Chapel Hill Spa Health Club v. Goodman , 368 S.E.2d 60 (1988)

Chapel Hill Spa Health Club v. Goodman


The North Carolina Court of Appeals held the referral discount in question was a violation of the state statute. Goodman agreed to pay $750 for a two-year membership to the spa. The sales person promised her a $20 discount off of the subsequent renewal rate for each new member that she referred. Goodman defaulted on the installments of her two-year membership dues and the spa sued to recover. She defended claiming that the contract violated the state referral sales statute and was void. The court held that the referral plan violated the state statute and voided the initial membership agreement. Both the referral plan and the original contract were agreed to at the same time, suggesting that both were part of, and intended to be, a single transaction. This, coupled with evidence that the prospect of the discounted renewal actually influenced Goodman's choice in joining in the first place, convinced the court that both agreements were interdependent, and the violation of state stature by the referral program caused the membership agreement to be voidable under state law.

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Published In: MLM / Direct Sales Updates, MLM Consulting / Network Marketing Updates

Reference Info:State, 4th Circuit, North Carolina | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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