A federal court in Florida has ruled that a disclaimer of representations contained in the franchise agreement between a childcare business franchisor and its franchisees barred claims against the franchisor for alleged pre-sale misrepresentations.

The franchisees claimed they relied on oral and written misrepresentations about the required initial investment and other matters relating to their purchase of the franchise. They claimed the misrepresentations induced them to enter into their franchise agreements. The franchisor argued that the contractual disclaimer, stating in capital letters that the franchise agreement was the parties' entire agreement, that there were no oral or written understandings outside the franchise agreement, and that the franchisees were not relying on representations outside the franchise agreement, prevented the franchisees from any action or recovery on these claims.

Some evidence supported the franchisees' allegations. Still, the court ruled the agreement's disclaimer of representations limited the potential claims to misrepresentations contained in the franchise agreement itself and that any claim of reliance by the franchisees on alleged misrepresentations outside the agreement was unreasonable. The court's ruling was consistent with other court decisions on disclaimers of representations and reliance.

It is easy, after an agreement has been made, for someone to later claim there were additional promises outside the agreement. A disclaimer of representations provision in a franchise agreement or any agreement, is useful to thwart claims brought later, by franchisees or anyone. This type of disclaimer is included in most well drafted franchise documents. Many franchisors also require franchisees to answer and sign pre-sale questionnaires that confirm the franchise agreement is the entire agreement between the parties, that there are no oral or written understandings not included in the franchise agreement, and that the franchisee is not relying on any representations outside the franchise agreement.

Click to read the entire decision: Creative American Education v. The Learning Experience