Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

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Defenses. Thomas Klutz obtained a franchise from Kahala Franchise Corp. to operate a Samurai Sam's restaurant. Under their agreement, Klutz could transfer the franchise only if he obtained Kahala's approval and paid a transfer fee. Without telling Kahala, Klutz sold the restaurant to William Thorbecke. Thorbecke signed a note for the price. When Kahala learned of the deal, the franchisor told Thorbecke to stop using the Samurai Sam's name. Thorbecke stopped paying on the note, and Klutz filed a claim for the unpaid amount. In defense, Thorbecke asserted breach of contract and fraud. Are these defenses effective against Klutz? Explain. [Kahala Franchise Corp. v. Hit Enterprises, LLC, 159 Wash.App. 1013, (Div. 2 2011)] (See page 402.)