Fano Mdlolo is an entrepreneur residing in Durban. Fano’s businesses specialise in the retail of digital
equipment imported from Korea. These goods are branded” Zamdung”. All “Zamdung” stores carried
a minimum stock quantity of One Million Rands on their premises.
In January 2021 Fano Mdlolo franchised all his stores located in major malls in Durban, Pinetown,
Richards bay and Pietermaritzburg. In order to avoid excessive legal costs, Fano arranged with a
colleague from campus to draft a franchise agreement as a favour. He then proceeded to franchise
and sell these” Zamdung” stores to four different franchisees, using this franchise agreement.
In order to make his offer attractive to the prospective franchisees, Fano undertook to insure each
franchise and pay the premiums for a maximum of two years, thereafter the franchisee would obtain
cession or transfer of the insurance policy. Fano’s insurance agreement was comprehensive and
covered, inter-alia, theft, looting and damage and destruction by fire, for both the store and the stock.
During the rioting and looting in July 2021, Fano watched with astonishment as his years of
perseverance, dedication and achievement in “Zamdung” disappear in flames, his franchisees lost their
stock and experienced extensive damage to their stores.
The franchisees now approach Fano Mdlolo for compensation in terms of the franchise agreement.
Fano cannot approach his colleague that drafted the franchise agreement as his colleague met his
demise due to COVID. Fano now approaches you for advise in respect of his insurance policy and
franchise agreement.
Study the questions that follow pertaining to the above case study and answer concisely, to enable
Fano to understand and fulfil his obligations to his franchisees, in terms of the relevant agreements.
1.Explain the advantages of Franchising and the content of the franchise agreement to Fano, taking
into consideration the relevant sections of the Consumer Protection act and the common law. (15)
2.Discuss the duties of the franchisor and franchisee with Fano. (15)
3.Discuss Indemnity and non-indemnity insurance. (10)
4.Describe the function or functions of insurable interest in insurance law. In your answer
you must address the role of insurable interest as an essential requirement for an
insurance contract and its role in determining the amount that can be claimed by the
“Zamdung” franchisees when the risk occurred. (10)
5.Discuss what is meant by subrogation, and discuss the doctrine of subrogation in insurance
Law. (15)
6.Compare the difference between Insurance contract and Wagering contract. (10)
7.Fano wants to leave Kwazulu Natal and settle in the Western Cape. Discuss the termination
of the franchise agreements with Fano and the consequences of failing to comply with the
Consumer Protection act during the termination of the franchise agreements. (15)
