Under what circumstance is the waiver of punitive damages not applicable between Cream and the franchisee?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
H. WAIVER OF PUNITIVE DAMAGES, JURY TRIAL, AND CLASS ACTION.
Except for your obligation to indemnify us for third party claims under Section 6.C, we and you (and your owners) waive to the fullest extent permitted by law any right to or claim for any punitive or exemplary damages against the other and agree that, in the event of a dispute between us and you, the party making a claim will be limited to equitable relief and to recovery of any actual damages it sustains. We and you irrevocably waive trial by jury in any proceeding brought by either of us.
WE AND YOU AGREE THAT ANY PROCEEDING BETWEEN US OR RELATING TO THIS AGREEMENT WILL BE CONDUCTED ON AN INDIVIDUAL BASIS AND THAT ANY PROCEEDING BETWEEN US AND ANY OF OUR AFFILIATES, OR OUR AND THEIR RESPECTIVE OWNERS, OFFICERS, DIRECTORS, AGENTS, AND EMPLOYEES, ON THE ONE HAND, AND YOU OR YOUR OWNERS, GUARANTORS, AFFILIATES, AND EMPLOYEES, ON THE OTHER HAND, MAY NOT BE: (1) CONDUCTED ON A CLASS-WIDE BASIS, (2) COMMENCED, CONDUCTED OR CONSOLIDATED WITH ANY OTHER PROCEEDING, (3) JOINED WITH ANY CLAIM OF AN UNAFFILIATED THIRD-PARTY, OR (4) BROUGHT ON YOUR BEHALF BY ANY ASSOCIATION OR AGENT.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, the waiver of punitive damages does not apply to the franchisee's obligation to indemnify Cream for third-party claims. This means that while Cream and the franchisee generally waive the right to claim punitive or exemplary damages against each other in the event of a dispute, this waiver does not extend to situations where the franchisee is required to cover Cream's losses resulting from claims made by someone not party to the franchise agreement. In such cases, the franchisee may be liable for punitive damages.
This exception is significant because it carves out a specific area of potential liability for Cream franchisees. Indemnification clauses are common in franchise agreements, designed to protect the franchisor from liabilities arising from the franchisee's operations. However, the franchisee remains responsible for covering punitive or exemplary damages in those specific instances.
This clause also specifies that in any dispute between Cream and the franchisee, the claiming party is limited to equitable relief and recovery of actual damages sustained. Both Cream and the franchisee also irrevocably waive their right to a jury trial in any proceeding brought by either party. Furthermore, any proceeding must be conducted on an individual basis, prohibiting class action lawsuits or consolidated claims.