Opinion ID: 566843
Heading Depth: 2
Heading Rank: 1

Heading: Whether the Contracts Were for a Term of Three Years

Text: 22 Plaintiffs initially assert that the agreements they had with Exxon were not contracts for three years. Notwithstanding the fact that the documents both plaintiffs signed stated on their face that they were for a three-year term, plaintiffs argue that the agreements were only for a term of two years, ten months, and three days--a period non-inclusive of the retroactive provisions. Furthermore, they assert, the parties were not in agreement as to all of the material terms to be incorporated into the contemplated future contract, such as the amount and cost of the fuel to be delivered. Thus, plaintiffs claim they had no way of knowing whether they were bound by the terms of the previous contract or by new terms. We disagree. 23 Plaintiffs cite to legislative history of the PMPA, which reiterates that the overriding purpose of the law is to protect franchisees and prevent the  'leverage effect' over franchisees who do not have the protection of long term contracts. In this case, there is nothing to indicate the use of such leverage. There is no evidence to support plaintiffs' statements that the three years in the contract were unilaterally inserted by the franchisor at the time that a franchise was offered by Exxon to the wholesaler. To the contrary, plaintiffs were told that they were going to be offered a three-year franchise, and when it was offered, with the retroactive period plainly included in the contract, they signed it knowingly and willingly. Kentucky law clearly allows parties to a contract to predate a contract and both parties will be bound by that agreement. American Credit Indemnity Co. v. Hecht & Co., 137 Ky. 261, 125 S.W. 697, 699 (1910); accord Brewer v. National Surety Corp., 169 F.2d 926, 928 (10th Cir.1948) (It is competent for the parties to agree that a written contract shall take effect as of a date earlier than that on which it was executed, and when this is done, the parties will be bound by such agreement.) 24 Similarly, while plaintiffs are correct in their assertion that essential terms of the contract must be agreed upon, it is general contract practice that parties agree to enter into contracts and only later formalize their agreements in writing, using generally understood, or previously employed terms for the new agreement. In the present case, the plaintiffs operated the franchise during the period prior to when the three-year contract was signed with the knowledge that they would be signing a new agreement under the general terms and conditions of the one-year contract. 25 The March 1981 letter from Exxon alerted the dealers of the pending three-year contract offer and established the temporary amounts of fuel to be provided: 26 Three-year contracts for both motor gasoline and diesel fuel will be offered for the period beginning April 1, 1981. 27 .... 28 To allow time for contract volumes and other details to be worked out, during April and May of 1981, or until your contract is signed if earlier, Exxon will make available to you for purchase, monthly volumes of motor gasoline and diesel fuel equal to your purchases for each corresponding month in 1980, less any overlifts from the previous month.... 29 The other terms and conditions of your current contract will govern until the signing of your new contract. Any purchases of Exxon motor gasoline and/or diesel fuel during the period from April 1, 1981 until the signing of your new contract shall indicate your concurrence with these provisions during this interim period. 30 As soon as the new contract was presented, plaintiffs conformed to the terms of that contract. At no time during the intermittent period did they experience any difficulty based on the claimed lack of agreement on the terms. 1 31 We also note that, in arguing before the district court, plaintiffs stated that after the execution of the Massey franchise and the Lyons' franchise, the terms then related back to March 1 [sic] and after May 28, 1981, the obligations of the parties were governed thereby. We find this attempted distinction to be without significance. Further, we find plaintiffs' citation to Straney v. Smith, 255 S.W.2d 653, 655 (Ky.1953), to be inapposite. (There was so much left for future settlement that it cannot be said there was a consummation of an agreement which would have become operative without the formality of executing written memorials thereof....) 32