FRANCHISE AGREEMENT—WASHING MACHINES

This franchise agreement is made on this 10th day of May 1999 between ELH Limited, 56 G.C. Avenue, Kobe, Japan (hereinafter referred to as the franchisor which term unless excluded by or repugnant to the context shall include its successors and assigns) of the one part and Sales Limited, a Company registered under the Companies Act 1956 having its registered office at 5 N.K. Road, Chennai, India (hereinafter referred to as the franchisee which term shall unless excluded by or repugnant to the context include its successors and permitted assigns) of the other part.
Whereas the franchisor is carrying on business as a manufacturer of and dealer in different kinds of Washing Machines and has established a reputation and demand for its high quality Washing Machines and after-sales-service.
And whereas the franchisor through its exclusive research and practical business experience has developed secret, substantial and identified know-how which forms a system for appropriate operation of business in the selling and servicing of washing machines and which is contained in the Franchisor's Operational Manual, which is the franchisor's sole property.
And whereas the said washing machine has been patented under the name and style of "EL" Washing Machines.
And whereas the franchisor has a package of non-selected practical information resulting from experience and testing by the franchisor which is the secret, substantial and identified and hereinafter called know-how.
And whereas the franchisor's know-how in the body or in the precise configuration and assembly of its components is not generally known or easily accessible and not limited in the narrow sense the individual component of know-how should be totally unknown or unobtainable outside the franchisor's business and such know-how is "secret" to the franchisor.
And whereas the know-how includes the information which is of importance for sale of washing machines and its components and spares with the provision of service to the consumers end-users and in particular for the presentation of washing machines for sale, the processing of components in connection with the provision of services, methods of dealing with customers, administration and financial management, the know-how is useful for the franchisee by being capable at the date of conclusion of the agreement, of improving the competitive position of the Franchisee, inter alia, by improving its performance and helping it to enter a new market. All these are termed as "substantial know-how".
And whereas the know-how is described in a sufficiently comprehensive manner so as to make it possible to verify that it will fulfil the criteria of secrecy and substantiality are termed as "identified".
And whereas the franchisor has developed a System by virtue of having acquired the knowledge, experience in the field of electrical and manual operations of the washing machines, replacement or repair of its parts, oiling and cleaning of the related parts and to keep the machines in working condition.
And whereas the franchisor now intends to open sales and Service Centres in Chennai and in the neighbouring States.
And whereas the franchisor owns the Registered Trade Marks used in relation to the said Washing Machines and after-sales-service. In addition, the franchisor owns the valuable good-will in slogans of distinctive Marks which Markings are other identifying characteristics.
And whereas stocks of washing machines of the franchisor in Kobe (japan) or surrounding areas depends among other things, upon the provisions by the franchisor of a prompt, efficient satisfactory and courteous service to the consumers using the washing machines being the subject-matter of the Franchise including the accessories and spare parts and upon the vigorous cultivation and extension of the market for the washing machines.
And whereas the franchisee has assured that it will develop the business of sales and service of washing machines in Chennai and neighbouring areas.
And whereas the franchisor has made enquiries about the financial soundness of the franchisee, the technical knowledge of the Managing Director of the franchisee, its sales personnel, accommodation and title to the said sales office and its total accommodation for storing and exhibiting the franchisor's washing machines as also washing machines that might require repairing and servicing at the premises of the franchisee.
And whereas the franchisee has made enquiries into the title of premises from which the franchisor is carrying on manufacturing and selling business, the capital outlay, the personnel employed for running the business and its past dealings with other Franchisees and has satisfied itself about the adequacy of the same and ability of the franchisor to discharge its obligations under the present agreement.
And whereas the franchisee has made enquiries about the franchisor's patent and other rights, the steps taken for building good-will and reputation and test reports and the correspondence with consumers in relation to the purchase by the Users of the machines and the franchisee has satisfied itself about the financial stability, good-will, reputation, technical competence and adequacy of trained personnel to carry on the said business of manufacturing and selling the washing machines in an expansive market and to render satisfactory services to the consumers.
The franchisor and the franchisee have made themselves acquainted with the rules, regulations and laws relating to the manufacture of washing machines, its operation, sales and servicing and have satisfied themselves that it is satisfactory and in accordance with the provisions of law to manufacture, assemble and/or deal with the said washing machines throughout India and also for exports to foreign countries.
Now these presents wiTNESSETH and the parties hereby agree as follows:
In consideration of the franchisee making payment as hereinafter
provided the Franchisor hereby grants licence to the Franchisee to assemble and sell the franchisor's washing machines under its Trade Mark in accordance with the provisions of this Agreement.
The franchisor shall arrange for training for four weeks the
franchisee's two senior staff in the factory of the franchisee in the
technicalities of manufacture and operation and repairs of the washing
machines, its sales and after-sales-service. The travel and accommodation
expenses of the two staff shall be paid and borne by the parties equally. The franchisor agrees that the franchisee may at its own expenses arrange for any of its employees at any time to visit the franchisor's factory, office premises and other outlets to study the methods and to make notes and schedules relating thereto provided that in any year there should be only one visit by the employees of the franchisee and the duration of their stay with the franchisor shall not exceed two weeks and all their expenses would be borne equally by the parties.
