If another term of the Fitstop Agreement is found to be unconscionable, does the waiver of consequential damages still apply?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
You hereby waives to the fullest extent permitted by law, any right to or claim for any punitive, exemplary, incidental, indirect, special or consequential damages (including, without limitation, lost profits) against us arising out of any cause whatsoever (whether such cause be based in contract, negligence, strict liability, other tort or otherwise) and agrees that in the event of a dispute, that your recovery is limited to actual damages.
If any other term of this Agreement is found or determined to be unconscionable or unenforceable for any reason, the foregoing provisions shall continue in full force and effect, including, without limitation, the waiver of any right to claim any consequential damages.
Nothing in this Section or any other provision of this Agreement shall be construed to prevent us from claiming and obtaining expectation or consequential damages, including lost future royalties for the balance of the term of this Agreement if it is terminated due to your default, which the parties agree and acknowledge we may claim under this Agreement.
Source: Item 23 — RECEIPTS (FDD pages 50–135)
What This Means (2024 FDD)
According to the 2024 Fitstop Franchise Disclosure Document, the waiver of punitive damages, including consequential damages, remains in effect even if another term of the agreement is found to be unconscionable or unenforceable. This means that if a franchisee brings a claim against Fitstop, their recovery is limited to actual damages, and they waive the right to claim punitive, exemplary, incidental, indirect, special, or consequential damages, including lost profits.
This provision is significant for prospective Fitstop franchisees because it limits their potential financial recovery in case of a dispute with the franchisor. Even if a franchisee successfully proves that another term of the agreement is unfair or unenforceable, this does not negate the waiver of consequential damages. The franchisee is still bound by the agreement to only seek actual damages.
However, it is important to note that this limitation applies primarily to the franchisee's claims against Fitstop. The FDD states that Fitstop retains the right to claim expectation or consequential damages, including lost future royalties, if the agreement is terminated due to the franchisee's default. This creates an imbalance where Fitstop can pursue a broader range of damages against the franchisee, while the franchisee's recovery is limited.
Franchisees should carefully consider this waiver and understand its implications before signing the Franchise Agreement. It is advisable to seek legal counsel to fully understand the risks and potential limitations on their ability to recover damages in case of a dispute with Fitstop.