At Charapp & Weiss, we regularly counsel dealers on the hidden risks in supplier agreements—and for good reason. In today’s highly competitive retail automotive environment, dealerships must leverage their buying power wisely. Yet many dealers sign form contracts without fully understanding the legal obligations embedded in the fine print—terms that could cost significantly more than just the listed price.
The Power of the Fine Print
Every supplier agreement is a contract—and many are drafted to heavily favor the supplier. These agreements often include provisions on choice of law, venue, and jurisdiction that can tilt the playing field against the dealer. For example, a Virginia-based dealer who signs a contract governed by Nevada law and subject to Nevada courts may find themselves flying witnesses across the country and spending tens of thousands of dollars to contest a $10,000 dispute.
This is not hypothetical—it happens more often than you might think.
Know the Legal Landscape
When reviewing any supplier agreement, focus on the following legal concepts:
- Choice of Law: Which state’s laws govern the contract? It should be yours.
- Venue: Where can disputes be heard? Again, it should be where you do business.
- Jurisdiction: Can a court compel you to appear? If you’ve agreed to a far-off jurisdiction, probably yes.
A well-positioned dealer can and should negotiate these terms. After all, if a supplier is willing to do business in your city, they should be willing to resolve disputes there too.
Avoiding Common Contract Traps
Beyond legal venue, there are several recurring contract issues dealers must watch for:
1. Extended Terms and Automatic Rollovers
Many agreements include multi-year commitments with automatic renewal clauses. These provisions can trap a dealer into paying for services they no longer want or need, simply because no one flagged the renewal deadline.
Best Practice: Limit contract terms to month-to-month unless a longer term is clearly beneficial to you, and always reject automatic rollover clauses.
2. Termination Clauses for Sale or Closure
If your dealership is sold or closed, you shouldn’t remain liable under a supplier agreement. Contracts should include exit rights tied to these events.
3. Performance Standards and Warranties
Does the agreement spell out what the supplier is delivering and how it will perform? Too often, contracts contain vague obligations or disclaim all warranties.
Best Practice: Demand clarity on deliverables, performance expectations, and warranty terms.
4. Data Protection and Ownership
In the era of digital retailing, your customer data is a business asset. Yet, many agreements allow suppliers—including your franchisor—to collect, store, or even claim ownership of your data.
- Ensure the contract clearly states you retain ownership.
- Limit the supplier’s use of data strictly to the services under the agreement.
- Include a provision requiring compliance with the FTC Safeguards Rule.
Franchisors Are Suppliers Too
Voluntary programs from your manufacturer often come with supplier-like agreements—especially those involving data sharing. These are not standard DSSA terms and should be reviewed just like any third-party vendor agreement.
Watch for:
- Claims of data ownership by the manufacturer.
- One-sided indemnity or attorneys’ fees clauses.
- Application of out-of-state laws that could complicate compliance.
Red Flags to Watch For
Some supplier agreements contain provisions that unfairly shift liability or risk to the dealer:
- Unilateral attorneys’ fees: Both parties should bear responsibility based on who prevails.
- Indemnification clauses: Should be mutual—each party is responsible for its own wrongdoing.
- Personal guarantees: These may be hidden in signature blocks or boilerplate language. Do not sign personally unless you intend to be personally liable.
Use a Checklist—And Counsel
Charapp & Weiss recommends every dealership adopt a standard review checklist for supplier agreements. Some key items:
- Ensure choice of law and venue align with your home state.
- Avoid automatic renewals and long initial terms.
- Specify performance metrics and warranty obligations
- Safeguard your data and your rights.
For a detailed version, see our Supplier Agreement Checklist on page 4 of the November 2025 newsletter.
Bottom Line: Supplier agreements can expose your dealership to unnecessary risk if not carefully reviewed and negotiated. At Charapp & Weiss, we help dealers identify hidden liabilities, protect their data, and secure fair terms. Don’t sign on the dotted line without knowing exactly what you’re getting into—and what it might cost you later.