Does the waiver of punitive damages in the Budget franchise agreement apply to the Licensee's obligation to indemnify Budget under Article XIII?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.10 Waiver of Punitive Damages and Jury Trial. Except with respect to Licensee's obligation to indemnify Budget pursuant to Article XIII of this Agreement, the parties waive to the fullest extent permitted by law any right to or claim for any punitive or exemplary damages against the other and agree that, in the event of a dispute between them, the party making a claim will be limited to recovery of any actual damages it sustains.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the waiver of punitive damages does not apply to the Licensee's obligation to indemnify Budget under Article XIII of the agreement. This means that while both parties generally waive the right to claim punitive or exemplary damages against each other in the event of a dispute, this waiver specifically excludes the Licensee's duty to cover Budget's losses or expenses as outlined in Article XIII.
In practical terms, this means that if a franchisee is obligated to indemnify Budget, Budget retains the right to seek punitive damages from the franchisee in addition to actual damages. Article XIII outlines the circumstances under which the franchisee must indemnify Budget, including liabilities, claims, demands, damages, costs, and expenses arising from the franchisee's operation of the rental business. This indemnification extends to environmental claims, settlement costs, and attorney's fees.
This exception to the waiver of punitive damages is a significant point for prospective Budget franchisees. It creates a situation where the franchisee could be liable for substantial damages beyond the actual losses incurred by Budget if the circumstances trigger the indemnification clause. Franchisees should carefully review Article XIII and understand the potential liabilities they are assuming, as well as consult with a legal professional to fully grasp the implications of this clause.