Wednesday, June 20, 2007

Rhode Island Enacts Generally Applicable Dealership Law

This posting was written by Pete Reap, editor of CCH Business Franchise Guide.

The Rhode Island Fair Dealership Act, a generally applicable relationship/termination statute, became law without the Governor’s signature on June 14.

Notice Requirement

The statue, which was effective immediately, requires the grantor of a dealership (1) to provide at least 90 days’ prior written notice of termination, cancellation, nonrenewal, or substantial change in the competitive circumstances of a dealership and (2) to provide a dealer with at least 60 days in which to rectify a claimed deficiency.

The notice requirement does not apply to some situations—including terminations based on the dealer’s insolvency. A shortened 10-day notice period applies to cases of payment defaults.

“Good Cause”

Although the measure (House Bill No. 5275) does not explicitly require “good cause” for termination, it defines “good cause” as a failure to comply with essential and reasonable requirements imposed by the grantor or bad faith in carrying out the terms of the dealership.


The new law defines “dealership’ to mean a contract or agreement, either expressed or implied, oral or written, by which a person is granted the right to sell or distribute goods or services or use a trade name, trademark, service mark, logotype, advertising or other commercial symbol, in which there is a community of interest in the business of offering, selling, or distributing goods or services at wholesale, retail, by lease, agreement, or otherwise.

Civil Action

The law requires the repurchase of dealership inventories under certain circumstances and provides a private civil action for injunctive relief, damages, and attorneys’ fees.

It specifically excludes its application to certain classes of dealerships, including liquor, fuel, and motor vehicle dealerships; insurance agency relationships; and door-to-door sales dealerships.

Full text of Chapter 07-036 will appear in the CCH Business Franchise Guide.

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