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From Lawletter 177 Franchise termination for late payment upheld Facts: Robert Palmieri was an Exxon dealer. He continually made rental payments late. Exxon has established enforcement procedures for dealing with dealers who failed to pay on time. These procedures included some steps short of termination. Exxon terminated the franchise for late payment. Palmieri filed suit under the federal Petroleum Marketing Practices Act. Exxon moved to dismiss the suit on the grounds that it had reasonable grounds for termination under the PMPA. Ruling: The district court ruled against the dealer and dismissed the suit, holding that: (1) The PMPA allows termination for a dealer's failure to make payments on time, whatever the reason. The duty to pay rent in a timely fashion is both reasonable and of material significance to any franchise agreement. (2) Exxon did not give up or compromise its right to terminate by establishing enforcement procedures short of termination. (3) The dealer deliberately attempted to see whether or not the contractual understanding could be expanded in a way that was favorable to him.
• Never continue to violate your franchise agreement without obtaining legal advice, particularly in the face of repeated default notices. • Relying on oral assurances, promises or representations from franchisor personnel can be a real mistake, especially when what you are told contradicts the provisions of your franchise agreement. • Do not allow payment or statement disputes with your franchisor to continue on for long periods of time without obtaining legal advice. • Do not assume that just because your franchisor did not terminate your franchise in the past because or something you did or failed to do that it will not be able to do so in the future. Most franchise agreements contain a clause stating that the company's past waiver of the right to enforce a contract provision does not prevent it from enforcing the provision in the future. |
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