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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