What constitutes 'legal justification' for a Deck Medic franchisee's failure to pay a third-party supplier?

According to Deck Medic's 2024 Franchise Disclosure Document, a franchisee's failure or refusal to pay a third-party supplier or vendor for goods, products, supplies, equipment, materials, or any other items used by, benefitting, or intended to benefit the franchised business can be considered an event of default. However, this is only the case if the failure to pay is without legal justification, as determined by Deck Medic in its Reasonable Business Judgment.

The FDD does not define what would constitute 'legal justification'. This determination is left to Deck Medic's discretion using their Reasonable Business Judgment. This means that Deck Medic has the authority to decide whether a franchisee's reason for not paying a supplier is legally sound.

This clause carries significant implications for prospective Deck Medic franchisees. It means that if a franchisee withholds payment from a supplier due to a dispute over the quality of goods or services, Deck Medic will ultimately decide whether that dispute constitutes a valid legal justification. If Deck Medic determines there is no valid legal justification, the franchisee could be in default of their agreement, potentially leading to termination of the franchise. Prospective franchisees should seek clarity from Deck Medic on what specific circumstances would be considered a 'legal justification' for non-payment to avoid potential disputes and penalties.