FRANCHISE TERMINATION CHANGES

SB0115

SENATE BILL 115

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Roberto "Bobby" J. Gonzales
and
George K. Muñoz

AN ACT

RELATING TO TRADE PRACTICES; ADDING AND AMENDING DEFINITIONS IN
THE FRANCHISE TERMINATION ACT; REQUIRING NOTICE OF TERMINATION
OF FRANCHISES; CLARIFYING APPLICABILITY OF THE FRANCHISE
TERMINATION ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
Section 57-23-1 NMSA 1978 (being Laws 1985,
Chapter 229, Section 1) is amended to read:

"57-23-1. SHORT TITLE.--[
This act
]
Chapter 57, Article 23
NMSA 1978
may be cited as the "Franchise Termination Act"."

SECTION 2.
Section 57-23-2 NMSA 1978 (being Laws 1985,
Chapter 229, Section 2) is amended to read:

"57-23-2. DEFINITIONS.--As used in the Franchise
Termination Act:

A. "current price" means an amount equal to the
price listed in the supplier's printed price list in effect
when the franchise is terminated, less applicable trade and
cash discounts;

B. "dealer cost" means an amount equal to the sum
of the original invoice price that the dealer paid for
inventory and the cost to the dealer of its delivery from the
supplier to the dealer, less applicable discounts;

C. "dealer" means a person in the business of the
retail sale of
new or unused
farm tractors, farm implements,

utility tractors, industrial tractors, construction equipment,
outdoor power equipment
or the attachments to or repair parts
for
new or unused
farm tractors, [
or
] farm implements,
utility
tractors, industrial tractors, construction equipment or
outdoor power equipment
;

D. "franchise" means a written or oral contract or
agreement between a supplier and a dealer, that may be called a
"dealership" or by any other name, by which the dealer is
authorized to engage in the business of the retail sale of
inventory [
according to the methods and procedures prescribed
by
]
purchased from
the supplier;

E. "good cause" means the failure by a dealer to
substantially comply with essential and reasonable requirements
imposed upon the dealer by the franchise; provided that such
requirements are not different from those requirements imposed
on other similarly situated dealers, either by their terms or
in the manner of their enforcement;

[
E.
]
F.
"inventory" means new or unused farm
tractors, farm implements, utility tractors, industrial
tractors,
construction equipment, outdoor power equipment
,
attachments and repair parts that are provided by a supplier to
a dealer under a franchise [
agreement
] and that were purchased
within thirty-six months of the termination of the franchise or
were listed in the supplier's current sales manual at the time
of termination; and

[
F.
]
G.
"supplier" means a manufacturer, wholesaler
or distributor of
new or unused
farm tractors, farm implements,
utility tractors, [
or
] industrial tractors,
construction
equipment or outdoor power equipment
or the attachments to or
repair parts for that equipment."

SECTION 3.
A new section of the Franchise Termination Act
is enacted to read:

"[
NEW MATERIAL
] CONTENTS OF SUPPLIER NOTICE OF
TERMINATION--SUPPLIER FAILURE TO APPROVE OR DENY REQUEST--DEATH
OF DEALER--TERMINATION OF FRANCHISE.--

A. A dealer shall give a supplier at least thirty
days' prior written notice of termination of a franchise. A
supplier shall not terminate a franchise without good cause.
The supplier shall have the burden of proof to establish that
good cause exists.

B. "Good cause" exists when:

(1) the dealer has transferred a controlling
ownership interest in the dealer's business without the
supplier's written consent;

(2) it is found that:

(a) the dealer has filed a voluntary
petition in bankruptcy or an involuntary petition in bankruptcy
has been filed against the dealer and the petition has not been
discharged within thirty days after the petition was filed;

(b) there has been a closeout or sale of
a substantial part of the dealer's assets related to the
business; or

(c) there has been a commencement of
dissolution or liquidation of the dealer;

(3) there has been a deletion, addition or
change in dealer locations without the prior written approval
of the supplier;

(4) the dealer has materially defaulted under
any chattel mortgage or other security agreement between the
dealer and the supplier, or there has been a revocation of any
guarantee of the dealer's present or future obligations to the
supplier; provided, however, that "good cause" shall not exist
if a person revokes any guarantee in connection with or
following the transfer of such person's entire ownership
interest in the dealer unless the supplier requires the person
to execute a new guarantee of the dealer's present or future
obligations in connection with the transfer of ownership
interest;

(5) the dealer has failed to operate in the
normal course of business for seven consecutive days or has
otherwise abandoned the dealer's business;

(6) the dealer has pleaded guilty to or has
been convicted of a felony affecting the relationship between
the dealer and supplier;

(7) the dealer has engaged in conduct that is
injurious or detrimental to the dealer's customers or to the
public welfare or the representation or reputation of the
supplier's product; or

(8) the dealer has consistently failed to meet
and maintain the supplier's requirements for reasonable
standards and performance objectives, so long as the supplier
has given the dealer reasonable standards and performance
objectives that are based on the manufacturer's experience in
other comparable market areas.

