Under what condition are liquidated damages clauses in the Aerus franchise agreement unenforceable in California?

According to Aerus's 2025 Franchise Disclosure Document, the enforceability of liquidated damages clauses within the franchise agreement is subject to California law. Specifically, the California Addendum to the Disclosure Document and Franchise Agreement notes that under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable. This means that if a specific liquidated damages clause in the Aerus franchise agreement does not comply with the requirements of California Civil Code Section 1671, it cannot be legally enforced against a franchisee in California.

This has significant implications for prospective Aerus franchisees in California. Liquidated damages clauses typically specify a predetermined amount of money that a franchisee must pay to the franchisor in the event of a breach of contract, such as early termination. However, if such a clause is deemed unenforceable under California law, Aerus may not be able to collect the specified damages. This could protect franchisees from potentially excessive financial penalties.

It is important for potential Aerus franchisees in California to seek legal counsel to review the franchise agreement and understand the specific circumstances under which a liquidated damages clause might be deemed unenforceable. This would involve assessing whether the clause complies with California Civil Code Section 1671, which generally requires that liquidated damages be a reasonable estimate of the actual damages likely to result from a breach. Given this information, prospective franchisees can make informed decisions about entering into the franchise agreement and understand their rights and obligations under California law.