Under what conditions is the receiving party liable for a breach of the confidentiality agreement by its Representatives, according to The Standardx's FDD?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
Receiving party shall be liable for a breach of this Agreement by its Representatives; provided, however, the receiving party shall not be responsible for any breach of this Agreement by a Representative that has executed a separate confidentiality agreement with the disclosing party with respect to the Transaction.
The receiving party may only use Confidential Information for evaluation purposes with respect to the Property and the Business in relationship to the Transaction and may not disclose the Confidential Information to any third party other than to its affiliates, related companies, partners, employees, directors, officers, legal counsel, accountants, prospective lenders, consultants, advisors, principals, and existing investors (collectively, the "Representatives") who have a need to know Confidential Information, provided that the party which shares the Confidential Information with its Representatives shall inform all such Representatives to maintain the confidentiality of the Confidential Information.
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 receiving party is liable for a breach of the confidentiality agreement by its Representatives, unless the Representative has executed a separate confidentiality agreement with the disclosing party regarding the transaction. Representatives include affiliates, related companies, partners, employees, directors, officers, legal counsel, accountants, prospective lenders, consultants, advisors, principals, and existing investors. The receiving party must inform all such Representatives that they must maintain the confidentiality of the Confidential Information.
This means that as a prospective The Standardx franchisee, you are responsible for ensuring that anyone you share confidential information with, such as lawyers or consultants, also keeps that information confidential. You are responsible for their breach of the confidentiality agreement unless they have signed their own confidentiality agreement with The Standardx.
This requirement protects The Standardx's confidential business information. It is a fairly standard practice in franchising to ensure the confidentiality of proprietary information. Franchisees should carefully manage the sharing of confidential information and ensure that any representatives are aware of their obligations or have signed their own confidentiality agreements to mitigate potential liability.