Several dealer councils have worked with law firm TLT to negotiate the removal of contractual provisions which grant manufacturers control over who runs specific dealerships.
As manufacturers seek to renegotiate dealer agreements TLT said they are now seeking more control over the appointment and removal of dealer principals.
Richard Brennan, associate in TLT’s employment team, said: "The justification is that the legal risks to the dealer in having to comply with such an obligation are material, not to mention the fact that the dealer – who is subject to the highest retail standards - should be final arbiter as to whether its dealer principal is doing a good job.
"When asked to sign up to new agreements, be on the look-out for these provisions and seek advice."
Even if the manufacturer does not have a good reason for its request, TLT said it can sometimes be lawful to bow to its pressure.
However, Brennan has urged dealers to consider:
- does the manufacturer have the contractual right to demand that you remove the dealer principal? If so then, potentially, the dismissal is more likely to be 'fair'
- are the manufacturer's demands unjust? If so, you will have to consider what steps you can take to prevent the injustice, including the sometimes difficult task of trying to convince the manufacturer to change its mind
- whether there are alternative roles which you could offer to the dealer principal.