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Puerto Rico's Dealer's Contract Law, commonly known as Law 75, ' protects dealers and franchisees against the termination, nonrenewal, or impairment of their agreements without just cause. The statute defines just cause to include a dealer's failure to perform "any of the essential obligations" of the agreement, as well as "any action or omission . . . that adversely and substantially affects the interests of the principal or grantor in the marketing or distribution of the merchandise or service."2
Law 75 was enacted forty-six years ago after intense lobbying from Puerto Rican dealers who were frustrated with suppliers that unilaterally terminated distribution agreements so that they could supply clients directly after dealers had developed local markets for their products.3 The statute has withstood constitutional attacks4; intense lobbying from manufacturers and suppliers that want it abolished; and several amendments attempting to conform it to federal laws, such as an amendment regarding the validity of arbitration clauses in distribution agreements.5 Still, the interpretation of Law 75 and the impact of the statute are constantly evolving in light of current developments in law, commerce, and technology - from mergers and acquisitions to the integration of the global markets, from the nuances of constructive termination to the scope of protection afforded by federal trademark and copyright law. This article focuses on how each of these commercial and legal issues affects or is affected by the protections that Law 75 provides to dealers and franchisees in Puerto Rico.6
TRANSFERS, ASSIGNMENTS, ORACQUISITIONS
Law 75 provides that a principal or franchisor does not have "just cause" for terminating a distribution or franchise agreement merely because a dealer or franchisee violates an agreement provision that restricts its rights to sell, transfer, or otherwise assign its license or distribution rights to another party or to change its capital structure, management, or financing. To avoid liability under the statute, a principal or franchisor must prove that any such change has or will substantially hurt the development of the market, the distribution of merchandise, or the rendering of services.7
No judicial opinions have addressed this provision of Law 75. Nevertheless, the broad discretion that Law 75 affords dealers to assign their distribution rights appears to conflict with Article 1065 of the Puerto Rico Civil Code,...