Under what circumstances, if any, is a Cicis franchisee relieved of their obligation to defend or indemnify due to a delay in notice from the Indemnified Party?
Cicis Franchise · 2025 FDDAnswer from 2025 FDD Document
If a claim is commenced for which defense or indemnity is claimed to be due under Section 14.A or if an Indemnified Party becomes aware of facts which, if not corrected, might give rise to a right of defense or indemnification under that section, the Indemnified Party must give written notice thereof to you as soon as practicable but in no event more than 10 business days following the date on which the Indemnified Party becomes aware of such a claim.
Failure to give prompt notice will not relieve you of your obligation to defend or indemnify except to the extent you are materially prejudiced by such failure.
Source: Item 22 — CONTRACTS (FDD pages 64–65)
What This Means (2025 FDD)
According to Cicis's 2025 Franchise Disclosure Document, a franchisee's obligation to defend or indemnify an Indemnified Party can be relieved under specific conditions related to delayed notice. The Indemnified Party is required to provide written notice of a claim to the franchisee as soon as practicable, but no later than 10 business days after becoming aware of the claim. However, a delay in providing this notice does not automatically relieve the franchisee of their obligations.
The critical factor determining whether the franchisee is relieved of their duty to defend or indemnify is whether the delay in notice materially prejudiced the franchisee. This means that the franchisee must demonstrate that the delay negatively impacted their ability to defend against the claim or otherwise caused them harm. The extent to which the franchisee was materially prejudiced will determine the degree to which they are relieved of their obligations.
In practical terms, this means a Cicis franchisee needs to be prepared to act swiftly upon receiving any notice of a claim, even if the notice is delayed. They should assess whether the delay has hindered their ability to investigate the claim, gather evidence, or mount an effective defense. If material prejudice can be demonstrated, the franchisee may have grounds to reduce or eliminate their indemnification obligations. It is important for prospective franchisees to understand this clause and consult with legal counsel to fully grasp their rights and responsibilities regarding indemnification.