Missouri Contract Cases

Duty to Read

When you sign a contract, the law presumes that you’ve read it and understand its contents. This is commonly known as the “duty to read.” The duty to read is one of the concepts that tripped up plaintiff Victoria Major in this case about a browsewrap “contract”; although Major never read the website’s terms of use, she was held responsible for agreeing to them.

In the words of one Missouri court, the law “presumes that a party had knowledge of the contract he or she signed; and those who sign a contract have a duty to read it and may not avoid the consequences of the agreement on the basis that they did not know what they were signing.” Grossman v. Thoroughbred Ford, Inc., 297 S.W.3d 918, 922 (Mo. App. W.D. 2009).

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The Missouri Court of Appeals recently upheld the denial of the Kansas City Chief’s motion to compel its former employee to arbitrate an age discrimination claim. The purported arbitration agreement at issue was not binding because it was not supported by consideration.

The employee had signed an arbitration agreement on her first day of work. However, the Chiefs didn’t present the agreement to her until her first day of work — after she had accepted employment. In Missouri, continued employment on an at-will basis isn’t sufficient consideration to support an arbitration agreement, so the agreement failed for lack of consideration.

The appellate court rejected the Chiefs’ argument that the Chiefs’ mutual agreement to arbitrate constituted consideration because the agreement bound only the former employee, not the Chiefs. Here’s a link to the case, if you’d like to know more.

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Olson v. The Curators of the University of Missouri

Loreen Olson brought an action alleging breach of contract and related claims, in which she asserted that the Dean of the College of Arts and Sciences had offered her the job as chair of the Communications Department at a meeting, and she had accepted. The dean then sent Olson two offer letters, one for a three-year contract period and the other for the preceding two-month period. When Olson emailed the dean about other terms of employment — which she claimed had been discussed at the meeting — the dean instructed his assistant to email Olson to inform her that the dean would be contacting the faculty to select another chair due to irreconcilable differences. The Missouri Court of Appeals, Western District reversed the trial court’s grant of partial summary judgment in favor the university and remanded the case to the trial court, because the undisputed facts didn’t negate Olson’s contention that a contract had been formed during her meeting with the dean.
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FH Partners, LLC v. Complete Home Concepts, Inc.

I wrote about this case, which involves backdating contracts, in Backdating Contracts Is Tricky Business. In addition to the loan I discussed in that post, the appellate court considered FH Partners’ ownership of another loan and held that FH Partners had a partial ownership interest in the loan, reversing the trial court.

Frontenac Bank v. T.R. Hughes, Inc.

On review of the trial court’s granting of summary judgment in favor of Frontenac Bank, the Missouri Court of Appeals, Eastern District found that there were genuine issues of material fact as to whether the bank breached several promissory notes, based on an improper declaration of insecurity and a breach of the bank’s duty of good faith and fair dealing, when it called the notes based on an insecurity provision.

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Arvest Bank v. Uppalapati

The United States District Court for the Western District of Missouri held that the spouse of a debtor was liable under a personal guarantee that she signed. The spouse argued that she was protected by the Equal Credit Opportunity Act (ECOA), which prohibits a creditor from discriminating against any applicant for credit on the basis of race, color, religion, national origin, sex or marital status, age, or because the applicant is on public assistance.

Regulation B, which was promulgated under the ECOA, limits when a creditor can require the signature of persons other than the applicant on the credit documents. The regulations provide:

Except as provided in this paragraph, a creditor shall not require the signature of an applicant’s spouse or other person, other than a joint applicant, on any credit instrument if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and terms of the credit requested. A creditor shall not deem the submission of a joint financial statement or other evidence of jointly held assets as an application for joint credit. [12 C.F.R. § 202.7(d)(1)]

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Midwest Coal LLC v. Cabanas

In an action for fraudulent misrepresentation, the Missouri Court of Appeals, Western District affirmed the trial court’s grant of summary judgment in favor of the defendant, concluding that the plaintiff, a coal company, was unable to prove damages for lost profits.

