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Introduction:

A High Court ruling that enables car manufacturers to terminate franchise car dealer agreements with just a week's notice could have significant implications for the European dealer network, according to industry leaders.

Renault Credit International (RCI), a finance house owned by Groupe Renault, is currently awaiting the verdict of a High Court appeal after using a clause, which features in some finance agreements, to terminate Scottish dealer group Mackie Motors at just seven days notice.

Mackie Motors, which represented both Nissan and Renault, has argued that its relationship with the brands, as well as RCI, constituted an ‘umbrella agreement’ requiring RCI to act in ‘good faith’.

One expert warned that should the appeal fail, manufacturers would be entitled to instruct their captive finance house to act on the seven-day termination clause, thereby causing all franchise dealer agreements and other agreements in place with the dealer to terminate in line with the seven-day clause.

This could render a dealer in breach of its dealership agreement by being unable to operate without access to essential integrated systems.

The lack of security that would result from no longer having a guarantee of a 24-month rolling contract could also affect the way dealers run their businesses, making it difficult for manufacturers to demand investment from their dealer networks.

You can read the full article here.