AGREEMENTS BETWEEN RETAILERS AND SUPPLIERS OF FARM IMPLEMENTS

AGRICULTURE ‑- SALE ‑- CONTRACTS ‑- AGREEMENTS BETWEEN RETAILERS AND SUPPLIERS OF FARM IMPLEMENTS

(1) The requirements of RCW 19.98.010 apply both to dealers who have discontinued their relationship with suppliers of farm implements, machinery and parts and to routine part returns by active dealers.

(2) The terms of an annual part return adjustment agreement between a supplier and retailer need not be identical to those set forth in RCW 19.98.010.

(3) Although the right to return parts pursuant to an annual part return adjustment agreement is dependent upon the terms of that agreement, a retailer of farm implements, machinery and parts who has been granted such a contractual right by a supplier will then be entitled to elect between his contractual remedies and the remedies set forth in RCW 19.98.010.

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                                                               November 10, 1977

Honorable Al Henry
State Senator, 17th District
Rio Vista
White Salmon, Washington 98672                                                                                                               Cite as:  AGLO 1977 No. 50

Dear Sir:

            By letter previously acknowledged you have requested our opinion on three questions pertaining to certain contracts between retailers and suppliers of farm implements, machinery and parts.  We paraphrase your questions as follows:

            (1) Do the requirements of RCW 19.98.010 apply both to dealers who have discontinued their relationship with the supplier and to routine part returns by active dealers?

             [[Orig. Op. Page 2]]

            (2) Must the terms of an annual part return adjustment agreement between a supplier and a dealer be identical to those set forth in RCW 19.98.010?

            (3) Would it be lawful under RCW 19.98.010 for an annual part return adjustment agreement ". . . to specify a subset of the current parts catalog which will be accepted for return from an active dealer, and state that other parts, although listed in the current catalog, will not be accepted for return, or will be accepted at a lower rate of payment than 85%"?

            We answer your first question in the affirmative, your second question in the negative and your third question in the manner set forth in our analysis.

                                                                     ANALYSIS

            RCW 19.98.010, which codifies section 1, Chapter 277, Laws of 1975, first provides, in pertinent part, as follows:

            "Whenever any person, firm, or corporation engaged in the retail sale of farm implements and repair parts therefor enters into a written contract with any wholesaler, manufacturer, or distributor of farm implements, machinery, attachments, accessories, or repair parts whereby such retailer agrees to maintain a stock of parts or complete or whole machines, attachments, or accessories, and either party to such contract desires to cancel or discontinue the contract, unless the retailer should desire to keep such merchandise the manufacturer, wholesaler, or distributor shall pay the retailer for the merchandise.  Such payment shall be in the amount of one hundred percent of the net cost of all current unused complete farm implements, machinery, attachments, and accessories, including transportation charges paid by the retailer, and eighty-five percent of the current net prices on repair parts, including superseded parts listed in current price lists or catalogs which parts had previously been purchased from such wholesaler, manufacturer, or distributor and held by such retailer on the date of the cancellation  [[Orig. Op. Page 3]] or discontinuance of such contract or thereafter received by such retailer from the wholesaler, manufacturer, or distributor.  The wholesaler, manufacturer, or distributor shall also pay such retailer a sum equal to five percent of the current net price of all parts returned for the handling, packing, and loading of such parts for return:  PROVIDED, That the provisions of this section shall apply only to repair parts which are new, unused, and in good condition.  Upon the payment of such amounts, the title to such farm implements, farm machinery, attachments, accessories, or repair parts, shall pass to the manufacturer, wholesaler, or distributor making such payment, and such manufacturer, wholesaler, or distributor shall be entitled to the possession of such merchandise."

            The statute then goes on, in its second and third paragraphs, to say that:

            "The provisions of this section shall apply to any annual part return adjustment agreement made between a seller or retailer and a manufacturer, wholesaler, or distributor.

            "The provisions of this section shall be supplemental to any agreement between the retailer and the manufacturer, wholesaler, or distributor covering the return of farm implements, machinery, attachments, accessories, and repair parts so that the retailer can elect to pursue either his contract remedy or the remedy provided herein, and an election by the retailer to pursue his contract remedy shall not bar his right to the remedy provided herein as to those farm implements, machinery, attachments, accessories, and repair parts not affected by the contract remedy."

