TITLE 6

Commerce and Trade

SUBTITLE II

Other Laws Relating to Commerce and Trade

CHAPTER 25. PROHIBITED TRADE PRACTICES

Subchapter V. Security for Franchised Distributors


As used in this chapter, unless the context otherwise requires:

(1) "Franchise" means a contract or other arrangement governing the business relationship within this State between a franchised distributor and a franchisor where the franchised distributor is required to pay more than $100 to enter into such contract or other arrangement; provided, however, that a franchised distributor as defined under paragraph (2)(d) of this section shall not be required to have paid any consideration to enter into such contract or other arrangement.

(2) "Franchised distributor " means an individual, partnership, corporation, or unincorporated association with a place of business within the State, and engaged in the business of:

(a) Purchasing or taking on consignment products which bear the trademark or trade name of the manufacturer, producer or publisher for the primary purpose of selling such products to retail outlets; or

(b) Selling in or through retail outlets products which bear the trademark or trade name of no more than 3 manufacturers, producers, publishers, trademark licensors, or trade name licensors; or

(c) Purchasing or taking on consignment, books, magazines, journals, newspapers, or other publications for the primary purpose of selling such publications to retail outlets; or

(d) Operating a service station, filling station, store, garage or other place of business for the sale of motor fuel for delivery into the service tank or tanks of any vehicle propelled by an internal combustion engine.

(3) "Franchisor" means an individual, partnership, corporation or unincorporated association in the business of:

(a) Distributing or selling to one or more franchised distributors, on its own behalf or on behalf of another, products which bear the trademark or trade name of the manufacturer, producer or publisher; or

(b) Licensing the use of one or more trademarks or trade names to one or more franchised distributors; or

(c) Distributing or selling to one or more franchised distributors, on its own behalf or on behalf of another, books, magazines, journals, newspapers, and/or other publications published by it or by another; or

(d) Producing or refining of petroleum products, or the producer or fabricator of any automotive products sold or distributed by a service station.

(4) "Products" means any tangible items offered for sale irrespective of their nature, including, without limiting the generality of the term, all types of publications.

6 Del. C. 1953, § 2551; 57 Del. Laws, c. 693; 62 Del. Laws, c. 352, §§ 1-3.;

(a) Termination of a franchise by a franchisor shall be deemed to be "unjust," or to have been made "unjustly," if such termination is without good cause or in bad faith. Any termination of a franchise which is not unjust shall be deemed to be "just," or to have been made "justly."

(b) The failure of a franchisor to renew a franchise shall be deemed to be "unjust," or to have been made "unjustly," if such failure to renew is without good cause or in bad faith. Any failure to renew a franchise which is not unjust shall be deemed to be "just," or to have been made "justly."

(c) A provision of a franchise which permits a franchisor to terminate that franchise, which provision does not specify the grounds upon which such termination may be made, shall be construed to permit the franchisor to make only a just termination.

(d) A provision of a franchise which permits a franchisor to fail to renew that franchise, which provision does not specify the grounds upon which such failure to renew may be made, shall be construed to permit the franchisor only justly to fail or refuse to renew.

(e) A provision in a franchise permitting a franchisor to make an unjust termination of a franchise is against the public policy of this State and shall not be enforced in the courts of this State.

(f) A provision in a franchise permitting a franchisor unjustly to fail or refuse to renew a franchise is against the public policy of this State and shall not be enforced in the courts of this State.

(g) No franchisor may unjustly terminate a franchise.

(h) No franchisor may unjustly fail or refuse to renew a franchise.

(i) No franchisor may unjustly refuse to deal with a franchised distributor with whom the franchisor has been dealing for at least 2 years.

(j) Notwithstanding any terms of the franchise agreement to the contrary, no franchisor who leases real or personal property to a franchised distributor may charge the franchised distributor a rent or other charge for the use or occupancy of such real or personal property which is unreasonable or excessive in light of the franchisor's interest in such real or personal property, and the purpose to which the real or personal property is being used. The refusal of the franchisor to renew a lease for real or personal property except upon the payment of a rent or other charge which is unreasonable or excessive in light of the use to which the property has been placed by the franchisor and/or the interest of the franchisor in the real or personal property shall be deemed to be an unjust termination of the franchise.

