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Lawletter No. 159 Court says dealer could not rely on Shell’s oral promise A recent ruling by a Louisiana federal court illustrates the dangers of relying on oral promises from oil companies. The case, Talbert-Siebert Ent., Inc. v. Shell Oil Co. (M.D. La. 1992) CCH Bus. Fran. Guide, Para. 10,041, also demonstrates the perils of marketing "outside" product. Facts: A Shell dealer leased two stations. The retailer claimed that Shell orally promised to convert one station to a convenience store location. The written station lease expressly stated that no oral promises or representations which varied or contradicted its terms would be legally binding. Shell never put in the C-store. The dealer alleged that as a result he suffered severe financial hardship. When he ran out of gasoline, Shell terminated the franchise. At the second station, Shell required the dealer to pay by certified check. The franchise agreement expressly allowed Shell to impose this requirement. The dealer claimed undue hardship. The retailer purchased non-Shell gasoline, and had it delivered into the tanks which already contained Shell gasoline. The dealer sold this commingled product under the Shell name. Shell terminated the franchise on the second station for willful adulteration and misbranding. The dealer sued Shell under the PMPA. Ruling: The court ruled for Shell and against the dealer on the following grounds: (1) Oral contract invalid: The alleged oral contract to build a convenience store at the first station was legally invalid. A complete written agreement which expressly invalidates any oral promises overrides any such agreement. Therefore, the dealer had no legal justification for closing the first station. (2) Certified check requirement did not justify misbranding: The franchise agreement expressly permitted Shell to require the dealer to pay by certified check. Even if it had not, the dealer’s willful violation of Shell’s trademark rights at the second station would not be legally justified. Recommended procedures: With respect to the matters covered in this article, we would recommend the following: 1. Reliance on oral promises: It is almost always a mistake to rely on oral promises or representations from franchisor personnel. We realize that in many cases, all the dealer can do is to hope that the company will do what its employees say it will. But most franchise agreements contain clauses which invalidate such promises. The time to ask that something be put in writing or to consult with your lawyer is when you are may incur substantial expenses in reliance on what you are told. 2. Notes on oral promises: As we have frequently stressed in these pages, keep a record in writing of any important promises or representations that oil company personnel make to you. 3. New lease: Anytime that you are signing a new lease you may want to carefully consider whether or not there are any outstanding promises that have been made to you that have not been kept. If this is the case, you may want to consider talking to your lawyer before signing. Otherwise you may lose any right to enforce the promise. 4. Rebranding: Any steps to market "outside" product should only be taken with the greatest of care and after obtaining legal advice. |
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