## Facts

- A 1962 licensing agreement governed the relationship between Budget Rent-A-Car Corporation (franchisor) and J.J. Brooksbank Co., Inc. (early licensee).
- The agreement required Budget to spend at least 50% of the gross monthly per-car service charges paid by all licensees on “advertising, promotion, and reservations,” allocated reasonably on national and local bases for licensee benefit.
- Budget agreed to maintain reservations offices in New York City, Los Angeles, and Chicago and to forward applicable reservations made at Budget’s reservations office to the licensee “at no charge.”
- Brooksbank agreed to take and transmit reservations for other licensees at no charge to the recipient except transmission costs.
- Over time, Budget shifted from the named-office model to a centralized, computerized reservation network, changing how reservations were processed and how related costs were funded and allocated.
- Brooksbank claimed the modernized system increased its cost exposure and departed from the contract’s reservation and expenditure provisions.
- Brooksbank sought a declaratory judgment defining Budget’s contractual obligations; the trial court largely adopted Budget’s construction.
- Brooksbank appealed, and Budget filed a notice of review challenging portions of the judgment unfavorable to it.

## Issues

1. Whether the licensing agreement’s reservations-office and reservation-forwarding clauses barred Budget from implementing a centralized computerized reservation system.
2. Whether Budget satisfied the contractual requirement to spend a minimum percentage of pooled service charges on “advertising, promotion, and reservations,” reasonably allocated.
3. Whether the “at no charge” reservation-forwarding language prohibited Budget from funding reservation-system costs through pooled service-charge allocations rather than direct per-reservation fees.
4. Whether the trial court erred in interpreting and construing the 1962 agreement in light of subsequent technological and organizational changes.

## Decision

- The Minnesota Supreme Court affirmed the trial court’s construction of the licensing agreement.
- The court held that Budget’s modernization and centralization of its reservation system did not breach the agreement as interpreted.
- The court accepted findings that were supported by the trial evidence and treated the dispute primarily as contract interpretation.
- The court concluded that the contract did not lock Budget into the precise 1962 reservation methodology or cost structure.
- The court construed the “no charge” forwarding language as barring direct per-reservation referral charges, not pooled funding of reservation services through authorized service-charge expenditures.

## Legal Principles

- Contract terms describing performance obligations are read in context; absent explicit language fixing an exclusive method, the contract may permit reasonable operational changes consistent with the agreement’s function.
- A minimum-spend clause (e.g., a requirement to spend at least a stated percentage on designated categories) establishes a floor, not a ceiling, and allows discretion if expenditures fall within the specified categories and are reasonably allocated.
- A promise to provide a service “at no charge” can preclude direct transaction-specific fees while still allowing recovery of system costs through separate, contract-authorized pooled charges.
- Courts reviewing contract-construction disputes may defer to trial-court findings supported by the record while independently assessing the legal meaning of the agreement’s provisions.

## Conclusion

The court affirmed a contract interpretation allowing the franchisor to computerize and centralize its reservations system and to fund reservation-related costs through pooled service-charge expenditures, while treating “at no charge” language as barring direct per-reservation fees rather than system-wide cost allocation.


J.J. Brooksbank Co. v. Budget Rent-A-Car Corp., 337 N.W.2d 372 (Minn. 1983)