Sec. 4. Standards of conduct
452 words·~2 min read·
/bill/115/hr/470/ih/section-4·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
A franchise contract imposes on each party thereto a duty to act in good faith in its performance and enforcement. As used in this subsection, a duty of good faith shall— obligate a party to a franchise to do nothing that will have the effect of destroying or injuring the right of the other party to obtain and receive the expected fruits of the contract; obligate a party to do everything required under the contract to accomplish the purposes of the contract; and require honesty in fact and observance of reasonable standards of fair dealing in the trade.
No provision of any franchise agreement, express or implied, shall be interpreted or enforced in such a way as to obfuscate or avoid a party’s duty to act reasonably and in good faith with the other, or otherwise allow a disparate result in the franchise relationship. A franchise agreement imposes on the franchisor a duty of due care. Unless a franchisor represents that it has greater skill or knowledge in its undertaking with its franchisees, or conspicuously disclaims that it has any skill or knowledge, the franchisor is required to exercise the skill and knowledge normally possessed by franchisors in good standing in the same or similar types of business.
For purposes of this subsection— the term skill or knowledge means something more than the mere minimum level of skill or knowledge required of any person engaging in a service or business and involves a special level of expertise— which is the result of acquired learning and aptitude developed by special training and experience in the business to be licensed under the franchise agreement, or the result of extensive use and experience with the goods or services or the operating system of such business; which is the result of experience in organizing a franchise system and in providing training, assistance and services to franchisees; and which a prospective franchisee would expect in reasonable reliance on the written and oral commitments and representations of the franchisor; and a franchisor shall be permitted to show that it contracted for, hired, or purchased the expertise necessary to comply with the requirements of this subsection and that such expertise was incorporated in the franchise or communicated or provided to the franchisee.
The requirement of this subsection may not be waived by agreement or by conduct, but the franchisor may limit in writing the nature and scope of its skill and knowledge, and of its undertaking with a prospective franchisee, by stating that it claims no skill or knowledge in a particular area, provided that no inconsistent representation, whether written or oral, is made to the prospective franchisee irrespective of any merger or integration clause in the franchise agreement.