Are there circumstances under which the liquidated damages clause in the Healthsource Chiropractic Franchise Agreement might be unenforceable in California?

According to Healthsource Chiropractic's 2025 Franchise Disclosure Document, the enforceability of the liquidated damages clause within the Franchise Agreement is questionable in California. Specifically, Item 23 acknowledges that under California Civil Code Section 1671, certain liquidated damages clauses may not be enforceable. This means that if a franchisee in California breaches the agreement and Healthsource Chiropractic seeks to enforce the liquidated damages provision, a court might find the clause unenforceable based on state law.

This disclosure serves as a warning to potential Healthsource Chiropractic franchisees in California. It highlights a potential legal challenge to a standard clause in the franchise agreement. Franchisees should be aware that the pre-agreed amount of damages specified in the contract might not be automatically awarded to Healthsource Chiropractic in the event of a breach. Instead, the actual damages suffered by Healthsource Chiropractic would need to be proven, which could be less than the stipulated liquidated damages amount.

Prospective franchisees should seek legal counsel to fully understand the implications of California Civil Code Section 1671 on the liquidated damages clause in the Healthsource Chiropractic Franchise Agreement. Understanding the specific conditions under which such a clause might be deemed unenforceable is crucial for assessing the financial risks associated with the franchise. This also underscores the importance of understanding California-specific franchise laws when investing in a Healthsource Chiropractic franchise within the state.