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Lawletter No. 228 How to answer a default notice Governing law: The dealer's failure to respond to such notices could be construed as an admission that the facts alleged in the notice are true. If the facts are true, the failure to respond might be interpreted as a refusal to correct the problem or condition which triggered the notice. Practical aspects: A prompt response to a default notice, coupled with a request for an answer from the oil company can have several possible beneficial effects: (1) The company's failure to respond to the could be construed as an admission that the notice was in error or that the dealer corrected the problem; (2) A policy of prompt response to such notices helps the dealer to focus more clearly on his legal rights and responsibilities; (3) A dealer's file of copies of such notices and responses helps to build a record of his dealings with the company, which can be invaluable in any potential dispute; (4) If the dealer eventually needs to consult an attorney, records of the correspondence will permit the attorney to more effectively and quickly analyze and assert the retailers legal rights; and (5) If the marketing department decides to attempt to terminate or nonrenew the dealer's franchise, it will have to obtain approval from the company's legal department. Company attorneys will be less likely to approve such action where the dealer has promptly responded to default notices. In addition to the specific legal problems such responses might create, the oil company legal department will also realize that they are dealing with an individual who keeps the kind of records necessary for the vigorous assertion of his legal rights. Recommended procedures: If you receive a notice of default or lease violation, we suggest that you consider the following steps: 1. Review notice and lease: Carefully examine the description of the violation to determine whether the facts are correct. Most notices will contain a description of the conduct involved and the date on which it allegedly occurred. Review the franchise agreement section specified in the notice in order to determine whether the alleged conduct actually constitutes a violation of that clause. Most notices will specifically cite the relevant contract provisions. 2. Response where notice is accurate: . If you determine that you have violated the franchise agreement, correct the violation. Then respond using the form suggested below. If you feel that you cannot cure the default, consult your attorney immediately as you may be headed for serious problems. Where the facts stated in the notice are true, the dealer may use the following form to respond without admitting in writing to the truth of the allegations: CERTIFIED--RRR Oil Company District Office Dear sir, This letter is in response to a notice of default you sent to me dated (insert date) and signed by (insert name). The notice states that on (insert date of alleged default) I was in default of my franchise agreement in that (insert oil company's description of the alleged default). Please be advised that the condition or problem described therein does not exist at this time. I make no admission of the correctness of the allegations contained in the notice, and I reserve the right to contest your contention that I violated the franchise agreement. Please investigate the matter and advise me promptly in writing as to whether you agree with me. If I do not hear from you within a reasonable time, not to exceed thirty (30) days from the date of this letter, I will consider the matter resolved. Sincerely,
3. Warning: Repeated notices of violation or default, whether or not you respond to them, are a danger signal that you may very well be headed for an expensive lawsuit. In such cases, it is highly advisable to review the matter with your attorney. 4. Suggested response where dealer disputes the truth of the facts alleged in the notice: Great care should be taken to distinguish between a situation which the dealer feels that the facts stated in the notice are untrue and a situation in which the facts are true but the condition has been corrected. Where the facts are true, the dealer should use the form specified above. Where the oil company has simply alleged something in the notice that is untrue, we suggest the following reply: CERTIFIED--RRR Oil Company District Office Dear sir, This letter is in response to a notice of default you sent to me dated (insert date) and signed by (insert name of person who signed the notice). The notice states that on (insert date of alleged default) I was in default of my franchise agreement in that (insert oil company's description of the alleged default). Please be advised that the facts alleged in the notice of default are inaccurate. The true facts were that (insert true facts. WARNING: Do not insert other facts showing a default). I have therefore not violated any provision of my franchise agreement. Please investigate the matter and advise me as to whether you agree with me. If I do not hear from you within a reasonable time, not to exceed thirty (30) days from the date of this letter, I will consider the matter resolved. Sincerely, [Return to index] |
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