Breach of Contract and Fraud
Thomas Klutz obtained a franchise from Kahala Franchise Corp. to operate a Samurai Sams restaurant. Under their agreement, Klutz could transfer the franchise only if he obtained Kahalas 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 Sams 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.
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