The Franchise Memorandum

In Good Feet Worldwide, LLC v. Larry Schneider, 2011 U.S. Dist. LEXIS 83865 (S.D. Cal. August 1, 2011), the court held that the statute of frauds was satisfied even though the franchisee did not sign a franchise agreement. A dispute arose between the franchisor and franchisee that eventually required a determination of whether the forum selection clause was enforceable because the entire franchise agreement itself was not signed by the franchisee. The franchisor argued that the statute of frauds was satisfied because the specific franchisee in question had “signed documents that relate to, refer to, and/or comprise important Exhibits and Addenda to the Franchise Agreement that clearly evidence his intent to be bound by the Franchise Agreement.”

The rule of law applied by the court was that “a memorandum satisfies the statute of frauds if it identifies the subject of the parties’ agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty.” The court found that four signed “Territory and Location Exhibits” to the franchise agreement constituted adequate documentation of the underlying franchise agreement. The Territory and Location Exhibits contained a description of the territory in which the franchisee was to operate and identified the existence of a franchise agreement, which was a defined term in the Territory and Location Exhibit. The court noted that the statute of frauds only requires a signature by the party against whom the contract is to be enforced.