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2 J. F. Comm. Franchising 1 (1982-1983)

handle is hein.journals/fchlj2 and id is 1 raw text is: jora Volume 2, Number 1 ABA Forum Committee on Franchising Fran cisor Attorney Responsibility to Franchise Purchasers by Mark Rollinson Alexandria, Virginia Another metamorphic miracle is occurring at common law. Ever so gradually, attorneys are coming to be exposed to liability for neg- ligence to third parties with whom there is no privity. No field is more logically ready for the next step than franchise disclosure. Background The general evolution of attor- Mark Rollinson ney liability to third parties is well chronicled by David J. Meiselman in the February 1981 New York State Bar Jour- nal (Attorney Liability to Third Parties, pp. 108-111, 138-143.) Mr. Meiselman goes back to the roots of the English rule requiring privity, follows the rule in the U.S. as it was overturned in MacPherson v. Buick Motor Co. in 1916, and traces the virtual disappearance of the rule in matters relating to tangible products. He then outlines the development of extension of liability to those performing services, quite rapidly in California and quite gudgingly in New York, with various states following in one camp or the other. He concludes that while ... the weight of authority may support the strict privity rule, the trend is to the contrary. Meiselman slightly overstates the weight of authority, for the strict privity argument is dead. Well stated in the often cited 1931 case of Ultramares v. Touche, Niven & Co., the professional will be held respon- sible to third parties for false disclosure if it is the conse- quence of fraud or if the professionals have been so negligent as to justify a finding that they had no genuine belief.., for this again is fraud. 225 N.Y. 170, 189, 174 N.E. 441, 448. The sole question remaining is one of degree of responsibility. Franchise Disclosure Often franchising is mistakenly described as a relatively new phenomenon. In fact, franchising is almost as old as commerce itself. In modern times, whole industries have been built upon franchising (e.g., autos and gasoline) and giants not generally known to be franchised have become household words (e.g., Montgomery Ward). The close cousins of franchising, business opportunity sales, also are old. Just look at any old newspaper and become entranced with the many opportunities to make money in the privacy of your own home. What is new is the gradual decline of a caveat emptor philosophy and the strengthening of caveat venditor in its place, moving gradually to caveat venditor's helper as well. The push for disclosure related to mass merchandising of franchises began in the early sixties when, as noted (continued on page 21) Elsewhere in This Issue Bibliography: Sources and Trends for Franchise Law in the Eighties ........................... 33 Civil RICO: An End to Franchisee Fraud? ................. 26 Federal Income Tax Issues in Franchise Advertising Programs ........................ 7 Franchising: The Duty to Perform in Good Faith and Fair Dealing ........................... 17 Franchising Currents .................................... 28 (Including: Ninth Circuit Holds Ice Cream Franchisor's Trademark Not to Be Separate Product; Oil Company May Restrict Jobbers' Customers and Territories; Statute of Frauds Not Applicable to Claim under Arkansas Franchise Law; Franchisor May Be Held Vicariously Liable for Fran- chisee's Conduct; and others.) Selection of M arks ...................................... 3 Copyright © 1982 American Bar Association Spring 1982 Produced by the ABA Press

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