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Senate File 324

Partial Bill History

Bill Text

PAG LIN
  1  1                                         SENATE FILE 324
  1  2 
  1  3                             AN ACT
  1  4 RELATING TO CERTAIN FRANCHISE AGREEMENTS AND THE RIGHTS AND
  1  5    RESPONSIBILITIES OF THE PARTIES UNDER SUCH AGREEMENTS. 
  1  6 
  1  7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  1  8 
  1  9    Section 1.  NEW SECTION.  537A.10  FRANCHISE AGREEMENTS.
  1 10    1.  DEFINITIONS.
  1 11    When used in this section, unless the context otherwise
  1 12 requires:
  1 13    a.  "Affiliate" means a person controlling, controlled by,
  1 14 or under common control with another person, every officer or
  1 15 director of such a person, and every person occupying a
  1 16 similar status or performing similar functions.
  1 17    b.  "Business day" means a day other than a Saturday,
  1 18 Sunday, or federal holiday.
  1 19    c.  (1)  "Franchise" means either of the following:
  1 20    (a)  An oral or written agreement, either express or
  1 21 implied, which provides all of the following:
  1 22    (i)  Grants the right to distribute goods or provide
  1 23 services under a marketing plan prescribed or suggested in
  1 24 substantial part by the franchisor.
  1 25    (ii)  Requires payment of a franchise fee to a franchisor
  1 26 or its affiliate.
  1 27    (iii)  Allows the franchise business to be substantially
  1 28 associated with a trademark, service mark, trade name,
  1 29 logotype, advertisement, or other commercial symbol of or
  1 30 designating the franchisor or its affiliate.
  1 31    (b)  A master franchise.
  1 32    (2)  "Franchise" does not include any business that is
  1 33 operated under a lease or license on the premises of the
  1 34 lessor or licensor as long as such business is incidental to
  1 35 the business conducted by the lessor or licensor on such
  2  1 premises, including, without limitation, leased departments,
  2  2 licensed departments, and concessions and the leased or
  2  3 licensed department operates only under the trademark, trade
  2  4 name, service mark, or other commercial symbol designating the
  2  5 lessor or licensor.
  2  6    (3)  "Franchise" also does not include any contract under
  2  7 which a petroleum retailer or petroleum distributor is
  2  8 authorized or permitted to occupy leased marketing premises,
  2  9 which premises are to be employed in connection with the sale,
  2 10 consignment, or distribution of motor fuel under a trademark
  2 11 which is owned or controlled by a refiner which is regulated
  2 12 by the federal Petroleum Marketing Practices Act, 15 U.S.C. }
  2 13 2801 et seq.  The term "refiner" means any person engaged in
  2 14 the refining of crude oil to produce motor fuel, and includes
  2 15 any affiliate of such person.  "Franchise" also does not
  2 16 include a contract entered into by any person regulated under
  2 17 chapter 123, 322, 322A, 322B, 322C, 322D, 322F, 522, or 543B,
  2 18 or a contract establishing a franchise relationship with
  2 19 respect to the sale of construction equipment, lawn or garden
  2 20 equipment, or real estate.
  2 21    d.  "Franchise fee" means a direct or indirect payment to
  2 22 purchase or operate a franchise.  Franchise fee does not
  2 23 include any of the following:
  2 24    (1)  Payment of a reasonable service charge to the issuer
  2 25 of a credit card by an establishment accepting the credit
  2 26 card.
  2 27    (2)  Payment to a trading stamp company by a person issuing
  2 28 trading stamps in connection with a retail sale.
  2 29    (3)  An agreement to purchase at a bona fide wholesale
  2 30 price a reasonable quantity of tangible goods for resale.
  2 31    (4)  The purchase or agreement to purchase, at a fair
  2 32 market value, any fixtures, equipment, leasehold improvements,
  2 33 real property, supplies, or other materials reasonably
  2 34 necessary to enter into or continue a business.
  2 35    (5)  Payments by a purchaser pursuant to a bona fide loan
  3  1 from a seller to the purchaser.
  3  2    (6)  Payment of rent which reflects payment for the
  3  3 economic value of leased real or personal property.