C. Except as otherwise provided in this section, a
supplier shall provide a dealer at least one hundred eighty
days' prior written notice of termination of a franchise. The
notice shall state all reasons constituting good cause for the
termination and shall state that the dealer has sixty days in
which to cure any claimed deficiency. If all claimed
deficiencies are rectified within sixty days, the notice shall
be void. A supplier shall not terminate a franchise for the
reason set forth in Paragraph (8) of Subsection B of this
section unless the supplier gives the dealer notice of such
action at least two years before the effective date of the
action. If the dealer satisfies the supplier's requirements
for reasonable standards or performance objectives before the
expiration of the two-year notice period, the notice shall be
void and the franchise shall continue in full force and effect.
The notice and right-to-cure provisions under this section
shall not apply if the reason for termination is for any reason
set forth in Paragraphs (1) through (7) of Subsection B of this
section.

D. If a supplier has contractual authority to
approve or deny a request for a sale or transfer of a dealer's
business or an equity ownership interest in the dealer's
business, the supplier shall approve or deny the request within
sixty days after receiving a written request from the dealer.
If the supplier has neither approved nor denied the request
within the sixty-day period, the request shall be deemed
approved. The dealer's request shall include reasonable
financial, personal background, character reference and work
history information for the acquiring persons. If a supplier
denies a request made pursuant to this subsection, the supplier
shall provide the dealer with a written notice of the denial
that states the reasons for the denial. A supplier may only
deny a request based on the failure of the proposed transferees
to meet the reasonable requirements consistently imposed by the
supplier in determining approval of the transfer or approvals
of new dealers.

E. If a dealer dies and the supplier has
contractual authority to approve or deny a request for a sale
or transfer of the dealer's business or equity ownership
interest in the dealer's business, the dealer's estate or other
person with authority to transfer assets of the dealer shall
have one hundred eighty days to submit to the supplier a
written request for a sale or transfer of the business or
equity ownership interest. If the request is timely submitted,
the supplier shall approve or deny the request in accordance
with Subsection D of this section. Any attempt by the supplier
to terminate the franchise as a result of the death of a dealer
shall be delayed until there has been compliance with the terms
of this section or the one-hundred-eighty-day period has
expired."

SECTION 4.
A new section of the Franchise Termination Act
is enacted to read:

"[
NEW MATERIAL
] CHOICE OF LAW--ATTORNEY FEES--VALIDITY.--An attempt to waive a provision of the Franchise Termination
Act or application of that act is void. Any provision in a
franchise agreement that purports to elect the application of
the law of a state other than this state is void. Any
provision in a franchise agreement that requires a dealer to
pay attorney fees incurred by a supplier is void."

SECTION 5.
A new section of the

Franchise Termination Act
is enacted to read:

"[
NEW MATERIAL
] SUPPLEMENTAL PROVISIONS.--The provisions
of the Franchise Termination Act are supplemental to any
franchise agreement between the dealer and the supplier that
provides the dealer with greater protection. The dealer may
elect to pursue the dealer's contract remedy or the remedy
provided by state law or both, and an election by the dealer to
pursue such remedies shall not bar the dealer's right to
exercise any other remedies that may be granted at law or in
equity."

SECTION 6.
A new section of the Franchise Termination Act
is enacted to read:

"[
NEW MATERIAL
] CIVIL ACTIONS--ATTORNEY FEES.--If a
supplier violates any provision of the Franchise Termination
Act, a dealer may bring an action against the supplier in a
court of competent jurisdiction for damages sustained by the
dealer as a consequence of the supplier's violation, including
damages for lost profits, together with the actual costs of the
action, including the dealer's attorney and paralegal fees and
costs of arbitrators. The remedies set forth in this section
shall not be deemed exclusive and are in addition to any other
remedies permitted by law."

SECTION 7.
APPLICABILITY.--The provisions of this act
apply to:

A. all franchise agreements in effect on the
effective date of this act that have no expiration date and are
continuing contracts; and

B. all other franchise agreements entered into or
renewed on or after the effective date of this act.

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