Marine Equipment Manufacturers Put Out to Sea in Utah? Utah Passes New Law Providing Significant Protection to Marine Equipment Dealers

23 March 2021 Legal News: Distribution & Franchise Publication
Authors: Tim Patterson

Dealers throughout the United States are riding a wave of dealer-friendly laws.  Many of these statutes are to be expected, given a state’s economic priorities: Iowa’s laws predictably protect farm equipment dealers; Wisconsin’s laws protect motorcycle dealers; and Texas’ protect industrial equipment dealers.  These industry-specific laws are not surprising, and most manufacturers recognize the risks associated with doing business in these states, given how intertwined the states’ economic fortunes are with these industries. 

Some dealer-protection laws, however, do surprise.  A marine equipment manufacturer doing business in Utah, for example, should be able to assume that protecting marine equipment dealers is fairly low on the priority list of Utah’s legislature.  After all, Utah doesn’t even make the top 20 list for state boating registrations.  Nevertheless, as of March 16, 2021, Utah is now home to legislation providing significant protection to marine dealers operating in the state.  Marine manufacturers and dealers alike would be wise to familiarize themselves with this new law.

What Marine Equipment Manufacturers and Dealers Need to Know About Utah’s New Law

The new legislation creates a brand-new framework (ostensibly modeled off of marine equipment laws in other states) for terminating marine equipment dealerships in Utah – one that may be unfamiliar to many marine equipment manufacturers doing business in the state.  Here are the key takeaways:

  • Dealers cannot purchase and resell marine equipment in Utah without a written agreement that includes certain statutorily mandated provisions, including working capital standards, inventory standards, termination provisions, repurchase obligations, and successorship identification, Utah Code Ann. § 13-58-201;
  • Manufacturers cannot terminate dealer agreements unless a dealer “defaults on an agreement,” which includes, among other things, materially failing to: meet product-stocking obligations; timely remit payment; or comply with territorial marketing restrictions, id. §§ 13-58-301, 13-58-401;

  • Notwithstanding certain narrow exceptions, manufacturers must provide dealers with written notice of termination and certain lengthy cure periods (30, 60, or 160 days, depending on the type of default), id. § 13-58-302; and

  • Manufacturers must repurchase certain marine equipment inventory in the dealer’s possession at the time of termination – a potentially costly obligation depending on the size of the terminated dealer, id. § 13-58-401.

Utah’s new law represents an important foray into the relationship between marine equipment manufacturers and dealers in the state, and it further confirms that state legislatures are continuing to prioritize legislation that protects dealers regardless of whether the industry is at the forefront of the state’s economy.  Marine manufacturers and dealers should take notice and closely monitor legislative activity in other states, regardless of whether those states are reliant on a marine-based economy. 

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