Parties to a franchise business use an agreement with certain objectives. Most of these are stipulated in the franchise agreement document. And if they are not met, this brings discontinuity in the business relationship.
While the franchisor and the franchisee signs an agreement hoping that they will continue until termination or have the agreement renewed, this doesn’t always happen.
If you are a franchisee whose objectives have not been met as per your agreement, you may seek damages for any loss incurred.
Types Of Damages
It is uncommon for a franchise agreement to move on without hitches. And when they happen, there must be a legal remedy. The most important factor is knowing what you need and how to get it. If there is a breach of contract, the most common remedy is claiming financial compensation.
In case of any disagreement, the first point of referral is the franchise agreement. You can hire a franchise lawyer to help you understand what the agreement stipulates.
In the course of a franchise agreement, a franchisee may choose to:
- Remain in the franchise business.
- Leave after the contract is terminated.
- Have the contract renewed.
Where there is an illegal ending of the relationship, the franchisee may seek damages for the breach. In this case, the purpose of damages is not to punish the franchisor but to ensure the franchisee gets compensated for any losses suffered.
In most cases, what is to be paid for damages is stipulated in the agreement. This is referred to as liquidated damages. It gives both parties an estimate of what is to be given in case of loss to any party.
One can recover from any form of financial loss as long as it was reasonably foreseen when such parties were getting into the agreement. Meaning one cannot recover damages for pain and suffering or mental anguish for losses suffered.
Fortunately, the financial amount to be awarded may not be enough to cater to the losses incurred by the injured party sufficiently; this calls for alternative damages or equitable remedy.
The amount to receive is awarded by the court depending on the circumstances of your case. Damages to receive include:
- Contract damages: These include damages for:
- Restitution damages. This measure the benefits the franchisee would have obtained were it not for the franchisor’s breach of contract. It doesn’t involve the profits that the franchisee would have made.
- Expectation damages: This is what the franchisee expects from the franchisor; they may include actual and future profits. Here, the franchisee must demonstrate the value of the contract had the franchisor perform what they were supposed to do.
Again, they have to show the damage they are likely to suffer in the future. This must be supported by sufficient evidence. One best way to prove this is to show that both parties reasonably foresaw such damages at the time the agreement came into force.
According to the American bar association, you cannot recover both expectation and restitution damages
- Consequential damages: Occurs due to a breach of contract. They allow the franchisee to be taken back to their former position before the violation occurs. There must be a link between the breach and the franchisors egregious conduct.
- Statutory damages: These are primarily awarded when the franchisor conducts more than one breach. It could include unfair trade practices.
These damages are believed to compensate the plaintiff highly. However, they demand a lot of evidence for proof of loss incurred. Franchisees get such damages for wrongful termination or non-disclosures.
- Tort damages: In most cases, franchisees assert tort claims due to invasion of their contractual rights.
- Punitive damages: These are awarded for stopping the defendant or the franchisor from punishing them for their egregious conduct. They are only allowed in limited instances. For instance, in franchisor commits fraud.
Every state has its own laws when it comes to awarding punitive damages. The action to have such damages awarded is controlled by the nature of the franchisor’s conduct, financial position, the consciousness of the harm caused to the franchisee, etc.
Your lawyer can advise on whether to go for statutory damages or actual damages.
It’s always recommended to have expert testimony for the proper evidence to establish damages.
To get the above damages, you have to prove that:
- There was a breach of contract.
- You suffered a loss.
The burden of proof always rests with the plaintiff. For damages, you must have the proper evidence to prove your injuries. The latter will determine what kind of damages to recover.
Litigation Attorney
If your rights have been abridged, you need to protect your business and personal resources.
If your franchisor’s actions have resulted in your injuries, this may ultimately result in negotiation or litigation to recover damages.
With the help of a franchise attorney, you can choose to use alternative dispute resolution methods or litigate to protect your interest.
Your franchise lawyer can review the agreement to determine whether your legal rights have been violated and get the correct evidence to prove your losses.