  3  4    (7)  The purchase or agreement to purchase promotional or
  3  5 demonstration supplies, materials, or equipment furnished at
  3  6 fair market value and not intended for resale.
  3  7    e.  "Franchisee" means a person to whom a franchise is
  3  8 granted.  Franchisee includes the following:
  3  9    (1)  A subfranchisor with regard to its relationship with a
  3 10 franchisor.
  3 11    (2)  A subfranchisee with regard to its relationship with a
  3 12 subfranchisor.
  3 13    f.  "Franchisor" means a person who grants a franchise or
  3 14 master franchise, or an affiliate of such a person.
  3 15 Franchisor includes a subfranchisor with regard to its
  3 16 relationship with a franchisee, unless stated otherwise in
  3 17 this section.
  3 18    g.  "Marketing plan" means a plan or system concerning a
  3 19 material aspect of conducting business.  Indicia of a
  3 20 marketing plan include any of the following:
  3 21    (1)  Price specification, special pricing systems, or
  3 22 discount plans.
  3 23    (2)  Sales or display equipment or merchandising devices.
  3 24    (3)  Sales techniques.
  3 25    (4)  Promotional or advertising materials or cooperative
  3 26 advertising.
  3 27    (5)  Training regarding the promotion, operation, or
  3 28 management of the business.
  3 29    (6)  Operational, managerial, technical, or financial
  3 30 guidelines or assistance.
  3 31    h.  "Master franchise" means an agreement by which a person
  3 32 pays a franchisor for the right to sell or negotiate the sale
  3 33 of franchises.
  3 34    i.  "Offer" or "offer to sell" means every attempt to offer
  3 35 or to dispose of, or solicitation of an offer to buy, a
  4  1 franchise or interest in a franchise for value.
  4  2    j.  "Person" means a person as defined in section 4.1,
  4  3 subsection 20.
  4  4    k.  "Sale" or "sell" means every contract or agreement of
  4  5 sale of, contract to sell or disposition of, a franchise or
  4  6 interest in a franchise for value.
  4  7    l.  "Subfranchise" means an agreement by which a person
  4  8 pays a franchisor for the right to sell or negotiate the sale
  4  9 of franchises.
  4 10    m.  "Subfranchisee" means a person who is granted a
  4 11 franchise from a subfranchisor.
  4 12    n.  "Subfranchisor" means a person who is granted a master
  4 13 franchise.
  4 14    2.  APPLICABILITY.  Notwithstanding section 523H.2, this
  4 15 section applies to a new or existing franchise that is
  4 16 operated in this state and that is subject to an agreement
  4 17 entered into on or after the effective date of this Act.  For
  4 18 purposes of this section, the franchise is operated in this
  4 19 state only if the premises from which the franchise is
  4 20 operated is physically located in this state.  For purposes of
  4 21 this section, a franchise including marketing rights in or to
  4 22 this state, is deemed to be operated in this state only if the
  4 23 franchisee's principal business office is physically located
  4 24 in this state.  This section does not apply to a franchise
  4 25 solely because an agreement relating to the franchise provides
  4 26 that the agreement is subject to or governed by the laws of
  4 27 this state.  The provisions of this section do not apply to
  4 28 any existing or future contracts between Iowa franchisors and
  4 29 franchisees who operate franchises located out of state.
  4 30    3.  JURISDICTION AND VENUE OF DISPUTES.
  4 31    a.  A provision in a franchise agreement restricting
  4 32 jurisdiction to a forum outside this state is void with
  4 33 respect to a claim otherwise enforceable under this section.
  4 34    b.  A civil action or proceeding arising out of a franchise
  4 35 may be commenced wherever jurisdiction over the parties or
  5  1 subject matter exists, even if the agreement limits actions or
  5  2 proceedings to a designated jurisdiction.
  5  3    c.  Venue for a civil action commenced under this chapter
  5  4 shall be determined in accordance with chapter 616.
  5  5    4.  WAIVERS VOID.  A condition, stipulation, or provision
  5  6 requiring a franchisee to waive compliance with or relieving a
  5  7 person of a duty or liability imposed by or a right provided
  5  8 by this section or a rule or order under this section is void.
