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Court Watch

By Susan H. Morton and David W. Oppenheim
October 01, 2003

Failure to Disclose Under FTC Rule May Make Agreement Unenforceable

The U.S. District Court for the Eastern District of Pennsylvania has ruled that a letter agreement may have been unenforceable if the franchisor failed to comply with the FTC Franchise Rule by making required disclosure before the agreement was signed. Checkers Drive-In Restaurants, Inc. v. Benjamin Laster, et al., __ F.Supp.2d __, 2003 WL 22133836 (E.D.Pa. 2003).

Checkers, the franchisor, moved for summary judgment on its claims for breach of contract, alleging that the franchisee failed to make payments required under a letter agreement between the parties that authorized the franchisee to operate 17 Checkers restaurants. The franchisee cross-moved for summary judgment, arguing that the franchisor's failure to provide disclosures required by the FTC Franchise Rule rendered any agreement void and unenforceable. The franchisor disputed the applicability of the FTC Franchise Rule, and also contended that it had given the required disclosure.

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