Construction company BH visited a hotel of company HIF in city T to estimate the cost of renovation of the hotel. Company HIF offered company BH to renovate the hotel which would require ten years to recover the cost. Construction company BH bought the hotel, renovated it and operated it as a hotel HAI. Person GA, who was the executive of HIF decided to franchise to another local hotel. HIF asked major renovations to be done by hotel HAI that spent $ 3 million on the renovation. HIF refused to renew the franchise. Hotel HAI sold the hotel for $ 5million and filed a suit against HIF for fraud in Arkansas state court. To find: The reason for disclosing the franchise plan of company HIF to the construction company BH and hotel HAI.

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Chapter 16, Problem 3CT

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Case summary: Construction company BH visited a hotel of company HIF in city T to estimate the cost of renovation of the hotel. Company HIF offered company BH to renovate the hotel which would require ten years to recover the cost. Construction company BH bought the hotel, renovated it and operated it as a hotel HAI. Person GA, who was the executive of HIF decided to franchise to another local hotel. HIF asked major renovations to be done by hotel HAI that spent $3 million on the renovation. HIF refused to renew the franchise. Hotel HAI sold the hotel for $5million and filed a suit against HIF for fraud in Arkansas state court.

To find: The reason for disclosing the franchise plan of company HIF to the construction company BH and hotel HAI.

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