill of lading limited damages to $0.60 per pound weight of the goods, which came to just over $7000, a small fraction of their true value.

Firth admitted she was aware of the limitation when she entered into the contract but claimed she only agreed to it because of the assurance that the trailer would be properly supervised at all times.

Should Dave's be allowed to rely on the limitation clause?