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Lawletter No. 219 Understand what you sign Dealers often complain of an oil company's failure to live up to oral promises or agreements made by marketing personnel. Sometimes a franchisor may take advantage of a dealer's willingness to believe what he is told and his unfamiliarity with key elements of the basic law of contracts. The sales rep. may tell you one thing, and then ask you to sign a contract which says something else altogether. Practical aspects: We encourage you to make every reasonable effort to determine your legal rights in advance, particularly when signing written contracts or relying on oral statements from company personnel. But nothing said here should discourage you from seeking legal advice even if you have not followed the procedures suggested here. If the issue involved is an important one, your lawyer may be able to find ways to protect your rights or improve your position. This article addresses only the a few of the basic rules of contract law. Other legal rules may also apply to your particular situation. In some cases, for example, the dealer may have a case based on principles of the law of fraud. In future articles, we will cover the law of fraud as it applies to the factual situations described here. Key basic rules: Although it may not always seem fair, the following general rules are part of the law of contracts: (1) If you signed it, you understood and agreed to it: In nearly every case, you are conclusively presumed to have read, understood and agreed to the terms of any contract you sign. This rule applies even to the long, complex, fine print documents oil companies use. As a practical matter, very few, if any dealers fully understand the terms of the documents they routinely sign. In fact, it would take most attorneys a substantial amount of time to review and interpret the terms of such documents. Yet anyone who signs a franchise agreement with a major oil company exposes himself to some significant legal and business risks. (2) Sales rep.'s promise usually invalid: A corporate employee who makes an oral promise to someone must have the legal authority to do so. Otherwise, the promise is not binding on the corporation. Usually a franchise agreement specifies who that person is. (3) Can't change written contract orally: Virtually all leases and contracts used by oil companies contain a clause providing that no oral statement or promise from any of its personnel can change any of the terms. Courts generally will not enforce oral agreements which contract an agreement containing such a clause. Recommended procedures: We would suggest the following procedures: (1) Determine whether promise contradicts lease: Dealers run into the most serious problems when relying on an oral agreement which contradicts or varies the provisions of the lease or supply contract. The first question to ask when marketing personnel make some potentially important oral promise or agreement to you is whether your franchise documents say something different. (2) Determine what agreements require: You cannot tell whether an oral agreement contradicts the agreements you have signed unless you know what they say. It can be difficult to decipher the fine print legalese these documents contain. Therefore, we suggest the following: (a) Discussions of particular lease or contract provisions often appear in these pages and in the Lawletter. You may want to keep these publications handy for future reference. (b) Every time you renew, read all of the documents you sign at least once. (c) Each time you renew, spend at least one hour with an attorney. Have him explain what the lease requires you to do or to refrain from doing. Ask him to tell you what the agreements require the franchisor to do. 3. Determine authority of employee: Remember that the company will probably claim that you are not justified in relying on anything your sales rep. says that changes or varies the terms of the lease or supply contract. Most disputes arise in two types of situations: (a) The dealer claims that the rep. told him he did not have to obey some provision of the lease or supply contract; or (b) The dealer claims the sales rep. said that the company would do something for him that it is not required to do by such written agreements. Before you rely on any such statement, ask yourself whether you have any reason to believe that your franchise documents say something different. If you are not sure, you might want to seek legal advice, ask for the company to put the statement in writing or refrain from relying on what you are told. 4. Additional issues: As we stated above, nothing contained in this article should discourage any dealer from seeking legal advice regarding any current problem he may have. Here we are attempting to acquaint the reader with the basic rules of the game. These rules have a number of exceptions, and space forbids a detailed discussion of all of them here. If you have already committed yourself in some way without following the procedures recommended here, we suggest you see an attorney. In the future, when you rely on any such oral promise, use the procedures suggested here. |
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