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From Lawletter No. 213 Dealers may be giving up important rights at renewal time The 1994 amendments to the federal Petroleum Marketing Practices Act, 15 U.S.C. sections 21801-6, forbid a franchisor from requiring a franchisee to release or waive any right under state or federal law. This provision was intended to prevent the major oil companies from forcing dealers to give up important rights. However, the exact wording of this particular amendment, adding subsection 2805(f) may be cause for concern in some cases. The amendment does not come right out and say that a franchisor may not enforce such a provision. Rather, it says that the oil company may not require such a waiver or release as a condition of entering into or renewing a franchise. There is a reasonable possibility that the courts will ultimately determine that Congress intended to make any such franchise clause unenforceable. But such an interpretation is by no means a certainty. In the meantime, any franchisor who must defend any release or waiver clause in court will very probably claim that the clause was in fact negotiable. The franchisor will point out that the dealer simply signed it without comment or objection, oral or written. In the real world, of course, many dealers are afraid of the possible adverse consequences of antagonizing their suppliers with such objections. It is theoretically possible to create a written record which reflects the fact that standard form franchise agreements are offered on a 'take-it-or-leave-it' basis. This can be done by a carefully drafted letter. But such a step should not be taken lightly or without legal advice. Recommended procedures: Every contract involves giving up some rights. The key question in any given case is whether the franchise agreement you are about to sign contains waiver or release provisions which the PMPA forbids it from requiring. If it does, then you will want to carefully evaluate the effect of giving up or possibly prejudicing your rights with regard to the particular subject involved. Then the potential benefits of making a written record of your objection must be weighed against what you perceive as the possible consequences of antagonizing your supplier. This process requires sound and considered judgment. We recommend that it be undertaken as part of the franchise agreement review process. For a detailed report on that process, see '20 questions to ask about a service station franchise renewal,' Lawletter No. 202. |
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