What is an event of default under the Aerus consignment agreement related to payments?
Aerus Franchise · 2025 FDDAnswer from 2025 FDD Document
In addition, the following shall be "Events of Default" under this Agreement: (a) Consignee shall default under this Agreement or fail to perform or observe any of the agreements or covenants set forth in this Agreement or fail to pay when due any invoice or invoices covering products subject to this Agreement; (b) Consignee shall be declared to be in default under any material contract, agreement, or instrument to which Consignee is a party with Company or Aerus Franchising, or either of their affiliates or assigns, including without limitation the Franchise Agreement and documents incidental or related thereto, and such default shall continue beyond any applicable cure period; (c) Consignee shall sell, remove, or attempt to sell, remove, or assign Collateral not in the ordinary course of business; (d) any creditor of Consignee shall obtain possession of any Collateral by means including, without limitation, levy, distraint, replevin or self-help.
Source: Item 23 — Receipts (FDD pages 74–305)
What This Means (2025 FDD)
According to the 2025 Aerus Franchise Disclosure Document, an event of default under the consignment agreement occurs if the franchisee, referred to as the Consignee, fails to pay when due any invoice or invoices covering products subject to the agreement. This means that if an Aerus franchisee does not make timely payments for the products they have received on consignment, it will be considered a breach of the consignment agreement.
This default can trigger termination of the consignment agreement and allows Aerus to exercise its security interest in the consigned products (the Collateral) until full payment is made. The security interest ensures that Aerus retains a legal claim on the products to recover any outstanding debt.
For a prospective Aerus franchisee, this highlights the importance of maintaining timely payments for consigned products. Failure to do so not only risks losing the right to sell those products but also exposes the franchisee to potential legal action by Aerus to recover the debt. This is a fairly standard clause in consignment agreements, as it protects the consignor's (Aerus's) inventory and financial interests.