Lessons from the KFC Crisis

21 February 2018

This week, fast-food chain KFC has had to close hundreds of restaurants across the country as a result of "teething problems" with a new delivery contractor. Dubbed the #KFCCrisis, this event highlights society’s reliance on contracts and what is at stake when they break down.

A breach of contract means that one or more of the terms and conditions of a contract has been broken. We do not know the ins and outs of the contractual agreement between the contractor and KFC, but let’s look at the scenario hypothetically.

The contractor might have had an obligation under contract to deliver the chicken in a certain quantity, to certain places, by a certain date. By failing to carry out their side of the arrangement, the delivery, then the party could be said to be in breach of contract.

Subsequently, the future of that contract depends on the nature of the breach itself (for example, where a serious breach occurs, there might be grounds to terminate the contract altogether).

Breaching a contract can easily result in legal action. But, what options are available when a breach has occurred?

Financial Options

Damages are available to compensate for a loss suffered arising as a result of the breach. In the above scenario, this could include staffing costs and profits for the closed restaurants, wasted expenditure and costs to rectify the breach (unless the contract expressly excludes any of these liabilities). Damages can also be awarded even if there has been no actual loss, known as nominal damages. Remoteness of loss can be taken into consideration, including future loss that could reasonably occur as a result of failure of the contract. Financial penalties may also apply under the terms of the contract.

Non-Financial Options

There are other options available where damages might not be wholly suitable. An order for specific performance of contract could place KFC in the position it would have enjoyed had the contract been fully performed. This might have been appropriate had the contractor actively chose to withhold the delivery for some reason. Injunctive relief might also be an appropriate remedy in order to place KFC in a more equitable position. For example, this could be an order preventing the contractor from making any other deliveries until KFC’s deliveries had been made. 

Remedies and compensations are often outlined in the contract itself, so if you find yourself in your own KFC Crisis, check the contract first to see what it says. Try and talk through the problem with the other party and if that fails, seek legal advice. 

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