Content area
Full Text
Over the last century, as commercial relationships became more complex and intertwined, the law had to evolve to keep pace. Contracts that previously would have been voided for indefiniteness became permissible, even when they left out key terms, including price.1 That evolution resulted from the need for contracts that could confirm long-term or ongoing obligations between parties but also would allow adjustments for unforeseeable circumstances-such as market fluctuations, changes in industries, and general uncertainty occurring over extended periods of time-without which it would be commercially untenable for the parties to proceed.2 That flexibility is critical for price provisions in longterm sale of goods contracts, including those in franchising.
In a franchise system based on sales of the franchisor's products,3 the franchisor and franchisee aim to establish a longterm relationship in which the franchisee continually will purchase and resell the franchisor's goods to the public, whether those products are coffee, gasoline, soft drink concentrate, or hamburger patties.4 Those goods are the lifeblood of the franchise because they (along with the franchisor's trade and service marks) define the franchise and ensure a consistent customer experience, which is critical to the success of a network of independently operating dealers or franchisees.5 To survive long-term, the parties' relationship, based on the perpetual sale of goods from one party to the other, must include a means for adjusting the price of goods over time. An open price term contract fills that need.
Open price term contracts also can be important to business format franchises, even though those franchises do not directly involve sales of the franchisor's goods to consumers.6 In business format franchises, the franchise agreement often requires the franchisee to purchase franchisor-approved goods related to the operation of the franchised business. For example, hotel franchisors might require their franchisees to purchase toiletries, sheets, or furnishings from franchisor-approved vendors; or real estate services franchisees might be required to obtain printed advertising materials from particular printing companies selected by the franchisor. In this respect, business format franchises are similar to product franchises because to continue operating, the franchisee has no choice but to purchase goods from exclusive or limited sources into the future. As a result, franchisees and approved vendors often desire open price terms related to these supply provisions...