Who bears the risk of loss or damage to the collateral under the Chesters EFA?
Chesters Franchise · 2025 FDDAnswer from 2025 FDD Document
he assignee will not be subject to any claims, defenses or set-offs that you may have against us. We and our agents and representatives shall have the right at any time during regular business hours to inspect the Collateral and for that purpose to have access to the location of the Collateral.
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- Risk of Loss: You assume and shall bear the entire risk of loss, theft, damage and destruction of the Collateral from any cause whatsoever, and no loss, theft, damage or destruction of the Collateral shall relieve you of the obligation to make Payments or any other obligation under this EFA. You shall promptly notify us in writing of such loss, theft, damage or destruction. If damage of any kind occurs to any item of Collateral, you, at our option, shall at your expense (a) place the Collateral in good repair, condition or working order, or (b) if the Collateral cannot be repaired or is lost, stolen or suffers a constructive loss under an insurance policy covering the Collateral, pay to us the "Casualty Value." The Casualty Value will be equal to the total of (i) accrued and unpaid amounts then due and owing, and (ii) the remaining future Payments discounted to present value at 3%, in both cases as of the date the Casualty Value is received by us.
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- Choice of Law; Waiver of Jury Trial: Secured Party is an FDIC-insured institution with its main office in Alabama. This EFA is governed by applicable Federal Law and the laws of the State of Alabama with respect to interest and matters that are material to the determination of interest. This EFA is otherwise governed by the law of the State of Alabama, excluding conflicts of law principles. If any amount charged, collected or due exceeds the maximum amount permitted by applicable law, Secured Party shall make necessary adjustments to eliminate such excess. You consent to the non-exclusive jurisdiction of the courts located in Jefferson County, Alabama in any action or proceeding relating to this EFA, YOU WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH ACTION OR PROCEEDING, AND YOU WAIVE ANY RIGHT TO ASSERT THIS IS AN INCONVENIENT FORUM.
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- Miscellaneous: During the Term, you agree to provide us with all financial statements and copies of tax returns we may request.
Source: Item 23 — **RECEIPTS (FDD pages 48–197)
What This Means (2025 FDD)
According to Chesters' 2025 Franchise Disclosure Document, the franchisee bears the entire risk of loss, theft, damage, or destruction of the collateral under the Equipment Finance Agreement (EFA). This responsibility falls on the franchisee regardless of the cause of the loss, and such events do not relieve the franchisee of their obligation to make payments or fulfill any other requirements outlined in the EFA.
In the event of any damage to the collateral, Chesters has the option to require the franchisee to either repair the collateral at their own expense to restore it to good condition or, if repair is not feasible or the collateral is lost or stolen, to pay Chesters the "Casualty Value." The Casualty Value is calculated as the sum of any accrued and unpaid amounts due at that time, along with the remaining future payments, discounted to present value at a rate of 3% as of the date Chesters receives the Casualty Value.
Furthermore, the franchisee is obligated to maintain insurance coverage on the collateral to protect against loss during the term of the EFA, with Chesters named as the loss payee. This insurance must be in coverage amounts specified by Chesters and from an insurer acceptable to them. The franchisee must provide Chesters with a certificate of insurance upon request. If the franchisee fails to provide this certificate, Chesters has the right, but not the obligation, to obtain insurance themselves, with the franchisee bearing the costs, including premiums, finance charges up to 15% annually on the premium expense, and administrative fees up to $7.00 per month.