## Facts

- Burger King Corporation franchised Burger King restaurants and granted Family Dining, Inc. an exclusive territory in Bucks and Montgomery Counties, Pennsylvania under a written “Burger King Territorial Agreement” dated May 10, 1963.
- The agreement provided a 90-year exclusive territory, conditioned on a development schedule requiring a minimum number and pace of restaurant openings (commonly described as reaching ten restaurants after ten years and maintaining ten thereafter).
- Family Dining opened its first restaurant ahead of schedule and later openings were a mix of timely and late performance.
- After the fourth restaurant was substantially late, the parties executed a written modification in which Burger King waived compliance with the original building schedule.
- Burger King continued to approve sites and tolerated deviations for years while Family Dining continued development.
- In 1973 Burger King notified Family Dining that it was in default and purported to revoke exclusivity based on delays in developing the ninth and tenth restaurants.
- Family Dining proceeded with development and ultimately opened the ninth and tenth restaurants by 1975.
- Burger King filed a diversity declaratory-judgment action seeking a declaration that the territorial agreement had ended “by its own terms” due to noncompliance with the development timetable.
- The case was tried without a jury; after Burger King rested, Family Dining moved for involuntary dismissal under Federal Rule of Civil Procedure 41(b).

## Issues

1. Whether deviations from the contractual development timetable terminated the territorial agreement and its exclusivity by operation of the contract’s terms.
2. Whether the development schedule was properly treated as a condition (limiting Burger King’s right to withdraw exclusivity) rather than an independent promise whose breach justified termination.
3. Whether Burger King’s course of performance, including a written waiver and long acquiescence, barred strict enforcement and made termination an inequitable forfeiture.

## Decision

- The district court granted Family Dining’s Rule 41(b) motion and declined to declare the territorial agreement terminated.
- The court treated the development-rate language as a condition subsequent tied to exclusivity, not as a promise whose minor deviations automatically ended a long-term territorial grant.
- The court relied on Burger King’s longstanding tolerance of delays and its written waiver to reject Burger King’s attempt to impose strict compliance after years of flexibility.
- The court concluded that termination would impose an extreme forfeiture on Family Dining in light of its investment and substantial performance in developing the territory.
- The Third Circuit affirmed the judgment.

## Legal Principles

- Contract language that does not itself create an independent duty, but instead limits or qualifies a party’s right to enforce or withdraw a benefit, is properly construed as a condition rather than a promise.
- Conditions are construed, where fairly possible, to avoid disproportionate forfeiture when the condition’s purpose has largely been satisfied and strict enforcement would be inequitable.
- A party’s course of performance and waiver of strict compliance may prevent that party from later insisting on strict enforcement to terminate a long-term agreement.
- In a declaratory-judgment action seeking termination “by its own terms,” the plaintiff bears the burden to prove that the contractual basis for termination occurred; failure of proof permits involuntary dismissal after the plaintiff’s case-in-chief.

## Conclusion

The court refused to end Family Dining’s territorial exclusivity based on non-strict compliance with a development schedule, holding that the schedule functioned as a condition subsequent and that Burger King’s waiver and years of acquiescence made termination an inequitable forfeiture; the judgment for Family Dining was affirmed on appeal.


Burger King Corp. v. Family Dining, Inc., 426 F. Supp. 485 (E.D. Pa. 1977), aff’d, 566 F.2d 1168 (3d Cir. 1977)