What does the Payee agree to indemnify the bank for in the Browns Chicken indemnification agreement?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
Drawee Bank Please Note: There is an Indemnification Agreement below.
Indemnification Agreement
To the Bank Designated:
In consideration of your compliance with the request and authorization printed on the Authorization Form hereof, the Payee agrees with respect to any such action:
- (1) To Indemnify you and hold you harmless from any loss you may suffer as a consequence of your actions resulting from or in connection with the execution and issuance of any check, EFT, draft or order, whether or not genuine, purporting to be executed by the Payee and received by you in the regular course of business for the purpose of payment, including any costs or expenses reasonably incurred in connection herewith.
- (2) To Indemnify you for any loss arising in the event that any such check, EFT, draft or order shall be dishonored, whether with or without cause and whether intentionally or inadvertently.
- (3) To defend at our own cost any action which might be brought by any depositor or any other persons because of your actions taken pursuant to the foregoing request, or in any manner arising by reason of your participation.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, the Payee (likely Browns Chicken) agrees to indemnify the designated bank for specific losses related to check and electronic fund transfer (EFT) processing. This indemnification agreement outlines three key areas of liability protection for the bank.
First, the Payee commits to indemnify the bank and hold it harmless from any loss the bank may incur due to actions resulting from the execution and issuance of any check, EFT, draft, or order. This includes coverage whether or not the items are genuine and if they are received by the bank in the regular course of business for payment purposes. This also extends to any costs or expenses reasonably incurred by the bank in connection with these actions.
Second, the Payee agrees to indemnify the bank for any loss arising if any check, EFT, draft, or order is dishonored, regardless of the reason for the dishonor (with or without cause, intentionally or inadvertently). Finally, the Payee is responsible for defending, at its own cost, any action brought by a depositor or other person against the bank due to actions taken by the bank based on the Payee's request or arising from the bank's participation.
In essence, this agreement ensures that the bank is protected from financial and legal repercussions stemming from its compliance with the Payee's payment processing instructions. A prospective Browns Chicken franchisee should understand that this agreement is a standard banking practice to allocate risk and liability in financial transactions.