What presumption does the Secured Party benefit from in litigation related to the Bath Tune Up agreement?
Bath_Tune_Up Franchise · 2025 FDDAnswer from 2025 FDD Document
- (e) Secured Party shall not have any liability to Pledgor (whether in tort, contract, equity or otherwise) for losses suffered by Pledgor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Secured Party that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Secured Party shall be entitled to the benefit of the reputable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement and the other Financing Agreements.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2025 FDD)
According to Bath Tune Up's 2025 Franchise Disclosure Document, in any litigation related to the franchise agreement, the Secured Party benefits from a presumption. Specifically, the Secured Party is presumed to have acted in good faith and with ordinary care when performing the terms of the agreement and other financing agreements. This presumption favors Bath Tune Up (as the Secured Party) in legal disputes with franchisees.
This presumption means that the franchisee (Pledgor) would bear the initial burden of proving that Bath Tune Up did not act in good faith or failed to exercise ordinary care. This can be a significant hurdle for a franchisee bringing a claim against Bath Tune Up, as they would need to present compelling evidence to overcome this presumption.
However, this presumption does not protect Bath Tune Up from liability for losses resulting from acts or omissions constituting gross negligence or willful misconduct. If a franchisee can prove that Bath Tune Up acted with gross negligence or willful misconduct, the presumption of good faith and ordinary care would not apply, and Bath Tune Up could be held liable for the franchisee's losses. This clause outlines the standard of care expected and the circumstances under which Bath Tune Up can be held accountable, despite the presumption in its favor.