Bandag faces negligence claim

International truck tyre retreading business Bandag is today facing a compensation claim for commercial negligence. The legal action comes from its former franchise partner Newman Tyre Services in response to a breach of an implied contract of good faith and fair dealing between the two companies.

Bandag, globally renowned amongst the tyre replacement market operates on a franchise basis. Newman Tyre Services were contracted to produce Bandag products but were forced to cease trading after only 10 months despite producing a high quality product with good market acceptability and achieving its unit throughput targets.

It is alleged that certain information given to Newman by Bandag during its formation, which was used for both the business plan and all other financial planning, was not practical and that certain agreements that were made were not kept. Unfortunately the inaccuracy of this information and the effects of the broken promises did not come to light until after the company was trading.

Following a number of meetings with Bandag the already strained partnership could not recover and it is alleged that Bandag became in breach of the implied covenant of good faith and fair dealing. Inevitably the company was forced into liquidisation leaving a trail of disappointed creditors, annoyed trade creditors and a skilled workforce out of work.

Bandag promotes its dealer specific financial analysis and planning package for its franchisees however the Newman case suggests that they aren’t prepared to react or indemnify against consequential loss if the advice given turns out to be wrong.