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Murphy v. Holiday Inns, Inc. - Case Brief

216 Va. 490, 219 S.E.2d 874

 

 

Status:

Virginia, 1975

 

Facts:

P (Murphy) slipped and fell on water that had accumulated on a motel floor. D (Holiday Inn) had licensed the motel to the operator, who operated it under the terms of Holiday Inns’ franchise agreement. Holiday Inn submitted a motion for SJ, that no principal-agent or master-servant relationship existed with the operator, thus they would not be liable for Murphy’s injuries.

 

Procedural History:

D motioned for SJ and it was granted by the TC.

 

Issues:

Whether a franchisor who provides the trade name and trademark under a franchise agreement establish a principal-agent relationship if the franchisor retains no power to control daily operations?

 

Analysis:

The P introduced 9 provisions of the franchise agreement that it hoped would establish an agency agreement between the franchisor and franchisee. The court held that these provisions contain principal features of the typical franchise contract, including regulatory provisions. The court believed those provisions gave no control or right to control the methods or details of doing the work. They therefore agreed with the TC that no principal-agent or master-servant relationship existed. The purpose of those provisions was to achieve system-wide standardization of business identity, uniformity of commercial service, and optimum public goodwill, all for the benefit both contracting parties. The regulatory provisions did not give defendant control over the day-to-day operation of the motel. The D had no control over the daily maintenance of the premises, no power to control the motel’s current business expenditures, fix customer rates, or demand a share of the premises. D was given no power to hire or fire the motel’s employees, or to determine employee wages or working conditions, set standards for employee skills or productivity, supervise employee work routine, or discipline employees for nonfeasance or misfeasance. All of those powers were under the sole control of the owner/operator.

 

Holding:

No. The regulatory provisions of the franchise contract did not constitute control within the definition of agency.

 

Judgment:

Affirmed

 

Rule:

A franchise agreement that provides an operation system for a franchisee does not establish a principal-agent relationship.

 

If a franchise contract so “regulates the activities of the franchisee” as to vest franchisor with control within the definition of agency, the agency relationship arises even though the parties expressly deny it.

 

Dissent or Concurrence:

None

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