For what is the Secured Party accountable regarding the exercise of its powers related to Epcon Communities' collateral?
Epcon_Communities Franchise · 2025 FDDAnswer from 2025 FDD Document
The powers conferred on the Secured Party hereunder are solely to protect its interests in the Collateral and shall not impose any duty upon it to exercise any such powers.
The Secured Party shall be accountable only for the amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to the Debtor for any act or failure to act, except for the Secured Party's own gross negligence or willful misconduct.
Source: Item 23 — RECEIPTS (FDD pages 86–280)
What This Means (2025 FDD)
According to the 2025 FDD, regarding the exercise of powers related to the collateral, the secured party is accountable only for the amounts it actually receives. This means Epcon Communities, as the secured party, is only responsible for the funds directly resulting from exercising its authority over the collateral.
Furthermore, neither Epcon Communities nor its officers, directors, employees, or agents will be held responsible to the debtor (the franchisee) for any action or inaction. This protection extends to any act or failure to act, except in cases of the secured party's own gross negligence or willful misconduct.
In practical terms, this clause limits Epcon Communities' liability in managing the collateral. Franchisees should be aware that proving gross negligence or willful misconduct can be challenging, and the burden of proof rests on the franchisee. This is a fairly standard clause in franchise agreements, designed to protect the franchisor from liability for ordinary business decisions related to the collateral.