Lost profits are generally not recoverable as damages, because they are too speculative; however, they are recoverable with sufficient proof to provide a rational estimate of the amount of lost profit. In this case, however, the plaintiff had never turned a profit and was unable prove its case. (“With no history of profitability, Plaintiff cannot present sufficient evidence to prove lost profits from an existing commercial business.”)

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The Missouri Supreme Court decided an important case a few months ago involving non-competition and non-solicitation provisions in employment agreements. In Whelan Security Co. v. Kennebrew, the Supreme Court enforced a non-competition agreement and modified non-solicitation agreements against out-of-state former employees.

My labor and employment colleague, Gerry Richardson, wrote a blog post about the Whelan decision soon after it was filed in August 2012, and he included the following takeaways for employers:

  • Limit post-employment restrictions on customer solicitations to those customers with whom the employee interacted.
  • Use the one-year safe harbor for post-employment restrictions on a former employee’s solicitation of employees.
  • Include a statutorily recognized purpose for an employee non-solicitation obligation longer than one year in the text of the non-compete agreement, such as protection of confidential or trade secret business information, relationships with customers or suppliers, the employer’s goodwill, or loyalty to the employer.
  • Avoid general post-employment non-compete obligations with geographic scopes of more than a 50-mile radius from the employee’s last workplace with the employer and durations of greater than two years after the termination of employment.

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Lafarge North America, Inc. v. Miller

The Missouri Court of Appeals, Western District reversed the trial court’s grant of summary judgment in favor of Lafarge North America in its claim against Miller, the sole owner of a limited liability company, holding that material facts were in dispute as to whether Miller had agreed to personally guarantee Tiger’s obligations.

An employee of Tiger Ready Mix LLC, Miller’s company, had stamped Miller’s signature on a credit application and agreement to buy bags of concrete from Lafarge. When Tiger failed to pay several invoices, Lafarge sued Tiger for the debt and Miller on his purported personal guarantee. The appellate court quoted at length from Capitol Group, Inc. v. Collier, an opinion from earlier in the year in which the court stated that it would be difficult to prevail in an action to enforce a personal guarantee contained in a commercial contract where the individual didn’t sign the agreement twice — once in his capacity as an agent of the company and once in his individual capacity. (“While our caselaw does not hold that the only way an agent can be liable under a guaranty of this nature is by signing twice, this is the preferred method because it ‘clearly manifests his intent to assume personal liability.’”)

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American Eagle Waste Industries, LLC v. St Louis County, Missouri

The Missouri Supreme Court held that the plaintiffs — trash haulers — weren’t entitled to relief from the county’s actions based on an implied-in-law contract theory, as the intermediate appellate court had held, because the county hadn’t received a benefit from the haulers. (“The essential elements of quasi-contract are: (1) a benefit conferred upon the defendant by the plaintiff; (2) appreciation by the defendant of the fact of such benefit; and (3) acceptance and retention by the defendant of that benefit under circumstances in which retention without payment would be inequitable.”) However, the haulers were entitled to relief because R.S. Mo. § 260.247 provides an implied private right of action.

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Truman Bank v. New Hampshire Insurance Co.

In this case, Truman Bank’s debtor, a marina, suffered storm damage, repaired the damage using insurance proceeds, later sold the marina, and paid off the bank debt. The bank sued because the insurance company failed to pay the bank directly as a loss payee, seeking a second payment as well as statutory damages for vexatious refusal to pay. Here’s a short excerpt of the appellate court’s narration of the facts. Clearly, the court wasn’t impressed with the bank:

Still, the bank continued to demand that the insurer pay a second time for the storm damage. Undeterred by the fact that the owner had repaired the marina and paid off its loan, the bank filed suit against the insurer. To add insult to injury, the bank sued both for breach of contract and statutory penalties for vexatious refusal to pay.

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