Court Opinion

ID: 9754855
Source: CourtListenerOpinion
Date Created: 2023-08-28 20:16:43.698786+00
Date Added: 2024-06-11T07:27:59.725344
License: Public Domain

POMEROY, Justice,
concurring.
I agree with the conclusion of the majority that the agreement between William M. Razumic and Atlantic Rich-field Company (Arco), although largely couched in language defining a lessor-lessee relationship, contained elements of a franchise relationship as well; the case cannot be treated and decided, therefore, as if we were dealing only with a lease.
Where the duration of a franchise arrangement is indefinite, the courts, recognizing the substantial commitments which a lessee-franchisee finds it necessary to undertake in operating under such a contract, properly imply an obliga*385tion on the franchisor not to act arbitrarily in terminating the relationship. Professor Williston has commented upon the termination aspects of an indefinite term contract of this type as follows:
“The elaborate instruments used to create these distributorships, it should be remembered, are almost invariably drawn by or on behalf of the manufacturer and presented to the dealer or exclusive agent simply for his signature, not for further negotiation. The very fact that so frequently this carefully drawn instrument leaves the question of its termination, ‘an obligation incompletely expressed,’ and the startlingly disproportionate burden otherwise cast upon the dealer should here, as in the requirement and output contracts, justify the courts in inferring an intention to bind both parties for at least such time as may be required to demonstrate the cause or to establish grounds for honest dissatisfaction, or otherwise for a reasonable time just as where no other provision is made. And further, these contracts are made, if not upon an express promise, at least upon the understanding and expectation that the dealer will make a substantial investment in establishing or maintaining a business equipment or a service such as will successfully promote the sale of the manufacturer’s products within the exclusive territory.” IX Williston on Contracts (3rd ed.) § 1017a, pp. 162-165 (footnotes omitted).
Because, however, (with the exceptions hereafter noted) such considerations do not apply with equal weight to a contract like the one before us which contains a specific term, I am constrained to file this separate opinion.
The parties in the case before us entered into an agreement which was to continue for a three-year period. No provision was made as to renewal of the contract. The majority, relying on authority which deals with franchise agreements having no fixed term,1 in effect excises the *386three-year term provision from the contract and reads into the contract a duty on the franchisor-lessor to keep the agreement in force indefinitely, with no provision of any sort for termination, so long as the franchisee fulfills its obligation to provide good service to the public, and otherwise performs as required by the agreement. I cannot agree.
Of course, where an agreement of this nature provides for an express term, that term must be reasonable; a franchisor should not be able, by use of multiple renewals of short term agreements, to provide opportunities for the arbitrary termination of a franchise to the detriment of the franchisee. See IX Williston on Contracts, supra; Annotation: Distributorship Contracts — Termination, 19 A.L.R.3d 196, § 18[a] (What constitutes a reasonable time for the duration of a distributorship?); Gellhorn, Limitations of Contract Termination Rights — Franchise Cancellations, 1967 Duke L.J. 465. Likewise, although the duration of a fixed term may be of reasonable length, a franchisor, because of his prior course of dealing, may be estopped from refusing to renew without cause. Professor Gellhorn has expressed it this way:
“Although the ground rules of estoppel are similar to those of waiver, its application does not necessarily involve the same problems. When the terminated dealer alleges that the manufacturer is estopped from terminating the contract on the ground asserted, the question of proof revolves around whether the terminated dealer can show (1) that he changed his position in reliance on the manufacturer’s conduct and (2) that such reliance was reasonable. The difficulty of proving that the manufac*387turer has taken an “inconsistent” position, often an insurmountable roadblock for the dealer asserting a waiver defense, may be overcome by evidence that the manufacturer knew of the dealer’s change of position and failed to object.” Gellhorn, supra, 1967 Duke L.J. at 488-89 (footnotes omitted).
Assuming that neither estoppel nor a succession of unreasonably brief terms is present in a given situation, I strongly doubt the wisdom of this Court’s presuming to insist that the business relationship of the parties be continued indefinitely at the will of the franchisee. Courts generally have not gone so far. As one commentator has noted:
“It is obvious why the courts have been particularly reluctant to grant relief in non-renewal cases, especially where the continuance of a complicated interdependent business relationship is sought. Virtually all of the very limited number of cases won by franchisees have involved alleged wrongful exercise of franchise cancellation provisions rather than alleged claims of wrongful non-renewal of a fixed term franchise. The idea that the courts can or should review the duration provisions of franchises presents a direct challenge to the right of merchants to agree in advance on a foundation feature of their business risks and relationships.” C. Hewitt, Good Faith or Unconscionability — Franchisee Remedies for Termination, 29 Bus.Law. 227, 233-234 (1973) (footnotes omitted) (emphasis added).
In the case at bar, the trial court refused to permit the franchisee, Razumic, to introduce evidence of his performance or of trade usage between Arco and its dealers tending to show that the dealership “leases” were customarily renewed so long as the service station was operated in a business-like manner. The purpose of the offers, presumably, was to establish that Arco should be estopped from arbitrarily refusing to renew the agreement. The record is equally uninformative as to whether the term of three years was a reasonable period within which the franchisee could obtain a fair return on his investment and his efforts on *388behalf of Arco with respect to the newly constructed station. In my view of the case, evidence of these matters was important in determining the validity and enforceability of the three year term. It is for this reason that I would grant a new trial, and thus I concur in the order of the Court.
NIX, J., joins in this Opinion.

. See, e. g., Gellhorn, Limitations on Contract Termination Rights— Franchise Cancellations, 1967 Duke L.J. 465; C. Hewitt, Good Faith or Unconscionability — Franchisee Remedies for Termination, 29 Bus. *386Law. 227 (1973); Seegmiller v. Western Men, Inc., 20 Utah 2d 352, 437 P.2d 892 (1968). Furthermore, it should be observed that regardless of the wisdom of the Act of November 26, 1975, P.L. 454, §§ 1 et seq., 73 P.S. §§ 202-1 et seq. (Supp.1978) which as noted by the majority now governs the cancellation and renewal of such franchise agreements, the Act has no applicability whatsoever to the instant case which arose prior to the Act’s effective date. Indeed, if any conclusion were to be drawn from the passage of this legislation it would be that the General Assembly was seeking to alter a previously legitimate practice.