Once a dealership receives a notice indicating intent to cancel a contract from a manufacturer or distributor it must take swift and effective action. The steps that dealers take after receipt of a notice of cancellation or a notice to cure will determine the remaining course of their relationship with that party.
The response to a notice may have a big impact on each party’s legal rights under state law. Here are a few things that dealers should do when they receive notice that a contract with a supplier is in jeopardy.
Respond within thirty days
It is imperative that dealerships send a communication with a verifiable record of transmission within thirty days. They should direct their response to the party identified in the original contract rather than only the return address on a notice.
Relay intent to cure
An effective written response must detail how a dealership will remedy any issues identified in a notice to cure. Simply stating intent may be insufficient to assuage a supplier’s concerns. It may be helpful to articulate what specific action the principals of a dealership plan to take. However, describing any specific corrective action creates a firm commitment to follow through on it within 120 days.
Ultimately, dealerships must be very strategic in their responses to notices from suppliers. If dealerships dispute the veracity of the issues cited in a notice, a distributor could assert that the dealership indicated that it has no intent to cure. Of course, they should not explicitly admit to allegations that are not accurate.