  5  9 This subsection shall not affect the settlement of disputes,
  5 10 claims, or civil lawsuits arising or brought pursuant to this
  5 11 section.
  5 12    5.  TRANSFER OF FRANCHISE.
  5 13    a.  A franchisee may transfer the franchised business and
  5 14 franchise to a transferee, provided that the transferee
  5 15 satisfies the reasonable current qualifications of the
  5 16 franchisor for new franchisees.  For the purposes of this
  5 17 subsection, a reasonable current qualification for a new
  5 18 franchisee is a qualification based upon a legitimate business
  5 19 reason.  If the proposed transferee does not meet the
  5 20 reasonable current qualifications of the franchisor, the
  5 21 franchisor may refuse to permit the transfer, provided that
  5 22 the refusal of the franchisor to consent to the transfer is
  5 23 not arbitrary or capricious.
  5 24    b.  (1)  A franchisee may transfer less than a controlling
  5 25 interest in the franchise to an employee stock ownership plan,
  5 26 or employee incentive plan provided that more than fifty
  5 27 percent of the entire franchise is held by those who meet the
  5 28 franchisor's reasonable current qualifications for
  5 29 franchisees, and such transfer is approved by the franchisor.
  5 30 Approval of such transfer shall not be unreasonably withheld.
  5 31    (2)  If pursuant to such a transfer less than fifty percent
  5 32 of the entire franchise would be owned by persons who meet the
  5 33 franchisor's reasonable current qualifications, the franchisor
  5 34 may refuse to authorize the transfer, provided that
  5 35 enforcement of the reasonable current qualifications is not
  6  1 arbitrary or capricious.
  6  2    (3)  Participation by an employee in an employee stock
  6  3 ownership plan or employee incentive plan established pursuant
  6  4 to this subsection does not confer upon such employee any
  6  5 right to access trade secrets protected under the franchise
  6  6 agreement which access the employee would not otherwise have
  6  7 if the employee did not participate in such plan.
  6  8    c.  A franchisor may require as a condition of a transfer
  6  9 any of the following:
  6 10    (1)  That the transferee successfully complete a training
  6 11 program.
  6 12    (2)  That a transfer fee be paid to reimburse the
  6 13 franchisor for the franchisor's actual expenses directly
  6 14 attributable to the transfer.
  6 15    (3)  That the franchisee pay or make provision acceptable
  6 16 to the franchisor to pay any amount due the franchisor or the
  6 17 franchisor's affiliate.
  6 18    (4)  That the financial terms of the transfer comply at the
  6 19 time of the transfer with the franchisor's current financial
  6 20 requirements for franchisees.
  6 21    d.  A franchisee shall give the franchisor no less than
  6 22 sixty days' written notice of a transfer which is subject to
  6 23 this subsection, and on request from the franchisor shall
  6 24 provide in writing the ownership interests of all persons
  6 25 holding or claiming an equitable or beneficial interest in the
  6 26 franchise subsequent to the transfer or the franchisee, as
  6 27 appropriate.  A franchisee shall not circumvent the intended
  6 28 effect of a contractual provision governing the transfer of
  6 29 the franchise or an interest in the franchise by means of a
  6 30 management agreement, lease, profit-sharing agreement,
  6 31 conditional assignment, or other similar device.
  6 32    e.  A transfer by a franchisee is deemed to be approved
  6 33 sixty days after the franchisee submits the request for
  6 34 consent to the transfer unless the franchisor withholds
  6 35 consent to the transfer as evidenced in writing, specifying
  7  1 the reason or reasons for withholding the consent.  The
  7  2 written notice must be delivered to the franchisee prior to
  7  3 the expiration of the sixty-day period.  Any such notice is
  7  4 privileged and is not actionable based upon a claim of
  7  5 defamation.
  7  6    f.  A franchisor shall not discriminate against a proposed
  7  7 transferee of a franchise on the basis of race, color,
  7  8 national origin, religion, sex, or disability.
