What is the legal consequence if an Itan franchise agreement provision is deemed unfair, unjust, or inequitable in North Dakota?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
In recognition of the requirements of the North Dakota Franchise Investment Law (the "North Dakota Franchise Law"), the Disclosure Document, Franchise Agreement and Supplemental Agreements are amended as follows:
Covenants not to compete are generally considered unenforceable in the State of North Dakota, pursuant to Section 51-19-09 of the North Dakota Franchise Law.
Item 17 of the Disclosure Document and certain provisions in the Franchise Agreement and Supplemental Agreements include certain covenants restricting competition to which you must agree.
The Commissioner has held that covenants restricting competition contrary to Section 9-08-06 of the North Dakota Century Code, without further disclosing that such covenants may be subject to this statue, are unfair, unjust, or inequitable within the intent of Section 51-19- 09 of the North Dakota Franchise Law.
The Disclosure Document, Franchise Agreement and Supplemental Agreements are amended accordingly to the extent required by law.
Provisions requiring arbitration or mediation to be held at a location that is remote from the site of the franchisee's business are generally considered unenforceable in the State of North Dakota, pursuant to Section 51-19-09 of the North Dakota Franchise Investment Law.
Accordingly, the parties must agree on the site where arbitration or mediation will be held.
Provisions requiring jurisdiction in a state other than North Dakota are generally considered unenforceable in the State of North Dakota, pursuant to Section 51-19-09 of the North Dakota Franchise Investment Law.
Provisions requiring that agreements be governed by the laws of a state other than North Dakota are generally considered unenforceable in the State of North Dakota, pursuant to Section 51-19-09 of the North Dakota Franchise Investment Law.
Provisions requiring your consent to liquidated or termination damages are generally considered unenforceable in the State of North Dakota, pursuant to Section 51-19-09 of the North Dakota Franchise Investment Law.
Provisions requiring you to sign a general release upon renewal of the franchise agreement have been determined to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law.
Provisions requiring you to pay all costs and expenses incurred by us in enforcing the franchise agreement have been determined to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law.
Accordingly, any such provision is modified to read that the prevailing party in any enforcement action is entitled to recover all costs and expenses including attorney's fees.
Provisions requiring you to consent to a waiver of trial by jury have been determined to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law.
Provisions requiring you to consent to a limitation of claims within one year have been determined to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Investment Law.
Accordingly, any such provision is modified to read that the statute of limitations under North Dakota Law will apply.
Provisions requiring you to consent to a waiver of exemplary and punitive damages have been determined to be unfair, unjust and inequitable within the intent of Section 51-19-09 of the North Dakota Franchise Invest Law.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, several provisions within the franchise agreement are modified to comply with North Dakota law. Specifically, if a provision is deemed unfair, unjust, or inequitable under Section 51-19-09 of the North Dakota Franchise Law, the agreement is amended accordingly. This ensures that the agreement aligns with North Dakota's legal requirements, protecting the franchisee from potentially unfavorable terms.
Several specific examples are provided in the FDD. Covenants restricting competition are generally unenforceable in North Dakota. Provisions requiring arbitration or mediation at a remote location, jurisdiction in another state, governance by laws of another state, consent to liquidated or termination damages, signing a general release upon renewal, or paying all enforcement costs are generally considered unenforceable. In the case of the franchisee paying all costs and expenses, the provision is modified to state that the prevailing party in any enforcement action is entitled to recover all costs and expenses, including attorney's fees.
Additionally, provisions requiring a waiver of trial by jury, a limitation of claims within one year, or a waiver of exemplary and punitive damages are also deemed unfair. For limitations of claims, the provision is modified to apply the statute of limitations under North Dakota Law. These modifications aim to protect the franchisee's rights and ensure a fairer contractual relationship within the bounds of North Dakota law.
Prospective Itan franchisees in North Dakota should carefully review these modifications and understand their rights under the North Dakota Franchise Law. It is advisable to consult with a legal professional to ensure full comprehension of the franchise agreement and its implications within the state.