## Facts

- Ernst and Barbara Ann Larese operated a Baskin-Robbins store under a 10-year franchise agreement with Creamland Dairies, an area franchisor.
- The agreement barred any assignment, transfer, or sublease of the franchise or related rights without prior written consent of Creamland and Baskin-Robbins; unauthorized transfers were “null and without effect.”
- In February and August 1979, the Lareses located prospective buyers and sought consent to transfer their franchise rights.
- Creamland refused to consent to both proposed transfers.
- The Lareses sued in federal district court, alleging Creamland tortiously interfered with their contracts with the prospective buyers by unreasonably withholding consent.
- The district court granted summary judgment to Creamland, interpreting the contract as giving Creamland an absolute, unqualified right to refuse consent.
- The Lareses appealed.

## Issues

1. Under Colorado law, does a franchisor’s contractual right to approve a transfer grant an absolute power to withhold consent, or is consent constrained by good faith and commercial reasonableness when the contract does not expressly confer unfettered discretion?
2. Did the district court err by granting summary judgment on the theory that the consent clause created an unlimited veto over proposed transfers?

## Decision

- The Tenth Circuit reversed the grant of summary judgment and remanded.
- The court held the district court erred in construing the consent-to-transfer clause as granting an unlimited, absolute right to refuse consent.
- Predicting Colorado law, the court concluded that a consent requirement functioning as a restraint on alienation is subject to a reasonableness limitation unless the agreement expressly provides an absolute right.
- Because the record did not resolve whether Creamland’s refusals were reasonable or made in good faith, summary judgment was improper.

## Legal Principles

- A contract clause requiring a party’s prior written consent to an assignment or transfer, without explicit language granting sole and unlimited discretion, is generally construed to include a requirement that consent not be unreasonably withheld.
- Restraints on alienation are construed narrowly; courts are reluctant to infer an absolute veto from general consent language.
- An expressly negotiated provision granting an absolute right to withhold consent may be enforceable, but such an absolute power is not implied from a standard consent clause.
- When reasonableness is required, disputes about the motives for withholding consent and the commercial reasonableness of the refusal commonly present fact questions that can preclude summary judgment.

## Conclusion

The Tenth Circuit held that, absent explicit language granting unfettered discretion, a franchisor’s consent-to-transfer clause is subject to a reasonableness (and related good-faith/commercial reasonableness) limitation under Colorado law, requiring reversal of summary judgment and remand to determine whether the refusals were reasonable.


Larese v. Creamland Dairies, Inc., 767 F.2d 716 (10th Cir. 1985)