  7  9    g.  A transfer of less than a controlling interest in the
  7 10 franchise to the franchisee's spouse or child or children
  7 11 shall be permitted if following the transfer more than fifty
  7 12 percent of the interest in the entire franchise is held by
  7 13 those who meet the franchisor's reasonable current
  7 14 qualifications.  If following such a transfer fifty percent or
  7 15 less of the interest in the franchise would be owned by
  7 16 persons who meet the franchisor's reasonable current
  7 17 qualifications, the franchisor may refuse to authorize the
  7 18 transfer, provided that enforcement of the reasonable current
  7 19 qualifications is not arbitrary or capricious.
  7 20    h.  A franchisor shall not deny the surviving spouse or a
  7 21 child or children of a deceased or permanently disabled
  7 22 franchisee the opportunity to participate in the ownership of
  7 23 a franchise under a valid franchise agreement for a reasonable
  7 24 period, which need not exceed one year, after the death or
  7 25 disability of the franchisee.  During such reasonable period,
  7 26 the surviving spouse or the child or children of the
  7 27 franchisee shall either meet all of the qualifications which
  7 28 the franchisee was subject to at the time of the death or
  7 29 disability of the franchisee, or sell, transfer, or assign the
  7 30 franchise to a person who meets the franchisor's current
  7 31 qualifications for a new franchisee.  The rights granted
  7 32 pursuant to this subsection are subject to the surviving
  7 33 spouse or the child or children of the franchisee maintaining
  7 34 all standards and obligations of the franchise.
  7 35    i.  Incorporation of a proprietorship franchise shall be
  8  1 permitted upon sixty days' prior written notice to the
  8  2 franchisor.  Such incorporation does not prohibit a franchisor
  8  3 from requiring a personal guaranty by the franchisee of
  8  4 obligations related to the franchise, and the owners of the
  8  5 corporation must meet the franchisor's reasonable current
  8  6 qualifications for franchisees.
  8  7    j.  A transfer within an existing ownership group of a
  8  8 franchise shall be permitted provided that the transferee
  8  9 meets the franchisor's reasonable current qualifications for
  8 10 franchisees, and written notice is submitted to the franchisor
  8 11 sixty days prior to such a transfer.  If less than fifty
  8 12 percent of the franchise would be owned by persons who meet
  8 13 the franchisor's reasonable current qualifications, the
  8 14 franchisor may refuse to authorize the transfer, provided that
  8 15 enforcement of the reasonable current qualifications is not
  8 16 arbitrary or capricious.
  8 17    6.  ENCROACHMENT.
  8 18    a.  If a franchisor develops, or grants to a franchisee the
  8 19 right to develop, a new outlet or location which sells
  8 20 essentially the same goods or services under the same
  8 21 trademark, service mark, trade name, logotype, or other
  8 22 commercial symbol as an existing franchisee and the new outlet
  8 23 or location is in unreasonable proximity to the existing
  8 24 franchisee's outlet or location and has an adverse effect on
  8 25 the gross sales of the existing franchisee's outlet or
  8 26 location, the existing adversely affected franchisee has a
  8 27 cause of action for monetary damages in an amount calculated
  8 28 pursuant to paragraph "d", unless any of the following apply:
  8 29    (1)  The franchisor has first offered the new outlet or
  8 30 location to the existing franchisee on the same basic terms
  8 31 and conditions available to the other potential franchisee and
  8 32 such existing franchisee meets the reasonable current
  8 33 qualifications of the franchisor including any financial
  8 34 requirements, or, if the new outlet or location is to be owned
  8 35 by the franchisor, on the terms and conditions that would
  9  1 ordinarily be offered to a franchisee for a similarly situated
  9  2 outlet or location.
  9  3    (2)  The adverse impact on the existing franchisee's annual
  9  4 gross sales, based on a comparison to the annual gross sales
  9  5 from the existing outlet or location during the twelve-month
  9  6 period immediately preceding the opening of the new outlet or
  9  7 location, is determined to have been less than six percent
  9  8 during the first twelve months of operation of the new outlet
  9  9 or location.
  9 10    (3)  The existing franchisee, at the time the franchisor
  9 11 develops, or grants to a franchisee the right to develop, a
  9 12 new outlet or location, is not in compliance with the
  9 13 franchisor's then current reasonable criteria for eligibility
  9 14 for a new franchise, not including any financial requirements.
