Are there any circumstances under which liquidated damage clauses in Bhc agreements are unenforceable, according to Civil Code, Section 1671?

According to Bhc's 2025 Franchise Disclosure Document, the franchise agreements contain a liquidated damage clause. Under California Civil Code, Section 1671, certain liquidated damage clauses are unenforceable. This means that while Bhc includes a clause that requires franchisees to pay a predetermined amount of damages in the event of a breach, California law may prevent Bhc from enforcing this clause under certain circumstances.

This is important for prospective franchisees in California because it means that the liquidated damages clause in the franchise agreement may not always be enforceable. If a franchisee breaches the agreement, a court might not automatically require them to pay the amount specified in the liquidated damages clause. The enforceability will depend on whether the specific conditions meet the requirements of California Civil Code Section 1671.

It is advisable for potential Bhc franchisees to consult with a legal professional to fully understand the implications of Civil Code Section 1671 and how it may affect their rights and obligations under the franchise agreement, especially concerning the payment of damages upon termination or breach of contract.