Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Know Your Franchise Agreement: The Third-Party Beneficiary Clause
This article begins a feature that periodically will examine a specific section or clause in the Uniform Franchise Offering Circular (UFOC).
In a UFOC, a typical third-party beneficiary clause reads like this: “No third-party beneficiaries. Nothing in this Agreement is intended, nor will be deemed, to confer rights or remedies upon any person or legal entity not a party to this Agreement.”
Applicable Law
In most states, persons who are intended to be the beneficiaries of contract performance may enforce the contract even though they are not parties to the agreement. For example, if a furniture maker agrees to manufacture a custom dining room table as a wedding gift contracted for and paid for by a distant relative, the newlywed couple may often sue as third-party beneficiaries if the table is not delivered or is inferior.
In franchising, each franchisee often makes promises that would appear to be of benefit to other franchisees in the system. For example, franchisees may all agree in their franchise agreements to only provide services in their exclusive territory or to only provide specified services. Also, many franchise agreements prohibit franchisees from forwarding advertisements to individuals outside of their designated exclusive territory. Such promises appear to be intended to benefit both the franchise system in general and all other franchisees in the system in particular.
Some contracts may contain clauses or other language specifying that there are no third-party beneficiaries to the contract. Courts will often enforce this language. In the situation described above, this would disallow any franchisee from directly suing another franchisee that has engaged in advertising and services in the franchisee's exclusive territory.
The Author's Opinion
As with many franchise agreement terms, franchisors often add provisions that seek to strip rights from franchisees. In the area of third-party beneficiaries, these clauses may state that nothing in this agreement is designed to provide third-party beneficiary rights to franchisees or any other persons. Unfortunately, this may create a system in which the franchisee has no right to enforce key aspects and provisions of the system that he or she has to comply with but that other franchisees may ignore. When a neighboring franchisee is invading a franchisee's exclusive territory, this may be a bitter pill to swallow.
Peter C. Lagarias [email protected]
This article begins a feature that periodically will examine a specific section or clause in the Uniform Franchise Offering Circular (UFOC).
In a UFOC, a typical third-party beneficiary clause reads like this: “No third-party beneficiaries. Nothing in this Agreement is intended, nor will be deemed, to confer rights or remedies upon any person or legal entity not a party to this Agreement.”
Applicable Law
In most states, persons who are intended to be the beneficiaries of contract performance may enforce the contract even though they are not parties to the agreement. For example, if a furniture maker agrees to manufacture a custom dining room table as a wedding gift contracted for and paid for by a distant relative, the newlywed couple may often sue as third-party beneficiaries if the table is not delivered or is inferior.
In franchising, each franchisee often makes promises that would appear to be of benefit to other franchisees in the system. For example, franchisees may all agree in their franchise agreements to only provide services in their exclusive territory or to only provide specified services. Also, many franchise agreements prohibit franchisees from forwarding advertisements to individuals outside of their designated exclusive territory. Such promises appear to be intended to benefit both the franchise system in general and all other franchisees in the system in particular.
Some contracts may contain clauses or other language specifying that there are no third-party beneficiaries to the contract. Courts will often enforce this language. In the situation described above, this would disallow any franchisee from directly suing another franchisee that has engaged in advertising and services in the franchisee's exclusive territory.
The Author's Opinion
As with many franchise agreement terms, franchisors often add provisions that seek to strip rights from franchisees. In the area of third-party beneficiaries, these clauses may state that nothing in this agreement is designed to provide third-party beneficiary rights to franchisees or any other persons. Unfortunately, this may create a system in which the franchisee has no right to enforce key aspects and provisions of the system that he or she has to comply with but that other franchisees may ignore. When a neighboring franchisee is invading a franchisee's exclusive territory, this may be a bitter pill to swallow.
Peter C. Lagarias [email protected]
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Role and Responsibilities of Practice Group Leaders
Ideally, the objective of defining the role and responsibilities of Practice Group Leaders should be to establish just enough structure and accountability within their respective practice group to maximize the economic potential of the firm, while institutionalizing the principles of leadership and teamwork.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?