  9 15    (4)  The existing franchisee has been granted reasonable
  9 16 territorial rights and the new outlet or location does not
  9 17 violate those territorial rights.
  9 18    b.  (1)  The franchisor, with respect to claims made under
  9 19 paragraph "a", shall establish both of the following:
  9 20    (a)  A formal procedure for hearing and acting upon claims
  9 21 by an existing franchisee with regard to a decision by the
  9 22 franchisor to develop, or grant to a franchisee the right to
  9 23 develop, a new outlet or location, prior to the opening of the
  9 24 new outlet or location.
  9 25    (b)  A reasonable formal procedure for mediating a dispute
  9 26 resulting in an award of compensation or other form of
  9 27 consideration to a franchisee to offset all or a portion of
  9 28 the franchisee's lost profits caused by the establishment of
  9 29 the new outlet or location.  The procedure shall involve a
  9 30 neutral third-party mediator.  The procedure shall be deemed
  9 31 reasonable if approved by a majority of the franchisor's
  9 32 franchisees in the United States.
  9 33    (2)  A dispute submitted to a formal procedure under
  9 34 subparagraph (1) does not diminish the rights of a franchisor
  9 35 or franchisee to bring a cause of action for a violation of
 10  1 this subsection if no settlement results from such procedure.
 10  2    c.  A franchisor shall establish and make available to its
 10  3 franchisees a written policy setting forth its reasonable
 10  4 criteria to be used by the franchisor to determine whether an
 10  5 existing franchisee is eligible for a franchise for an
 10  6 additional outlet or location.
 10  7    d.  (1)  In establishing damages under a cause of action
 10  8 brought pursuant to this subsection, the franchisee has the
 10  9 burden of proving the amount of lost profits attributable to
 10 10 the compensable sales.  In any action brought under this
 10 11 subsection, the damages payable shall be limited to no more
 10 12 than three years of the proven lost profits.  For purposes of
 10 13 this paragraph, "compensable sales" means the annual gross
 10 14 sales from the existing outlet or location during the twelve-
 10 15 month period immediately preceding the opening of the new
 10 16 outlet or location less both of the following:
 10 17    (a)  Six percent of the annual gross sales for that twelve-
 10 18 month period immediately preceding the opening of the new
 10 19 outlet or location.
 10 20    (b)  The actual gross sales from the operation of the
 10 21 existing outlet or location for the twelve-month period
 10 22 immediately following the opening of the new outlet or
 10 23 location.
 10 24    (2)  Compensable sales shall exclude any amount
 10 25 attributable to factors other than the opening and operation
 10 26 of the new outlet or location.
 10 27    e.  Any cause of action brought under this subsection must
 10 28 be filed within eighteen months of the opening of the new
 10 29 outlet or location or within thirty days after the completion
 10 30 of the procedure under paragraph "b", subparagraph (1),
 10 31 whichever is later.
 10 32    7.  TERMINATION.
 10 33    a.  Except as otherwise provided by this section, a
 10 34 franchisor shall not terminate a franchise prior to the
 10 35 expiration of its term except for good cause.  For purposes of
 11  1 this subsection, "good cause" is cause based upon a legitimate
 11  2 business reason.  "Good cause" includes the failure of the
 11  3 franchisee to comply with any material lawful requirement of
 11  4 the franchise agreement, provided that the termination by the
 11  5 franchisor is not arbitrary or capricious.  The burden of
 11  6 proof of showing that the action of the franchisor is
 11  7 arbitrary or capricious shall rest with the franchisee.
 11  8    b.  Prior to termination of a franchise for good cause, a
 11  9 franchisor shall provide a franchisee with written notice
 11 10 stating the basis for the proposed termination.  After service
 11 11 of written notice, the franchisee shall have a reasonable
 11 12 period of time to cure the default, which in no event shall be
 11 13 less than thirty days or more than ninety days.  In the event
 11 14 of nonpayment of moneys due under the franchise agreement, the
 11 15 period to cure need not exceed thirty days.
 11 16    c.  Notwithstanding paragraph "b", a franchisor may
 11 17 terminate a franchise upon written notice and without an
 11 18 opportunity to cure if any of the following apply:
 11 19    (1)  The franchisee or the business to which the franchise
 11 20 relates is declared bankrupt or judicially determined to be
 11 21 insolvent.
