If a party to the Chatime agreement is a trustee, in what capacity are they bound by the agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) If a party consists of more than one person, this Agreement binds each of them separately and any two or more of them jointly.
- (2) An obligation, representation, or warranty in favor of more than one person is for the benefit of them separately and jointly.
- (3) A party which is a trustee is bound both personally and in its capacity as a trust
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to the 2025 Chatime Franchise Disclosure Document, if a party to the agreement is a trustee, they are bound both personally and in their capacity as a trustee. This means the trustee is liable in two ways:
First, the trustee is liable in their own right, as an individual. Their personal assets could be at risk if the Chatime franchise fails to meet its obligations under the franchise agreement. This is a significant consideration, as it extends the liability beyond just the assets held in trust.
Second, the trustee is liable in their role as the manager of the trust. The assets held within the trust are also at risk. This dual liability ensures that Chatime has recourse to both the individual and the trust assets, providing a stronger guarantee of compliance with the franchise agreement. This is a common practice to ensure all parties are held accountable.
This clause is particularly important for prospective Chatime franchisees who plan to operate their franchise through a trust structure. They must understand that they cannot shield themselves completely from personal liability, and the assets of the trust are also at risk. It is advisable to seek legal counsel to fully understand the implications of this clause before entering into a franchise agreement.