Does Indiana law restrict or prohibit Caring Transitions from imposing liquidated damage provisions?
Caring_Transitions Franchise · 2025 FDDAnswer from 2025 FDD Document
THE STATE OF INDIANA HAS STATUTES WHICH MAY SUPERSEDE THE FRANCHISE AGREEMENT IN YOUR RELATIONSHIP WITH THE FRANCHISOR, INCLUDING THE AREAS OF TERMINATION AND RENEWAL OF YOUR FRANCHISE [INDIANA CODE §§23-2-2.5-1 THROUGH 23-2-2.5-50]. THIS STATE ALSO HAS COURT DECISIONS WHICH MAY SUPERSEDE THE FRANCHISE AGREEMENT IN YOUR RELATIONSHIP WITH THE FRANCHISOR, INCLUDING THE AREAS OF TERMINATION AND RENEWAL OF YOUR FRANCHISE. THE STATE OF INDIANA HAS A STATUTE WHICH RESTRICTS OR PROHIBITS THE IMPOSITION OF LIQUIDATED DAMAGE PROVISIONS [INDIANA CODE §23-2-2.7(10)]. A PROVISION IN THE FRANCHISE AGREEMENT WHICH TERMINATES THE FRANCHISE UPON THE BANKRUPTCY OF THE FRANCHISEE MAY NOT BE ENFORCEABLE UNDER TITLE 11, UNITED STATES CODE §101.
A general release required as a condition of renewal and/or assignment/transfer shall not apply to any claim or liability arising under the Indiana Franchise Disclosure Law and the Indiana Deceptive Franchise Practices Law.
The franchise agreement does not expressly give you the right to terminate, but Indiana law may give you the right to terminate if we commit a substantial breach of the franchise agreement.
Any provision in the franchise agreement or franchise development agreement that requires the application of the laws of another state or designates jurisdiction or venue in a forum outside the State of Indiana is void with respect to a claim otherwise enforceable under the Indiana Franchise Disclosure Law or the Indiana Deceptive Franchise Practices Law.
In the event of a conflict of laws, the provisions of the Indiana Franchise Disclosure Law and the Indiana Deceptive Franchise Practices Law will prevail.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2025 FDD)
According to Caring Transitions' 2025 Franchise Disclosure Document, Indiana law does have provisions that restrict or prohibit the imposition of liquidated damage provisions in franchise agreements. Specifically, Indiana Code §23-2-2.7(10) addresses this issue. This means that the standard terms in Caring Transitions' franchise agreement regarding financial penalties for early termination or breaches may not be fully enforceable in Indiana.
For a prospective Caring Transitions franchisee in Indiana, this is a significant protection. Liquidated damages can be a substantial financial burden if a franchisee needs to terminate the agreement early due to unforeseen circumstances. The Indiana law provides a safeguard against potentially excessive penalties.
However, the FDD also notes that Indiana statutes and court decisions may supersede the franchise agreement in other areas, including termination and renewal. It also states that any provision in the franchise agreement that requires the application of laws from another state or designates jurisdiction outside of Indiana is void with respect to a claim enforceable under Indiana franchise laws. Therefore, franchisees should be aware of all the ways Indiana law protects them. It is important for prospective franchisees to seek legal counsel to fully understand their rights and obligations under both the franchise agreement and Indiana law.