Licensors, manufacturers, and other businesses that find themselves as unwitting franchisors face interesting issues when they attempt to enforce an arbitration clause.
Enforcing Arbitration Clauses in 'Hidden' or Unlawful Franchise Agreements
Licensors, manufacturers, and other businesses that find themselves as unwitting franchisors face interesting issues when they attempt to enforce an arbitration clause. Most registration states will usually have statutory provisions that declare that the sale of an unregistered franchise or the sale of a franchise without the required disclosure is unlawful. <i>See, e.g.,</i> Cal. Corp. Code '' 31110, 31119; 815 Ill.Comp.Stat. ' 705/5; N.Y. Gen. Bus. Law ' 683.1; Wash. Rev. Code ' 19.100.020.(1). However, in the usual case, the sale is not declared to be void, but is voidable through an action for rescission. <i>See, e.g.</i> Cal. Corp. Code '' 31300; Wash. Rev. Code ' 19.100.190(2); N.Y. Gen. Bus. Law ' 691; 815 Ill.Comp.Stat. ' 705/26.
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