Limitations on Contract Termination Rights: Franchise Cancellations

The remarkable growth in recent years of franchise contracts as a means of marketing a variety of goods and services has been accompanied by an increase in litigation over franchise terminations. To date, however, the courts have provided only stopgap protections against the gravest abuses. Some courts have imposed subjective good faith limitations and a few legislatures have broached the area, but the results have not been satisfactory. Behind the franchise termination situation often lie elementary considerations of fairness which the courts in other contexts have been able to deal with by expanding established principles of contract law. The application of these principles to franchise terminations is the subject of this article.