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PLAYBOOK TEMPLATES

Franchise Agreement

A Franchise Agreement defines the relationship between a franchisor and franchisee, setting the terms for brand use, operations, and ongoing support. This playbook outlines key negotiation strategies, performance obligations, and critical clauses to protect both parties’ long-term interests.

Limitation of Liability

Why This Matters: Limiting liability mitigates the risk of disproportionate damages and financial ruin from a single claim. It balances risk allocation and provides certainty regarding potential exposure.

Negotiation strategy

If you're the Franchisor:

Negotiate for a liability cap that reflects the company's risk tolerance. Ensure carve-outs for gross negligence and willful misconduct are included to protect against significant risks.

If you're the Franchisee:

Aim to establish a liability cap that is reasonable and aligns with industry standards. Advocate for exclusions that protect against excessive liability, such as statutory obligations.

Essential elements

1

Liability Cap

Maximum financial exposure limit.
2

Carve-Outs

Exceptions to liability limits.
3

Symmetry

Equal liability caps for parties.

Action framework

ACCEPT

Propose edits when liability caps are too high or low, or when carve-outs are missing.

EDIT

Reject if the clause imposes unlimited liability or lacks essential carve-outs.

ADD

Add language to define liability limits if absent.

PRO TIP

Always ensure liability caps are aligned with the contract's risk profile and business objectives.

Example clauses

FAVORABLE

Balanced Liability Clause

"The liability of each party under this agreement shall be limited to [insert amount or percentage], except in cases of gross negligence, willful misconduct, or breach of indemnification obligations."
NEUTRAL

Standard Liability Clause

"The total liability of each party shall not exceed [insert amount], excluding liability arising from intentional misconduct or statutory obligations."
UNFAVORABLE

Unlimited Liability Clause

"Each party shall be liable for all damages without limitation, regardless of the nature of the breach."

Fallbacks

High-Risk Projects

For high-risk projects, implement stricter liability caps and additional carve-outs to reflect heightened risk, such as data breaches and regulatory fines.

Low-Risk Contracts

In low-risk contracts, allow for more lenient liability caps, focusing on essential carve-outs only, reflecting the lower risk profile.

International Agreements

In international agreements, consider jurisdictional differences in liability laws and adjust caps and carve-outs accordingly.
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