The franchisor shall from time to time make available to the
franchisee all technical, administrative, operational, after-sales-service
know-how. The franchisor shall also provide the Franchisee with the
training manual, display manual, operation manual, after-sales-service
manual and all updating and replacement materials and manuals prepared by the franchisor, the copyrights whereof shall remain vested in the franchisor and the franchisee shall not make use of those matters other than for the purpose of this agreement and for sales and service of the franchisor's "EL" Brand Washing machines.
The franchisor shall be under no obligation to continue to supply the
EL washing machines if it discontinued selling in its own outlets in Kobe (japan) and it shall have the right for good cause not to supply a particular type of EL washing machine which it considers to be unsuitable for sale in India.
The franchisor shall be entitled to require the franchisee to stop
selling any EL washing machines which the franchisor had withdrawn
from the market as being defective and such stock would be bought back by the franchisor at the price at which they were sold.
The franchisor undertakes to make every endeavour to assist the
franchisee to obtain licences for the sole and exclusive use in India the said EL washing machine Trade Marks.
In the event of any infringement or threat of any infringement of the
EL Trade Mark by a third party in India or any claim being made against the franchisee alleging the franchisor's use of the Trade Mark EL infringes any Trade Mark or other industrial property belonging to third parties the franchisee shall forthwith notify to the franchisor and take such steps as the franchisor may reasonably request to prevent any such infringement or to defend and protect against any such claim in accordance with the franchisor's reasonable instructions without prejudice to the franchisor's right to take action or conduct any court proceedings whether in its own name or in the name of the franchisee and any costs incurred shall be shared equally by the parties herein.
The franchisee undertakes not to use any name or mark other than
the "EL" in connection with the sale of the washing machines. The franchisee shall not use any name or mark liable to be confused with "EL". The franchisee shall use the Trade Mark "EL" only in relation to the sale of the franchisor's washing machines and any such forms, types, designs and colours as may from time to time be authorised by the franchisor in writing.
During the continuance of this agreement or after termination of this
agreement, the franchisee shall not use the "EL" Trade Mark as part of the franchisee's corporate name and on termination of this agreement shall perform such acts and execute such documents as shall be required in order to ensure that the sole and exclusive right to use "EL" Trade Mark in India shall remain vested in the franchisor.
The franchisee shall use its outlets for the sale of "EL" washing
machines along with the type of machines that it sells at present from its outlets and of no other brand or type of washing machines.
The franchisee shall ensure that the retail business is conducted at
the stores and outlets conform with the high standards associated with the franchisor and shall comply with all reasonable arrangements and requests of the franchisor regarding operation of the said business including after- sales-service.
The franchisee shall use in the stores and outlets, the display signs, packaging materials, display items and other presentational items as are consistent with the franchisor's standards and image and for this purpose the franchise may order from the franchisor supplies of such items.
The franchisee shall in all its letters, stationery and other conspicuous spaces indicate in a manner approved by the franchisor that it is carrying on its business as franchisee of the franchisor of EL washing machines.
The franchisee shall carry on the business at each store or outlet on its own account and risk in an efficient and courteous manner giving complete satisfaction to its customers and shall not do anything to bring the name and reputation of the FRANCHISOR into disrepute.
The franchisee shall always promptly attend to any complaint in
the functioning of the washing machine and rectify the same, replace any spare parts, if necessary, and to make it workable as quickly as possible and perform all its contractual and legal obligations to its customers so that they need not go for legal action and shall indemnify the franchisor against all liabilities arising from any failure to do so.
The franchisee shall keep its stores open and appropriately staffed during normal shopping hours in the vicinity of its stores or shop outlets and make available its technical staff for receiving complaints and attending to the same and whenever required to repair the "EL" washing machines at the premises of the customers during the evening hours and on Saturdays and Sundays and Holidays by special arrangement. The Franchisor shall send its technical staff to conduct a formal pre-arranged inspection of received stores and meet some of the disgruntled workers and customers of the Franchisee and to meet their demands.
The franchisee shall sell "EL" washing machines at a competitive price but keeping a margin of at least 15% on the purchase price paid by the Franchisee for these washing machines.
The parties hereby agree that each one will assist the other in obtaining the necessary permission or compliance with the laws of Japan and India for the purpose of giving effect to the present agreement and complying with all the rules and regulations in relation to the business, the franchisor paying for and meeting all rates, taxes, fees and cesses payable in relation to this agreement in Japan and the franchisee shall pay and bear all Indian rates, taxes, cesses, levies fees and other expenses in relation to the present agreement in India.
This Agreement is made subject to compliance with the provisions of law in Japan and in India and wherever required by law the agreement will be suitably modified.
The franchisor shall deliver the EL washing machines and spare parts on receipt of the Order from the franchisee at the ruling price and supplies to be effected within six weeks plus the time required for transportation. All the expenses, costs, duties, etc. for delivery of the machines at the stores of the franchisee shall be borne by the franchisor and be added to the sale price of the machines. However, the franchisor shall not be liable for any delay in supplying the washing machines and spares ordered from the franchisor. In view of the apprehended delay in reaching supplies to the franchisee in time, sufficient supplies of spare parts for repairs to be stored by the franchisee at its every stores outlets.
