ZAPATHA V DIARY MART, INC.
381 Mass. 284, 408 N.E.2d 1370 (1980)
NATURE OF THE CASE: This was a dispute over a franchise agreement. Dairy Mart (D)
appealed from a decision in favor of Zapatha (P) holding that holding that D did not act in
good faith, that the termination provision in P's franchise agreement with D was
unconscionable, and that D's termination of the agreement without cause was an unfair and
deceptive act.
FACTS: P is a high school graduate who had attended college for one year and had also
taken college evening courses in business administration and business law. P was employed by
a company engaged in the business of electroplating. He rose through the ranks to foreman
and then to the position of operations manager, at one time being in charge of all metal
finishing in the plant with 150 people working under him. In May, 1973, he was discharged. P
met with D and signed an application to be considered for a franchise. When signing the
agreement D told P to take the agreement to a lawyer but stated that the terms were
nonnegotiable. The termination provision allowed either party, after twelve months, to
terminate the agreement without cause on ninety days' written notice. In the event of
termination initiated by it without cause, Dairy Mart agreed to repurchase the saleable
merchandise inventory at retail prices, less 20%. In 1974, another store became available
and P elected to surrender the Agawam store. They executed a new franchise agreement, on an
identical printed form, relating to the new location. Things proceeded quite well for the
next few years until, D presented P with a new franchise agreement. P refused to sign the
new form and D terminated the relationship as per the original franchise agreement. P sued
stating that the clause for termination without cause was unconscionable and that D's
conduct was unfair and deceptive. The trial court found the termination provision
unconscionable and that the UCC provisions applied to the contract. D appealed.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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