The general tendency of the Courts has been to treat a franchise as a contract, and to be governed closely by the language and evident intent of the makers, but to safeguard the rights of the public to the fullest extent consistent with justice.
A franchise requires specific performance of specific acts. Nothing will be assumed or implied. The Courts recognize that the investors are entitled to reasonable returns, and that the public is entitled to fair rates.
In the case of Los Angeles Water Company vs. City of Los Angeles (103 U. S., 711), the United States Courts held that at the expiration of a 30-year franchise, which provided that the city was to pay for the value of all improvements, when the city failed to agree upon, tender, or pay such value, so long as the company complied with the terms of the contract, and until the city terminated it by making or tendering payment, the passage of an ordinance by the city fixing rates was void.
In the case of Weatherly vs. Capital City Water Company (Ala. 22 So., 140), the Alabama Courts held that the acceptance of a franchise involved a grave responsibility, and that the company could not stop furnishing water and fire protection, even if the work was done at a loss.
In the case of Myer vs. Brown (65 Cal., 589), the Court said:
"It is well occasionally to recall the fact that there is no more reason to permit a municipal government to repudiate its obligations entered into for value, than to permit an individual to do so. Good faith and fair dealing should be exacted of one equally with the other."
Judge Brewer, in the Kansas City Water-Works case (62 Fed. Rep., 853), said:
"All contracts involving property rights and obligations, between municipalities and individuals, must be presumed to be based upon and to recognize the ordinary laws of business transactions."
In 1903 the Maine Supreme Court issued a set of instructions to appraisers appointed to fix values of certain properties. The Court set forth its views as follows:
"Summarized, these elemental principles are, the right of the company to derive a fair income based upon the fair value of the property at the time it is being used for the public, taking into account the cost of maintenance and depreciation and the current operating expenses, and the right of the public to demand that the rates shall be no higher than the services are worth to them, not in the aggregate, but as individuals."