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Vicarious Liability

By Rupert M. Barkoff
February 27, 2012

At the recently held annual program of the American Bar Association's Forum on Franchising, there was an interesting program addressing the subject of vicarious liability. The primary issue discussed was when is a franchisor's control over a franchisee ' required to protect the franchisor's trademark rights and to create a viable franchise system with the desired level of uniformity or minimum standards ' so great that the franchisor risks being held vicariously liable for the actions of its franchisees? Cohen, Meretta and Wall, When Is Control by Franchisors Out of Control?, 2011 ABA 34th Annual Forum on Franchising (2011).

It is an interesting question, for the franchisor-oriented lawyer constantly finds himself (or herself) in a dilemma. Much like a poker player, to succeed in determining how much control to grant his client within the franchise agreement, the lawyer is essentially drawing to an inside straight. If either the lawyer's franchise agreement or the client's conduct demonstrates excessive control, the client may find itself vicariously liable for the acts of its franchisees. But if the franchisor does not exert enough control, it risks losing its trademark rights.

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