Delaware law sets rules for recreational equipment dealer agreements

Manufacturers and distributors must use written dealer agreements and follow rules when ending them. These rules cover Delaware manufacturers, distributors, and dealers of new recreational equipment. An agreement must be signed before a manufacturer or distributor sells new recreational equipment through a dealer. It must assign the dealer an exclusive area for its product line. Ending an agreement requires good cause. The manufacturer or distributor must state its reasons in writing; the dealer has 30 days to say it intends to fix the problems. A 30-day notice period applies to specified grounds, including a felony conviction, certain license actions, or bankruptcy. The area cannot be reviewed or changed without both parties’ consent during the first year after the agreement is signed. For good-cause termination, the usual notice period is at least 120 days; it may be 30 days for specified grounds.

Warrantors must compensate dealers for required warranty work and follow rules for claims and payments. These rules apply to warrantors and Delaware dealers who perform warranty work on new recreational equipment. Compensation must reasonably cover diagnostic work, parts, repairs, and labor. Labor pay cannot be below the dealer’s reasonable rate for similar nonwarranty work; parts pay has stated minimums tied to wholesale cost, handling, and return freight. A dealer may protest a denial to the Public Service Commission. A warrantor may audit paid claims for up to 180 days and charge back claims involving fraud, unnecessary work, or work done improperly. Dealers must submit claims within 180 days after finishing the work. Approved claims must be paid within 30 days; claims not denied in writing within 30 days are treated as approved and must be paid within 45 days after submission.

Dealers may seek a buyback of some inventory when they leave an agreement for good cause, and manufacturers or distributors may object to certain business transfers only on listed grounds. These provisions cover new recreational equipment dealers, manufacturers, distributors, and eligible family members taking over a dealership. A buyback is available when a dealer ends the agreement for good cause and the manufacturer fails to fix the claimed problems. It covers specified recent equipment, parts, and tools, with different payment rules for each. A manufacturer or distributor may object to an ownership transfer only on listed grounds and must give its reasons. A family successor may be rejected only on listed grounds; succession cannot move the business or change agreement terms without consent. A dealer must choose the buyback within 45 days after the agreement ends. For an ownership transfer, the manufacturer or distributor must object within 10 business days after receiving the notice and required documents.