What are the obligations of Extreme Art Studio to mitigate the effects of a Force Majeure event?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
Each party must use its best efforts to mitigate the effect of the event of Force Majeure upon its performance of the Franchise Agreement and to fulfill its obligations under the Franchise Agreement. Upon completion of the event of Force Majeure, the party affected must as soon as reasonably practicable recommence the performance of its obligations under this Franchise Agreement. However, in the event the Force Majeure continues for a period of six months or more, then the unaffected party may, at its option, terminate this Franchise Agreement by 30 days' written notice to the party asserting such Force Majeure. An event of Force Majeure does not relieve a party from liability for an obligation which arose before the occurrence of the Force Majeure event, nor does that event affect any obligation to pay money owed under the Franchise Agreement or to indemnify us, whether such obligation arose before or after the Force Majeure event. An event of Force Majeure shall not affect Franchisee's obligations to comply with any restrictive covenants in this Franchise Agreement during or after the Force Majeure event.
Source: Item 22 — CONTRACTS (FDD page 49)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, both the franchisee and franchisor have obligations to mitigate the effects of a Force Majeure event. Extreme Art Studio must use its best efforts to lessen the impact of the Force Majeure event on its performance under the Franchise Agreement. Following the Force Majeure event, Extreme Art Studio must resume fulfilling its obligations as soon as reasonably possible. However, if the Force Majeure continues for six months or more, the franchisee has the option to terminate the Franchise Agreement with 30 days written notice to Extreme Art Studio.
It is important to note that Force Majeure is to be construed narrowly and does not include general economic, market, or societal conditions, even if they are a direct or indirect result of the Force Majeure event. For example, if a government-imposed closure of the franchised business occurs due to a Force Majeure event, the franchisee is only relieved of obligations as necessary to comply with the government mandate, not due to resulting economic or market conditions.
In the event of a Force Majeure event, the party affected must promptly notify the other party within 48 hours, detailing the nature and estimated duration of the event, and provide periodic reports on its progress. This clause does not relieve either party from obligations that arose before the Force Majeure event, nor does it affect any obligation to pay money owed under the Franchise Agreement or to provide indemnification, regardless of when the obligation arose. Additionally, the franchisee's obligations to comply with restrictive covenants in the Franchise Agreement remain in effect during and after the Force Majeure event.