6 Del. C. 1953, § 2552; 57 Del. Laws, c. 693; 62 Del. Laws, c. 352, § 4.;

(a) If a franchisor (1) unjustly terminates a franchise, or (2) unjustly fails or refuses to renew a franchise, or (3) threatens, or attempts, or gives notice that it intends to attempt unjustly to terminate a franchise, or (4) threatens, or attempts, or gives notice that it intends to attempt unjustly to refuse to renew a franchise, then the franchised distributor whose franchise is threatened shall be entitled to recover damages from the franchisor and, in addition, shall be entitled to secure in the Court of Chancery of this State, subject to general equitable principles, an order enjoining such termination or, in case of a failure or refusal to renew, a mandatory order for renewal of the franchise. Pending the issuance of such an order, the franchised distributor shall be entitled to an order enjoining such termination pendente lite, or in case of a failure or refusal to renew, a mandatory order extending the franchise pendente lite. Any such order, whether final or pendente lite, shall contain provisions directing the franchisor to sell or consign to the franchised distributor the products covered by the franchise and/or to license to the franchised distributor the trademarks or trade names covered by the franchise, and otherwise to deal with the franchised distributor under the terms of the franchise so terminated.

(b) Without limiting any other provisions of this chapter, if a franchisor unjustly refuses to deal with a franchised distributor with whom the franchisor has been dealing for at least 2 years, the franchised distributor shall be entitled to recover damages from the franchisor pursuant to subsection (a) of this section plus all other damages (including, without limitation, loss of profits) allowed under the law of this State; and, in addition, shall be entitled to secure in the Court of Chancery of this State an order directing the franchisor to deal with the franchised distributor on fair and competitive terms. Pending the issuance of such final order, the franchised distributor shall be entitled to secure such a mandatory order pendente lite.

(c) Except as otherwise provided in subsection (b) of this section, damages recoverable pursuant to the provisions of this chapter shall include, but shall not be limited to, the following:

(1) A fractional portion of the franchised distributor's tangible assets (both real and personal) in this State used with respect to the terminated or unrenewed franchise, including, but not limited to, sales outlets and facilities, offices, warehouses, trucks and the furnishing, equipment and accessories therein; the numerator of the fraction shall consist of the franchised distributor's gross sales (in the most recently completed fiscal year) within this State attributable to the terminated or unrenewed franchise, and the denominator of the fraction shall consist of the franchised distributor's total gross sales (in the most recently completed fiscal year) in this State; and

(2) Loss of goodwill; and

(3) Loss of profits, which loss shall be presumed to be no less than 5 times the profit obtained by the franchised distributor, by virtue of the terminated franchise, in the most recently completed fiscal year; and

(4) All other damages allowed under the law of this State; and

(5) The reasonable counsel fees and expenses incurred in the action or actions brought pursuant to this chapter.

6 Del. C. 1953, § 2553; 57 Del. Laws, c. 693.;

Individuals or entities who are parties to a franchise agreement as set out by the Federal Trade Commission shall not be deemed employees for purposes of Chapter 11 of Title 19.

79 Del. Laws, c. 39, § 1.;

Notwithstanding any provision in a franchise agreement which provides otherwise, any termination of a franchise or election not to renew a franchise must be made on at least 90 days' notice.

6 Del. C. 1953, § 2554; 57 Del. Laws, c. 693; 79 Del. Laws, c. 39, § 1.;

This law shall apply to franchises in existence on July 8, 1970, and the renewal of such franchises, as well as franchises subsequently executed.

6 Del. C. 1953, § 2555; 57 Del. Laws, c. 693; 79 Del. Laws, c. 39, § 1.;

This chapter may be cited as the "Delaware Franchise Security Law."

6 Del. C. 1953, § 2556; 57 Del. Laws, c. 693; 79 Del. Laws, c. 39, § 1.;