 11 22    (2)  All or a substantial part of the assets of the
 11 23 franchise or the business to which the franchisee relates are
 11 24 assigned to or for the benefit of any creditor which is
 11 25 subject to chapter 681.  An assignment for the benefit of any
 11 26 creditor pursuant to this subparagraph does not include the
 11 27 granting of a security interest in the normal course of
 11 28 business.
 11 29    (3)  The franchisee voluntarily abandons the franchise by
 11 30 failing to operate the business for five consecutive business
 11 31 days during which the franchisee is required to operate the
 11 32 business under the terms of the franchise, or any shorter
 11 33 period after which it is not unreasonable under the facts and
 11 34 circumstances for the franchisor to conclude that the
 11 35 franchisee does not intend to continue to operate the
 12  1 franchise, unless the failure to operate is due to
 12  2 circumstances beyond the control of the franchisee.
 12  3    (4)  The franchisor and franchisee agree in writing to
 12  4 terminate the franchise.
 12  5    (5)  The franchisee knowingly makes any material
 12  6 misrepresentations or knowingly omits to state any material
 12  7 facts relating to the acquisition or ownership or operation of
 12  8 the franchise business.
 12  9    (6)  The franchisee repeatedly fails to comply with one or
 12 10 more material provisions of the franchise agreement, when the
 12 11 enforcement of such material provisions is not arbitrary or
 12 12 capricious, whether or not the franchisee complies after
 12 13 receiving notice of the failure to comply.
 12 14    (7)  The franchised business or business premises of the
 12 15 franchisee are lawfully seized, taken over, or foreclosed by a
 12 16 government authority or official.
 12 17    (8)  The franchisee is convicted of a felony or any other
 12 18 criminal misconduct which materially and adversely affects the
 12 19 operation, maintenance, or goodwill of the franchise in the
 12 20 relevant market.
 12 21    (9)  The franchisee operates the franchised business in a
 12 22 manner that imminently endangers the public health and safety.
 12 23    8.  NONRENEWAL OF A FRANCHISE.
 12 24    a.  A franchisor shall not refuse to renew a franchise
 12 25 unless both of the following apply:
 12 26    (1)  The franchisee has been notified of the franchisor's
 12 27 intent not to renew at least six months prior to the
 12 28 expiration date or any extension of the franchise agreement.
 12 29    (2)  Any of the following circumstances exist:
 12 30    (a)  Good cause exists, provided that the refusal of the
 12 31 franchisor to renew is not arbitrary or capricious.  For
 12 32 purposes of this subsection, "good cause" means cause based on
 12 33 a legitimate business reason.
 12 34    (b)  The franchisor and franchisee agree not to renew the
 12 35 franchise.
 13  1    (c)  The franchisor completely withdraws from directly or
 13  2 indirectly distributing its products or services in the
 13  3 geographic market served by the franchisee, provided that upon
 13  4 expiration of the franchise, the franchisor agrees not to seek
 13  5 to enforce any covenant of the nonrenewed franchisee not to
 13  6 compete with the franchisor or franchisees of the franchisor.
 13  7    b.  As a condition of renewal of the franchise, a franchise
 13  8 agreement may require that the franchisee meet the then
 13  9 current requirements for franchises and that the franchisee
 13 10 execute a new agreement incorporating the then current terms
 13 11 and fees for new franchises.
 13 12    9.  SOURCES OF GOODS OR SERVICES.  A franchisor shall not
 13 13 require that a franchisee purchase goods, supplies,
 13 14 inventories, or services exclusively from the franchisor or
 13 15 from a source or sources of supply specifically designated by
 13 16 the franchisor where such goods, supplies, inventories, or
 13 17 services of comparable quality are available from sources
 13 18 other than those designated by the franchisor.
 13 19    However, the publication by the franchisor of a list of
 13 20 approved suppliers of goods, supplies, inventories, or
 13 21 services, or the requirement that such goods, supplies,
 13 22 inventories, or services comply with specifications and
 13 23 standards prescribed by the franchisor, does not constitute
 13 24 designation of a source.  Additionally, the reasonable right
 13 25 of a franchisor to disapprove a supplier does not constitute a
 13 26 designation of source.  This subsection does not apply to the
 13 27 principal goods, supplies, inventories, or services
 13 28 manufactured by the franchisor, or such goods, supplies,
 13 29 inventories, or services entitled to protection as a trade
 13 30 secret.
