What Is a General Release and Why Does It Matter for Franchisees?
March 16, 2023A “general release” is a document in which one person releases another from any claims or threats of lawsuits. Franchisors often require franchisees to sign general releases at various points in the relationship to insulate themselves from franchisee lawsuits. If, as a franchisee, you have signed a general release, in all likelihood you will not be able to sue the franchisor for any wrongs that it may have done prior to the date you signed the release.
How exactly does a general release of claims impact a franchisee?
Generally, releases are effective to eliminate all claims you may have up until the time of the release execution date. It usually does not matter whether you, as the franchisee, were aware of the claims or not at the time that you signed the release, although in some states, a special form of document must be used to release unknown claims.
General releases are usually not effective to release claims that arise after the date that you signed the contract. Thus, for example, if the franchisor defrauded you before the date of the release, it is usually going to be effective to release that claim. On the other hand, if the franchisor is breaching a contract on a continuing basis, the breaches before the release will be nullified, but those occurring after the release will not. You should consult a good franchise lawyer to determine if you have claims that survive the signing of a general release agreement.
What should a franchisee be wary of in a general release of claims?
Franchisors sometimes engage in franchise fraud, misrepresentation or overstated financial claims about how much the franchise can make in order to get someone to purchase a franchise. Once the sale is complete, the franchisor may have liability to the franchisee for a lawsuit. What do they do? The franchisor gets the franchisee to sign a general release of claims. Another instance when franchisors ask for general release contracts is when there is any kind of change in the system, such as a requirement to purchase new equipment, new software, or other such requirements. Additionally, franchisors routinely ask for a release upon transfer or renewal of the franchise agreement.
Does a franchisee need to have a franchise lawyer look over a general release of claims?
Although it’s not required that a franchisee has a franchise lawyer look over a general release of claims, it’s a very wise idea to do so. Releases are frequently buried within documents that primarily serve other purposes, such as renewal agreements or transfer documents, and franchisees frequently do not realize that they are signing releases. As franchise lawyers, we can explain exactly what is in a franchisor’s general release. We know how to spot them, and we can help a franchisee navigate the contract.
Get Legal Representation For Your General Release Of Claims
As franchise lawyers, one of the first things we ask franchisees when they’re considering suing is whether they’ve signed a release. Unfortunately, they don’t always know off the top of their heads.
What else should a franchisee know when faced with a general release of claims?
One of the most frequent instances for franchisors to ask for general releases is when a franchisee wants to move the franchise agreement from his or her personal name to a corporation or LLC. Technically, the document that accomplishes this transfer is called an Assignment and Assumption Agreement. But usually, franchisors will include in it a paragraph or two in which the franchisee releases any claims that it has against the franchisor.
Courts typically will enforce releases. In fact, courts tend to give releases a special place in the law, since they make short work of a lawsuit and get a complaint off the court’s docket. As franchise lawyers, franchisees frequently tell us that they did not understand that they were signing a release, that they had no choice, or that they felt coerced. Usually, these arguments do not fare well in court. Most judges will say that if you are of sound mind and are capable of understanding the language of the release itself, the circumstances do not matter.
Let Franchise Lawyer help you navigate your general release of claims
A good franchise lawyer can help you understand a general release, particularly if it is buried in another document. Your franchise lawyer can also explain the consequences of signing a release, whether there are alternatives, and how you might get around it. If you have already signed a general release, your franchise lawyer can help you determine if you have claims against the franchisor or whether you have given some up.
Let our experienced franchise lawyers ensure you understand your contract clearly, and there won’t be any surprises or issues down the road. Get connected today.