            Question (1):

            Based upon the foregoing we therefore answer your first question in the affirmative.  RCW 19.98.010 applies to both of the situations referred to therein.  By virtue of its opening  [[Orig. Op. Page 4]] paragraph, it applies upon the termination or discontinuance of a contract between a supplier and a retailer of farm implements and repair parts ‑ and by reason of its second paragraph, it also applies in the case of any annual part return adjustment agreement made between such a supplier and retailer.

            There is, however, an important distinction between the effect of the law in the two cases to which it thus applies.  In the event of termination of a written contract between a supplier and retailer of farm implements, RCW 19.98.010 fulfills two separate functions.  First, it grants the retailer a statutory right to return such implements and/or parts as had previously been obtained under that contract ‑ regardless of the terms of the agreement itself.  And then secondly, the statute further grants to the retailer a right to receive payment from the supplier for those implements or parts on the basis of 100% of the net cost of unused complete farm implements and 85% of the current net price for repair parts returned.

            In the case of an annual part return adjustment agreement, on the other hand, the statute itself grants no right to return parts annually.  That right, instead, exists only pursuant to the contract between the supplier and retailer and thus, in the absence of an annual part return adjustment agreement,per se, there exists noright to return unused parts at all (except on termination of the maintenance contract).  Accordingly, the sole function of RCW 19.98.010, supra, in such a case is that of granting the retailer who returns parts under an annual part return adjustment agreement a statutory right to receive payment on the basis of at lest 85% of the current net price of the parts thus returned ‑ or more if the contract so provides.

            Questions (2) and (3):

            Your other two questions both relate solely to the second of these two applications of RCW 19.98.010.  First you have asked:

            "Must the terms of an annual part return adjustment agreement between a supplier and a dealer be identical to those set forth in RCW 19.98.010?"

            We answer this question in the negative on the basis of the third paragraph of RCW 19.98.010,supra, which, repeated for ease of reference, states that:

             [[Orig. Op. Page 5]]

            "The provisions of this section shall be supplemental to any agreement between the retailer and the manufacturer, wholesaler, or distributor covering the return of farm implements, machinery, attachments, accessories, and repair parts so that the retailer can elect to pursue either his contract remedy or the remedy provided herein, and an election by the retailer to pursue his contract remedy shall not bar his right to the remedy provided herein as to those farm implements, machinery, attachments, accessories, and repair parts not affected by the contract remedy."

            Likewise, in response to your third question, this also means that an annual part return adjustment agreement may specify a subset of the current parts catalog which will be accepted for return from an active dealer in accordance with the statutory reimbursement formula.  A more troublesome aspect of your question, however, is whether the agreement may then go on to state that additional parts will also be accepted for return ‑ but at a lower rate than 85% of the current net price.

            In our opinion, the only reading of the third paragraph of RCW 19.98.010,supra, which gives it meaning consistent with the apparent intent of the statute as a whole requires a negative response to that question.  In short, once a retailer is granted a contractual right to return parts under an annual part return agreement the retailer will then, by operation of law, have a statutory right to elect between the contract and statutory remedies.  Therefore, even if the agreement purports to specify a lower rate of payment that 85% of the net cost for "other" parts returned thereunder, the retailer (once he is able to establish a contractual right to return parts at all) will be entitled to claim the best of both worlds.  In short, the retailer in such a case will be entitled to insist upon reimbursement at the statutory rate for all parts returned under the agreement if that remedy is more beneficial than the contractual rate of reimbursement.  As stated previously, however, it is important once again to note that this election of remedies appliesonly to those repair parts with regard to which the contract has given the retailer a right to return.

             [[Orig. Op. Page 6]]

            We trust that the foregoing will be of some assistance to you.

Very truly yours,

SLADE GORTON
Attorney General

PHILIP H. AUSTIN
Deputy Attorney General

MARIANNE McGETTIGAN
Assistant Attorney General