For Aw, what is the effect of a compromise or release of claims on the Guaranty and Assumption of Obligations?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
Each of the undersigned consents and agrees that: (1) his direct and immediate liability under this Guaranty will be joint and several with all other current and future guarantors of Franchisee's obligations; (2) he will render any payment or performance required under the Agreement upon demand if Franchisee fails or refuses punctually to do so; (3) such liability will not be contingent or conditioned upon pursuit by the Company of any remedies against Franchisee or any Other person; (4) such liability will not be diminished, relieved or otherwise affected by any extension of time, credit or other indulgence which the Company may from time to time grant to Franchisee or to any Other person, including without limitation, the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which will in any way modify or amend this Guaranty, which will be continuing and irrevocable during the term of the Agreement; and (5) this Guarantee shall apply to any amounts recovered from Company as a preference, fraudulent transfer or otherwise in a bankruptcy or similar proceeding.
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the Guaranty and Assumption of Obligations agreement stipulates that the guarantor's liability will not be affected by any compromise or release of claims. This means that even if Aw, as the franchisor, compromises or releases any claims against the franchisee, the guarantor's obligations under the guaranty remain fully in effect.
This provision protects Aw by ensuring that the guarantor remains responsible for the franchisee's obligations, regardless of any concessions Aw might make to the franchisee. The guarantor's liability is not diminished or relieved by any extension of time, credit, or other indulgence granted to the franchisee. This includes accepting partial payments or performance, or compromising or releasing claims.
For a prospective Aw franchisee, this means that anyone signing a Guaranty and Assumption of Obligations agreement is committing to a continuing and irrevocable guarantee. The guarantor should understand that their obligations will persist throughout the term of the franchise agreement, even if Aw modifies the franchisee's obligations or reaches a settlement on certain claims. This clause ensures that Aw has recourse to the guarantor even if they adjust the terms with the franchisee.