Under what condition might liquidated damages clauses in the Itan Franchise Agreement or Supplemental Agreements not be enforceable?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
Any such provisions contained in the Franchise Agreement or Supplemental Agreements may not be enforceable.
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.
-
- Liquidated damages and termination penalties are prohibited by law in the State of Indiana and, therefore, the Disclosure Document, the Franchise Agreement and Supplemental Agreements are amended by the deletion of all references to liquidated damages and termination penalties and the addition of the following language to the original language that appears therein:
Notwithstanding any such termination, and in addition to the obligations of the franchisee as otherwise provided, or in the event of termination or cancellation of the Franchise Agreement under any of the other provisions therein, the franchisee nevertheless shall be, continue and remain liable to franchisor for any and all damages which franchisor has sustained or may sustain by reason of such default or defaults and the breach of the Franchise Agreement on the part of the franchisee for the unexpired Term of the Franchise Agreement.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, there are several conditions under which liquidated damages clauses in the Franchise Agreement or Supplemental Agreements may not be enforceable. In California, under Civil Code Section 1671, certain liquidated damages clauses are unenforceable, meaning any such provisions in Itan's agreements might not be enforceable.
Furthermore, in North Dakota, provisions requiring consent to liquidated or termination damages are generally considered unenforceable under Section 51-19-09 of the North Dakota Franchise Investment Law. This means that if an Itan franchise is purchased in North Dakota, the franchisee may not be bound by liquidated damages clauses.
In Indiana, liquidated damages and termination penalties are prohibited by law. Therefore, for Itan franchises operating in Indiana, all references to liquidated damages and termination penalties are deleted from the Disclosure Document, the Franchise Agreement, and Supplemental Agreements. Instead, the franchisee remains liable for any and all damages the franchisor sustains due to the franchisee's default or breach of the Franchise Agreement for the unexpired term.