What is the scope of the covenant not to sue in the Belocal Transfer Agreement?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
INCLUDE THE FOLLOWING PARAGRAPH FOR TRANSFERS IN CALIFORNIA ONLY:[c. The parties to this Transfer Agreement expressly waive and relinquish all rights and
benefits which any of them may now have or in the future have under and by virtue of California Civil Code Section 1542. Each party does so understanding the significance and consequence of such specific waiver. Section 1542 provides that "[a] general release does not extend to claims which the creditor does not know or suspect exist in his favor at the time of executing the release, which is known by him must have materially affected his settlement with the debtor." For the purpose of implementing a general release and discharge as described in Sections 5.a. and 5.b., above, each party hereto expressly acknowledges that this Transfer Agreement is intended to include in its effect, without limitation, all claims described in Sections 5.a. and 5.b. above, which the parties do not know or suspect to exist in their favor at the time of execution hereof, and that this Transfer Agreement contemplates the extinguishment of any such claims.]
Covenant Not to Sue.
Each of the parties hereto covenants and agrees for themselves and for their assigns, heirs, representatives, agents, family members, and all other persons acting on their behalf or claiming under them (collectively, "Covenantors") not to participate in, bring, or allow to be brought on behalf of any Covenantor, any action, cause of action, suit, or other proceeding of any kind, which has accrued or which may ever accrue, whether based in the Constitution, common law, or statute, contract, tort, or in equity, for actual or punitive damages or other relief, against one another arising out of, resulting from, or in any manner related to the matters released in Sections 5.a. and 5.b
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, the covenant not to sue within the Transfer Agreement requires each party (including their assigns, heirs, representatives, agents, family members, and anyone acting on their behalf) to agree not to participate in, bring, or allow any legal action against one another. This includes any action, cause of action, suit, or other proceeding, regardless of its basis (Constitution, common law, statute, contract, tort, or equity). The covenant covers claims for actual or punitive damages or other relief. The claims covered are those arising out of, resulting from, or in any way related to the matters released in Sections 5.a. and 5.b of the Transfer Agreement.
In essence, this means that upon transferring a Belocal franchise, both the transferring franchisee and the franchisor agree to release each other from any known or unknown claims related to the franchise agreement. This prevents future litigation between the parties regarding issues connected to the transferred franchise. The scope is broad, covering virtually any type of legal claim that could arise from the franchise relationship.
For franchisees in California, there is an express waiver of rights under California Civil Code Section 1542, which states that a general release does not cover claims the creditor doesn't know about that would have materially affected the settlement. By including this waiver, Belocal ensures that the release covers even unknown claims, reinforcing the comprehensive nature of the covenant not to sue. Franchisees outside of Washington State also represent that they have been represented by an attorney, have discussed the meaning of the agreement with their attorney, and understand the scope and effect of each provision, further solidifying the enforceability of the covenant.