Everyone knows that feeling when you finish writing something, send it out into the world, and then suddenly notice a typographical error. With today's automated spelling and grammar checks, the error is usually the benign substitution of one word for another – "has" instead of "had," for example. When the substitution is one party for another in a contract, however, completely changing rights and responsibilities, the error is not so benign. Just ask WOW Cafe and Wingery Franchising Account, L.L.C. ("WOW").

The contract in question was an Area Development Agreement ("ADA") executed in 2007 between WOW and Spencer Franchise Services of Georgia, Inc. ("Spencer"), whereby Spencer was granted exclusive right and option to "establish, operate, and/or provide guidance to multiple WOW Cafe Franchise businesses" in all but two counties in Georgia. Under the ADA, Spencer was the "Developer" and WOW the "Franchisor." Everything went wonderfully until, in 2011, the relationship between them went south. WOW sent Spencer a notice of default, claiming Spencer had failed to fulfill its contractual obligations. Spencer countered that WOW had breached the ADA, and sued.

Enter the contested contract provision. Article 4.2 of the ADA, located in a paragraph describing the Developer's obligations, stated in part:

In addition to Developer's obligation to open its own Franchise Units as described above, Franchisor shall, at a minimum, sell or cause some third party to sell the number of Franchise Units set forth on the Minimum Development Requirements, which is attached hereto as Schedule 2.

(emphasis added). Spencer claimed that WOW was responsible for selling franchises in Spencer's exclusive territory and it was merely managing them and collecting the fees.

WOW, on the other hand, said that was obviously a typographical error and clearly the intent was that the word "Franchisor" should be "Developer." The purpose of the ADA, according to WOW, is to carry out a business model whereby developers sell and open a certain number of restaurants in their exclusive territory. The U.S. District Court for the Eastern District of Louisiana agreed. The court found it was clearly a mutual error, rendering the contract absurd, and, therefore, the word "Franchisor" was a typo as a matter of law. The court ordered the contract rescinded under Louisiana law and granted summary judgment in favor of WOW.

The U.S. Court of Appeals for the Fifth Circuit, however, said not so fast. The appellate court agreed it was "logical" to replace the word "Franchisor" with "Developer" given the context of the provision, but not clearly an error as a matter of law. Spencer presented an interpretation that the appellate court found plausible: both parties intended for WOW to have responsibility for selling the franchises and that, otherwise, Spencer would not have entered into the ADA because it would not have been economically feasible. The ADA was drafted from WOW's template – a template that contains identical language – and the record contained evidence of a course of conduct since the ADA was executed. WOW disputed that evidence, but it was still enough to create a question of fact. The Fifth Circuit vacated the district court's judgment and remanded the case.

Was it a typo, or did the two parties really intend that WOW would be responsible for selling franchises in Spencer's exclusive territory? That is now a question for a jury to decide.

Spencer Franchise Services of Georgia, Inc. v. WOW Cafe and Wingery Franchising Account, L.L.C., No. 14-31024 (5th Cir. Sept. 3, 2015) (per curiam).

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