 13 31    10.  FRANCHISEE'S RIGHT TO ASSOCIATE.  A franchisor shall
 13 32 not restrict a franchisee from associating with other
 13 33 franchisees or from participating in a trade association, and
 13 34 shall not retaliate against a franchisee for engaging in these
 13 35 activities.
 14  1    11.  DUTY OF GOOD FAITH.  A franchise imposes on the
 14  2 parties a duty of good faith in performance and enforcement of
 14  3 the franchise agreement.  "Good faith" means honesty in fact
 14  4 and the observance of reasonable commercial standards of fair
 14  5 dealing in the trade.
 14  6    The duty of good faith is imposed in situations including,
 14  7 but not limited to, where the franchisor opens a new outlet or
 14  8 location that has an adverse impact on an existing franchisee.
 14  9 A determination of whether the duty of good faith with respect
 14 10 to a new outlet or location has been met shall be made
 14 11 pursuant to the provisions, standards, and procedures in
 14 12 subsection 6.
 14 13    12.  EXCLUSION.  For purposes of this section, "franchise"
 14 14 does not include a contract under which a franchise
 14 15 relationship is established with respect to retreaded tires
 14 16 and related equipment used for commercial vehicles.
 14 17    13.  PRIVATE CIVIL ACTION.  A person who violates a
 14 18 provision of this section or order issued under this section
 14 19 is liable for damages caused by the violation, including, but
 14 20 not limited to, costs and reasonable attorneys' and experts'
 14 21 fees, and subject to other appropriate relief including
 14 22 injunctive and other equitable relief.
 14 23    14.  CHOICE OF LAW.  A condition, stipulation, or provision
 14 24 requiring the application of the law of another state in lieu
 14 25 of this section is void.
 14 26    15.  CONSTRUCTION WITH OTHER LAW.  This section does not
 14 27 limit any liability that may exist under another statute or at
 14 28 common law.
 14 29    16.  CONSTRUCTION.  This section shall be liberally
 14 30 construed to effectuate its purposes.
 14 31    17.  SEVERABILITY.  If any provision or clause of this
 14 32 section or any application of this section to any person or
 14 33 circumstances is held invalid, such invalidity shall not
 14 34 affect other provisions or applications of the section which
 14 35 can be given effect without the invalid provision or
 15  1 application, and to this end the provisions of this section
 15  2 are declared to be severable.
 15  3    Sec. 2.  NEW SECTION.  523H.2A  APPLICABILITY –
 15  4 LIMITATION.
 15  5    1.  Notwithstanding section 523H.2, this chapter does not
 15  6 apply to a franchise agreement which is entered into on or
 15  7 after July 1, 2000.  A franchise agreement which is entered
 15  8 into on or after July 1, 2000, shall be subject to section
 15  9 537A.10.
 15 10    2.  This chapter shall govern all actions with respect to a
 15 11 franchise agreement entered into prior to July 1, 2000, no
 15 12 matter when the occurrence giving rise to such action occurs.  
 15 13 
 15 14 
 15 15                                                             
 15 16                               MARY E. KRAMER
 15 17                               President of the Senate
 15 18 
 15 19 
 15 20                                                             
 15 21                               BRENT SIEGRIST
 15 22                               Speaker of the House
 15 23 
 15 24    I hereby certify that this bill originated in the Senate and
 15 25 is known as Senate File 324, Seventy-eighth General Assembly.
 15 26 
 15 27 
 15 28                                                             
 15 29                               MICHAEL E. MARSHALL
 15 30                               Secretary of the Senate
 15 31 Approved                , 2000
 15 32 
 15 33 
 15 34                                
 15 35 THOMAS J. VILSACK
 16  1 Governor
     

Text: SF00323                           Text: SF00325
Text: SF00300 - SF00399                 Text: SF Index
Bills and Amendments: General Index     Bill History: General Index

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