Who waives the right to claim punitive or exemplary damages in the Alloy franchise agreement?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
- **K.
Waiver of Punitive Damages.
You and your affiliates and us and our affiliates agree to waive, to the fullest extent permitted by law, the right to or claim for any punitive or exemplary damages against the other and agree that in the event of any dispute between them, each will be limited to the recovery of actual damages sustained.**
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, both the franchisee and Alloy, along with their respective affiliates, waive the right to claim punitive or exemplary damages against each other. This means that in the event of a dispute, both parties are limited to recovering only the actual damages they sustained. This waiver is applicable to the fullest extent permitted by law.
For a prospective Alloy franchisee, this provision has significant implications. It means that if Alloy breaches the franchise agreement or otherwise causes harm to the franchisee's business, the franchisee can only recover compensation for direct financial losses. They cannot seek additional damages intended to punish Alloy for particularly egregious behavior. Similarly, Alloy is limited in its ability to seek punitive damages from the franchisee.
This type of waiver is relatively common in franchise agreements. It aims to limit the potential financial exposure of both parties in the event of a dispute. However, franchisees should carefully consider the implications of this waiver, as it could limit their ability to recover full compensation if Alloy engages in misconduct. Franchisees should consult with an attorney to understand the full legal ramifications of this provision and whether it is enforceable in their specific jurisdiction.
It's important to note that in certain states like Washington, such waivers may be void except under specific circumstances, such as a negotiated settlement with independent counsel after the agreement is in effect, as per RCW 19.100.220(2). Therefore, franchisees need to be aware of the specific state laws governing franchise agreements in their area.