termination

You’re a franchisor and the term of your franchise agreement is five years, but you can terminate it early for cause. The term and termination provision also auto-renews. Do you have the right to elect not to renew the agreement at the end of the initial term or a renewal term? Or are you on the hook for ever if the franchisee doesn’t give you an out by materially breaching the agreement?

To help you analyze the issue, here’s the first part of the term and termination provision: “The initial term of this Agreement shall begin on the date hereof and, unless sooner terminated by [the franchisor for cause] as provided in paragraph 6, shall end five years after such date, and shall automatically renew itself for successive five-year terms thereafter (the ‘renewal terms’).”

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Glenn v. HealthLink HMO, Inc.

Dr. Byron Glenn brought breach of contract claims against HealthLink HMO and HealthLink PPO (HealthLink) alleging breach of an HMO Agreement and a PPO Agreement. The Circuit Court of Girardeau County granted summary judgment in favor of HealthLink, and the Missouri Court of Appeals affirmed in part and reversed in part.

Background

Glenn signed HMO and PPO agreements in 2001 to become a network provider for HealthLink. Beginning in 2007, after receiving complaints about Glenn’s services, HealthLink provided Glenn with various notices of termination of the agreements and subsequently rescinded the notices. HealthLink eventually terminated the PPO agreement and provided timely notice of non-renewal of the HMO agreement. HealthLink removed Glenn’s name from two of HealthLink’s online provider directories before the HMO agreement expired.

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