Under what circumstances, as outlined in The Standardx Franchise Agreement, would the limitation on indirect damages not apply?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
- c. EXCEPT IN FULFILLMENT OF ANY INDEMNIFICATION OBLIGATIONS, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR LOSS OF USE DAMAGES) ARISING OUT OF THE SERVICES OR ANY OBLIGATIONS UNDER THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED UPON BREACH OF CONTRACT, BREACH OF WARRANTY, TORT (INCLUDING NEGLIGENCE) OR ANY OTHER LEGAL THEORY, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES. EXCEPT IN FULFILLMENT OF
ANY INDEMNIFICATION OBLIGATIONS, EACH PARTY'S LIABILITY UNDER THIS AGREEMENT WILL BE LIMITED TO AND WILL NOT EXCEED THE SUM WHICH EQUALS THE FEES PAID TO HYATT UNDER THIS AGREEMENT.
Source: Item 18 — OTHER INCOME (LOSS), NET (FDD pages 187–399)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, the limitation on indirect damages does not apply in cases of indemnification obligations. Specifically, the franchise agreement states that neither party is liable to the other for special, incidental, or consequential damages, including lost profits or loss of use, except when fulfilling indemnification obligations. This means that if one party is required to protect the other from losses or liabilities, the standard limitations on damages do not apply.
This exception is significant for prospective The Standardx franchisees because it clarifies the extent of liability in situations where one party is at fault and must indemnify the other. Indemnification typically covers losses, damages, or liabilities incurred by one party due to the actions (or inactions) of the other party or a third party. The exception ensures that the indemnifying party is fully responsible for covering these losses, even if they include indirect damages that would otherwise be excluded.
For example, if The Standardx franchisee's actions lead to a lawsuit against The Standardx, and the franchisee is obligated to indemnify The Standardx, the franchisee could be liable for all damages, including consequential damages like lost profits, which would normally be capped or excluded. Franchisees should carefully review the indemnification clauses in The Standardx Franchise Agreement to understand the scope of their potential liabilities and ensure they have adequate insurance coverage to protect themselves.
It's important for potential franchisees to consult with legal counsel to fully understand the implications of the indemnification and limitation of liability clauses within the franchise agreement. This will help them assess the risks and responsibilities associated with operating a The Standardx franchise and make informed decisions about their investment.