Some states have applied these laws to the dealer-manufacturer relationship. The practical effect of this can be that your contract's termination provisions may be read to require good cause and an opportunity to cure. The contract that is actually enforced by a court may be far different than the written dealer agreement you have had in place for many years. Typically, there are continuing oral communications between your people and the dealer about the duration of the dealership or the circumstances under which the dealership could be terminated. A number of common law legal theories may prevent termination, even if the contract provides otherwise.
Evidence is admissible to explain or clarify ambiguous writings.
When you are reviewing the contract, look for possible ambiguity on language concerning the hot issues like inventory buy-back and length of termination notice. Custom and practice in the industry and the course of dealing and course of performance between you and the dealer are regularly admitted as evidence to clarify what the real meaning of the written contract was. Every contract carries an implied covenant of good faith and fair dealing. These standards are increasingly applied by the courts to curb abuse of broad or limitless discretion by a manufacturer, even when the dealer contract expressly grants unfettered discretion. What effect this may have may be affected by how big the dealer is and whether the dealer is regularly represented by counsel and whether counsel participated in the negotiation of the dealer agreement.