The price payable by the franchisee for "EL" washing machines supplied by the franchisor shall be the current retail price at the franchisor's shop plus the cost of delivery including the transport, insurance and other expenses. The franchisee shall make payment on delivery of its machines inclusive of all expenses of carriage, insurance and delivery charges.
All payments by the franchisee shall be in Indian Currency and the
franchisee shall render all assistance in getting the same repatriated if the Reserve Bank of India and other authorities permit. The franchisee shall furnish a Bank Guarantee for the due payment of the price of the washing machines that might be delivered to the franchisee.
The franchisor shall not actively market or sell any "EL" washing machines in India nor permit any other FRANCHISEE or distributor to do so but such other franchisee or distributor may accept orders from the members of the public and pass on the same to the franchisee for delivery of machines ordered. The franchisee agrees to indemnify and keep the franchisor indemnified against all liabilities, claims, damages, actions or injury of every description which may occur or affect the franchisor for any failure of the franchisee to perform its obligations under this agreement or from any act or omission whatsoever on part of the franchisee and its staff.
The franchisor may withdraw from the market any of its "EL" brand washing machines which has been found defective and the franchisee shall ensure that if such machine has been sold to be replaced with a new one and if the defective machine has not already been delivered, the same shall be kept back by the franchisee and be kept in the custody of the franchisee to be replaced by the franchisor at no extra cost to the franchisee.
The parties herein may terminate the agreement by giving six months notice in writing to the other setting out the reasons for such termination and upon such termination the franchisee shall not sell "EL" brand washing machines except those are already in stock. The franchisor shall continue to be liable to supply the spare parts if required for the repair and service of EL washing machines already sold by the franchisor to the franchisee and suitable pre-estimate should be made for the possible requirements of spare parts and the franchisor shall supply these spare parts in terms of the agreement even though the agreement stands terminated.
The termination of this agreement shall not prejudice any right or claim of either party prior to the termination or obligation of either party under this agreement.
Upon termination of the agreement howsoever occurring the franchisee shall not order further washing machines from the franchisor but shall be entitled to continue to sell "EL" brand washing machines which are already in stock with the franchisee and to render the after-sales-service and for this purpose if required, the franchisor shall render all possible assistance to the franchisee.
The obligations contained under this agreement which expressly or by implication apply after termination of this agreement shall after such termination constitute a separate agreement and be enforceable notwithstanding termination of this agreement.
If any part or term or provision of this agreement herein is declared by any Court of Law to be invalid or be accepted by the parties as being in conflict with the law or unenforceable, then the validity and enforceability of the remaining portion of this agreement shall not be affected. In such a case the offending part or term or provision shall be deemed not to be part of this agreement.
This agreement does not constitute the franchisee an agent or legal representative or partner of the franchisor for any purpose whatsoever or vice versa save and except when it is expressly provided confirmed or otherwise agreed in writing. Neither party is in any way authorised to make any contract or agreement, or give any warranty or make any representation on behalf of the other nor to create any obligation expressed or implicit on behalf of the other.
No forbearance, delay or indulgence by either party in enforcing any of the terms and conditions of this agreement shall prejudice or affect the rights and remedies hereunder nor shall any waiver of any breach thereof operate as a waiver of any subsequent breach and no waiver or variation of any of the terms or conditions of this agreement shall be valid or have any effect unless the same be made in writing and signed by an authorized officer of the party concerned.
The parties hereby agree that they shall not disclose to a third party excepting to the Auditors, Professional Advisors and bankers and they shall not make any unauthorised use of any information as to the methods of operation, technicality, financial affairs, present or future plan or policies of the other party information which do not come under the public domain.
Each party shall be responsible for obtaining all necessary work- permits and permission in respect of all representatives of the parties for visiting the other for the purposes of this agreement and all costs and expenses to be borne and shared equally by the parties.
Neither party shall be liable for any breach of this agreement to the extent that it is caused by Force Majeure circumstances for which it is not responsible.
The benefit of this agreement may not be assigned by the franchisee without prior written consent of the franchisor and on such terms and conditions as the franchisor may impose.
All communications, notices, orders, or other matters between the parties under this agreement may be by fax, or telex or by the usual notices sent by Speed Post or Courier service. Such notices, reports and other matters shall be given at the address mentioned hereinabove of the parties.
This Agreement shall be governed by the laws of India and any proceedings arising out of this Agreement shall be in the appropriate Indian Court and all orders and decrees would be expressed in Indian Currency.
In witness whereof the parties herein executed these presents on the day, month and year first above-written.
Signed, sealed and delivered by
Mr.	Director
of AB Ltd. pursuant to Board
Resolution dated	in
Calcutta in presence of:	Signature
Signed, sealed and delivered by
Mr.	Director
of Sales Ltd. pursuant to Board
Resolution dated	
in the presence of:	Signature