Section 79: Bonding provisions
Section 79. Prior to the execution of any contract for health club services and for a period of five years after initially commencing operation of a health club, every seller which sells contracts for health club services, except weight loss and control services which do not provide physical exercise facilities and classes, and which do not obligate the customer for more than thirty days, and which do not require an initiation fee as a condition of said contract, shall, for each individual health club location or facility, maintain a bond issued by a surety company admitted to do business in the commonwealth. The principal sum of the bond shall be either twenty-five thousand dollars, for each health club location or facility that sells contracts for terms not greater than twenty-four months, or one hundred thousand dollars for each health club location or facility that sells contracts for terms greater than twenty-four months but not greater than thirty-six months, and evidence of such bond shall be filed with the secretary of state within thirty days of its procurement. The bond shall be in favor of the commonwealth for the benefit of any buyer or class of buyers who suffers any loss or damage because a health club facility ceases operation, fails to open or fails to honor a buyer's right to cancel a contract for health club services pursuant to section eighty-two, and who obtains a judgment for said loss or damage which is not satisfied within thirty days of its entry. Said bond shall provide for the surety to pay the amount of such unsatisfied judgment either directly to said buyer or class of buyers or, if the attorney general obtains said judgment on behalf of said buyer or buyers and so directs, then to the attorney general for distribution to said buyers.
The liability of the surety on the bond shall be limited to indemnifying the claimant only for his actual damages. The aggregate liability of the surety to all persons for all breaches of the conditions of the bonds provided for herein shall in no event exceed the amount of the bond.
A change in ownership of a health club or location shall not release, cancel or terminate liability under any bond filed for such health club or location under this section as to any buyer who purchases a health club contract while such bond is in effect, unless the transferee, purchaser, successor or assign of such health club or location obtains a bond under this section for the benefit of such buyer. The fact that any health club is in bankruptcy proceedings, or that its debts have been discharged in bankruptcy, shall not be a bar or defense to a surety's obligation under any such bond.