About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

7 Franchise L.J. 1 (1987-1988)

handle is hein.journals/fchlj7 and id is 1 raw text is: Termination of Franchises: Application of the Implied Covenant of Good Faith and Fair Dealing by T. Mark McLaughlin and Caryn Jacobs* Chicago, Illinois T. Mark McLaughlin Caryn Jacobs I. Introduction The law is well established that every contract contains an implied covenant which requires the contracting parties to deal with each other in good faith. In the recent past, several terminated dealers have claimed that their suppliers acted without good cause in terminating their contractual re- lationship, and that the suppliers thereby violated the im- plied covenant of good and fair dealing. A number of terminated franchisees have invoked the same common-law theory in seeking relief for the allegedly wrongful termina- tion of their franchise agreements. In many states, statutes exist which prohibit the termi- nation of franchise agreements without good cause, which typically is defined as the franchisee's failure to comply sub- stantially with contractual obligations. In a few jurisdic- tions, such as Wisconsin and Puerto Rico, dealers are afforded similar protection.2 Less than half of the states have enacted legislation regulating dealer and/or franchise ter- minations. Moreover, as noted above, most of those statutes cover franchises, as that term is defined in the statute, and *Mr. McLaughlin is a partner and Ms. Jacobs is an associate with'the law firm of Mayer Brown & Platt in Chicago. Illinois. do not apply to distributor relationships under which a dealer (without paying a franchise fee or undertaking to operate in a manner prescribed by the supplier) buys a manufacturer's goods for resale. In addition, even in states that have en- acted statutes requiring good cause for termination, the stat- utes typically have not been applied retroactively to cover agreements that were in effect prior to the statute.3 In the absence of an applicable statute requiring good cause for termination, a party claiming that its dealer or franchise agreement was terminated wrongfully must turn, appropri- ately enough, to the written agreement that governs its re- lationship. Of course, if that contract provides that termination is permissible only for specified good cause, and the terminated party has a colorable claim that good cause for termination did not exist, a straightforward claim for breach of the express contractual provision is available. In many cases in which the governing document did not permit such a garden variety breach of contract claim, how- ever, terminated dealers or franchisees have claimed that (continued on page 15) Elsewhere in This Issue Franchising in Mexico: Breaking Tradition .......... 3 Franchising Currents ................................. 7 (Including: Timing of Bankruptcy by Defaulting Franchisees Significantly Impacts Rights of Fran- chisors-Drafting Techniques May Be Helpful; Franchisor Could Not Tortiously Interfere with Contract to Which It Was a Party; Punitive Damages Awarded for Violation of Missouri Relationship Law; Trademark Protection Should Be Sought at Initial Stages of Franchise Development; Choice of Forum and Choice of Law Issues Continue to be Litigated; Franchise Lawyers Penalized for Pressing Frivolous Claims; and others.)

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most