Can a Chocolate Bash franchisee settle an Action without the Indemnitee's consent?
Chocolate_Bash Franchise · 2024 FDDAnswer from 2024 FDD Document
ARTICLE 16. INDEMNITY
- 16.1 Indemnity. Franchisee shall indemnify and defend (with counsel reasonably acceptable to CB Franchising) CB Franchising, its parent entities, subsidiaries and affiliates, and their respective owners, directors, officers, employees, agents, successors and assignees (collectively, "Indemnitees") against all Losses in any Action by or against CB Franchising and/or any Indemnitee directly or indirectly related to, or alleged to arise out of, the operation of the Business. Notwithstanding the foregoing, Franchisee shall not be obligated to indemnify an Indemnitee from Actions arising as a result of any Indemnitee's intentional misconduct or negligence. Any delay or failure by an Indemnitee to notify Franchisee of an Action shall not relieve Franchisee of its indemnity obligation except to the extent (if any) that such delay or failure materially prejudices Franchisee. Franchisee shall not settle an Action without the consent of the Indemnitee. This indemnity will continue in effect after this Agreement ends.
- 16.2 Assumption. An Indemnitee may elect to assume the defense of any Action subject to this indemnification, and control all aspects of defending the Action, including negotiations and settlement, at Franchisee's expense. Such an undertaking shall not diminish Franchisee's obligation to indemnify the Indemnitees.
Source: Item 22 — CONTRACTS (FDD pages 38–39)
What This Means (2024 FDD)
According to the 2024 Chocolate Bash Franchise Disclosure Document, a franchisee is not allowed to settle an Action without the consent of the Indemnitee. An "Action" is defined as any action, suit, proceeding, claim, demand, governmental investigation, governmental inquiry, judgment or appeal thereof, whether formal or informal.
The FDD states that the franchisee must indemnify and defend Chocolate Bash, its parent entities, subsidiaries, affiliates, and their respective owners, directors, officers, employees, agents, successors, and assignees (collectively, "Indemnitees") against all Losses in any Action by or against Chocolate Bash and/or any Indemnitee directly or indirectly related to, or alleged to arise out of, the operation of the Business.
However, the franchisee is not required to indemnify an Indemnitee from Actions arising as a result of any Indemnitee's intentional misconduct or negligence. Furthermore, any delay or failure by an Indemnitee to notify the franchisee of an Action does not relieve the franchisee of its indemnity obligation, except to the extent that such delay or failure materially prejudices the franchisee. An Indemnitee may elect to assume the defense of any Action and control all aspects of defending the Action, including negotiations and settlement, at the franchisee's expense, which does not diminish the franchisee's obligation to indemnify the Indemnitees.