Under what condition regarding bankruptcy may termination of an Engel & Volkers franchise not be enforceable?

According to Engel & Volkers' 2025 Franchise Disclosure Document, a standard clause in the franchise agreement allows for termination of the franchise upon the franchisee's bankruptcy. However, this termination provision may not be enforceable under federal bankruptcy law, specifically citing 11 U.S.C.A. Sec. 101 et seq.

This means that if an Engel & Volkers franchisee declares bankruptcy, the franchisor's right to automatically terminate the franchise agreement might be challenged in court under federal law. Federal bankruptcy laws are designed to protect debtors and may override certain contractual clauses that would otherwise be enforceable.

This protection is particularly important for prospective franchisees to understand. Bankruptcy can be a complex legal issue, and the enforceability of termination clauses can depend on the specific circumstances of the bankruptcy case. Franchisees facing financial difficulties should seek legal counsel to understand their rights and options under federal bankruptcy law.

It's also important to note that this disclosure appears as an addendum within the FDD, specifically addressing legal considerations within California. The enforceability of such clauses can vary significantly depending on state and federal laws, so franchisees should be aware of the legal landscape in their specific jurisdiction.