PowerSports applied for a franchise license from Harley-Davidson (Harley) to sell Harley products in Seminole County, Florida. During Harley’s interview of PowerSports, officers of PowerSports made certain representations and promises about PowerSports’s business practices and procedures. This was an important part of the negotiations because Harley had strict standards of quality and customer service with which all of its dealers had to comply. Based on these representations, Harley granted the franchise license, and PowerSports became an authorized dealer. Just days after it signed the franchise agreement, Harley became aware that PowerSports had taken significant steps toward plans to take the company public (sell company stock on the public market). This was inconsistent with Harley’s requirements and conditions for owning a franchise. Harley alleged that the representations made by PowerSports were false, and it sued PowerSports for fraudulent misrepresentation, demanding a rescission of the contract plus additional damages.

CASE QUESTIONS

1. Were PowerSports’s misrepresentations “material”? Why or why not?

2. Suppose PowerSports went public two years after the awarding of the franchise agreement. Could Harley still sue for rescission? How about 10 years?