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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Tagged as:
anti-stacking,
economic loss doctrine,
Equal Credit Opportunity Act,
Regulation B,
underinsured motorist
When people enter into a contract, everything changes. Before the contract is formed, people can change their minds. They can walk away from negotiations, ask for a higher price, or decide to do business with someone else. After the contract is formed, they have to do what they promised.
Contracts are promises that courts will enforce, but courts won’t get involved for just any promise. Courts require that the parties intend to be bound by their promises at the time of their contracting. And they require contracts to be a two-way street. That’s where consideration comes in. Each party has to bring something to the table.
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Tagged as:
consideration,
mutuality
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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Tagged as:
constructive eviction,
fraudulent inducement,
lost profits,
punitive damages,
title insurance
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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Tagged as:
non-compete,
protectable interest
A recent Seventh-Circuit case should serve as a cautionary tale that business owners need to consider the requirements of applicable insurance policies when trying to resolve a quality issue with a customer.
When Arbor Homes LLC’s plumbing contractor, Willmez Plumbing Inc., made a major mistake, Arbor worked with its customers, the Lorches, to make them whole. Unfortunately for Arbor, it didn’t comply with the requirements of the plumber’s commercial general liability insurance policy with West Bend Mutual Insurance Co. — under which Arbor was an additional insured — which allowed West Bend to successfully deny the claim.
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Tagged as:
voluntary payments provision
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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Tagged as:
personal guarantee,
rescission,
voluntary payment doctrine
Signing contracts correctly is important, not just as a matter of dotting i‘s and crossing t‘s. How a contract is signed can affect whether it’s enforceable and who’s on the hook. Here’s a basic “how-to” on signing contracts.
The correct legal persons should sign the contract
Only legal persons are parties to contracts. Legal persons can be humans (which are legally known as “individuals”) or corporations, limited liability companies, and other entities. As a general rule, if an entity wasn’t formed by filing a document with the Secretary of State, individuals are going to be on the hook for its contracts.
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Tagged as:
signature block
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.
Tagged as:
implied-in-law contract,
lost profits,
malicious prosecution,
punitive damages,
quasi-contract
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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Tagged as:
arbitration,
insurance broker
Good Morning America recently ran a story about a mother who gave her son an iPhone — along with her own terms of service. Failure to follow them would “result in termination” of his iPhone ownership.
Actually, “ownership” isn’t to be taken too literally, as the arrangement is more of a license: “It is my phone. I bought it. I pay for it. I am loaning it to you.” And the license is subject to certain acceptable use requirements, such as, “Do not send or receive pictures of your private parts or anyone else’s private parts.” And the risk of loss sits squarely on the licensee’s shoulders: “If it falls into the toilet, smashes on the ground, or vanishes into thin air, you are responsible for the replacement costs or repairs. Mow a lawn, babysit, stash some birthday money. It will happen, you should be prepared.”
To read the whole contract and a clip of an interview of licensor and licensee, see To My 13-Year-Old, An iPhone Contract From Your Mom, With Love. I’m sure more people have read these personal ToS than have slogged through Apple’s version.
