Zapatha v. Dairy Mart

• Zapatha = applicant to become a franchisee of a convenience store in May 1973
• Dairy Mart, Inc. = "Dairy" = Dairy Mart = a franchise convenience store chain
• In November 1973, Zapatha's application was approved
• Zapatha would use Dairy's trademark
• Dairy would pay Zapatha's rent
• Zapatha would pay Dairy a % of its gross sales
• The termination clause in the contract allowed either party to terminate after 12 months with a 90-days notice
• In November 1977, Dairy presented Zapatha with a new franchise contract with terms less favorable to Zapatha.
• Because Zapatha wouldn't sign the new contract, Dairy terminated the contract

• Zapatha sued Dairy in state superior court.
• Zapatha won.

Is a contract provision allowing termination without cause per se unconscionable?

• Zapatha argued that the termination of the franchise was unconscionable.

No; a contract provision allowing for termination without cause isn't per se unconscionable, & un-conscionability is decided on a case-by-case basis.

Reversed

Justice Wilkins: Dairy was required to purchase the merchandise of Zapatha at 80% of market value upon termination of the franchise; thus, the contract wasn't un-fair.

• Merchant’s Duty of Good Faith

Contracts_Ayres/9th_ed._Outline#C._Duty_of_Good_Faith