Justia Contracts Opinion SummariesArticles Posted in Commercial Law
Electronic Merchant Systems LLC v. Gaal
In 2014, EMS entered into a payment processing agreement with Procom, a business owned by Gaal that sold historical tours. The Agreement was executed by Gaal, who signed a personal-guaranty provision. It contained terms relating to “chargebacks,” which occurred when a Procom customer’s transaction was declined or canceled after EMS had credited Procom’s account for the purchase; EMS repaid the money to the Procom customer, then charged Procom for that money plus a fee. In 2019, EMS and Procom executed a second agreement, which contained an explicit integration clause; the guaranty provision was not signed by Gaal but by another Procom employee. During the COVID-19 pandemic, many customers canceled purchases with Procom, resulting in $10 million in chargebacks. Procom is involved in Chapter 7 bankruptcy proceedings. EMS filed a creditor’s proof of claim and sued Gaal. The district court dismissed for failure to state a claim, finding that the 2019 Agreement superseded the 2014 agreement “in all material respects,” including replacing Gaal’s guaranty.The Sixth Circuit affirmed in part, upholding the district court’s consideration of the bankruptcy filing for purposes of determining when chargebacks occurred and its finding that the 2019 Agreement replaced the 2014 Agreement rather than merely supplementing it. The court reversed in part, holding that any chargeback related to transactions occurring before the execution of the 2019 Agreement arose under the 2014 Agreement. View "Electronic Merchant Systems LLC v. Gaal" on Justia Law
KAP Holdings, LLC v. Mar-Cone Appliance Parts Co.
In 2006, Price approached Marcone about using e-commerce in the appliance parts industry. Price and Marcone entered into a non-disclosure agreement while evaluating the concept, but no partnership resulted. Price then created PartScription. Both companies sell appliance replacement parts online. In 2017, Price restarted talks with Marcone. In 2018, Marcone’s CEO proposed that PartScription and Marcone form a “50-50” partnership. Price accepted, and they shook hands on the idea. Price drafted a term sheet for the contemplated partnership. The first line sheet states “PartScription and Marcone (PSM) have agreed to form a partnership/joint venture to serve the independent hardware industry.” Negotiations continued. During a conference call, Marcone representatives purportedly “stated that they approved of the terms,” and offered one change regarding a joint bank account. Days later Price sent a follow-up email saying that his notes indicated “Marcone ha[d] approved the terms outlined in the draft PSM term sheet” and asking whether they needed to memorialize the agreement. No further memorialization took place. Marcone's representatives became unresponsive.In 2021, PartScription filed suit. The Seventh Circuit affirmed the dismissal of the suit. PartScription’s complaint fails to plausibly allege a valid contract; any amendment would be futile. The only documentation speaks of general goals— not obligations—and fails to identify definite and certain binding terms. View "KAP Holdings, LLC v. Mar-Cone Appliance Parts Co." on Justia Law
Ivey v. Transunion Rental Screening Solutions Inc.
TURSS provided background and credit screening services to property management professionals and landlords through its online platforms and undertook to build an online platform to sell customizable electronic lease forms. TURSS sent Helix a letter of intent that the platform would be completed in 2009. The companies entered into a five-year marketing agreement that required TURSS to provide the platform and Helix to provide the product. TURSS would receive 35% of the revenue generated from sales and Helix would receive 65%. The agreement was not exclusive. Helix provided electronic forms and supporting materials to TURSS but the platform was still not completed in 2015.Helix sued TURSS for“willful and intentional” breach of contract, fraud, negligent misrepresentation, and promissory estoppel. The court ultimately granted TURSS summary judgment. The appellate court and Illinois Supreme Court reversed, finding that Helix failed to present proof of its damages with reasonable certainty. Helix did not present evidence of revenues of a similar product or a similar business in a similar market. Where a plaintiff seeks lost profits for a new company, "without a track record of profit, attempting to sell a new and untested product to a new market,” the specter of impermissible speculation arises. View "Ivey v. Transunion Rental Screening Solutions Inc." on Justia Law
Posted in: Business Law, Commercial Law, Contracts, Supreme Court of Illinois
Walworth Investments-LG, LLC v. Mu Sigma, Inc.
Walworth, a former stockholder, sued Mu Sigma, a privately held data analytics company, and Rajaram, the company’s founder, CEO, and board chairman, alleging that after reaping the benefits of Walworth’s $1.5 million investment and reputational capital, the defendants embarked on a fraudulent scheme to oust Walworth of its substantial ownership interest in the company.The Cook County circuit court dismissed the complaint, citing the stock repurchase agreement (SRA), which included anti-reliance and general release provisions. The appellate court reversed, holding that the anti-reliance language was ambiguous. The Illinois Supreme Court reinstated the dismissal, stating that “the broad and comprehensive release agreed to by [Walworth], a sophisticated party represented by experienced counsel, unambiguously encompasses” the unjust enrichment and breach of contract claims. The bargained-for anti-reliance provisions reflected the understanding that there may be undisclosed information but that Walworth was satisfied by the information provided. Walworth had direct access to Rajaram to negotiate the arm’s-length transaction at issue and Rajaram was not acting as a fiduciary for Walworth. A corporation owes no fiduciary duty to its shareholder and Delaware law does not impose “an affirmative fiduciary duty of disclosure for individual transactions.” View "Walworth Investments-LG, LLC v. Mu Sigma, Inc." on Justia Law
Posted in: Business Law, Commercial Law, Contracts, Securities Law, Supreme Court of Illinois
Stackpole International Engineered Products, Ltd.. v. Angstrom Automotive Group, LLC
Stackpole (Purchaser) makes car parts. Precision (Seller) makes automotive subcomponents. In 2014, Seller gave Purchaser quotes on pumps, making “[a]cceptance of order” subject to APQP [Advanced Product Quality Planning Review]. Purchaser issued a “Letter of Intent” to buy 1.1 million 10R/10L shafts and 306,000 Nano shafts. Seller's employee signed the letter, which provided that Purchaser would issue purchase orders for actual shipments. The purchase orders contained six pages of supplemental terms, allowing Purchaer to “terminate . . . this contract, at any time and for any reason, by giving written notice,” and providing that purchase orders would “not become binding” until the additional provisions were “signed and returned.” Seller did not sign the purchase orders but shipped parts to Purchaser for two years. In 2017, Seller stated that it needed a price increase or it would have to halt production. Purchaser agreed to price increases “under duress and protest,” then sued for breach of contract. Seller counterclaimed, alleging that Purchaser had impermissibly withheld its approval to make the parts by an automatic rather than manual process.The district court awarded Purchaser summary judgment, finding the parties had formed a contract “for successive performances.” “indefinite in duration.” Michigan law makes such contracts presumptively terminable upon “reasonable notification” A jury awarded $1 million. The Sixth Circuit affirmed. The Letter of Intent constituted a contract, notwithstanding the failure to engage in APQP. No contextual factor suggests a right to terminate the Letter of Intent without notice. View "Stackpole International Engineered Products, Ltd.. v. Angstrom Automotive Group, LLC" on Justia Law
Product Solutions International, Inc. v. Aldez Containers, LLC
PSI helps customers bring products to market. P.B. contacted PSI for assistance with the design, manufacture, and distribution of a custom cosmetics bag (Orgo Bag). PSI submitted a purchase order to its Chinese manufacturers indicating that P.B. would purchase 100,000 Orgo Bags in the first year and purchase another 1.5 million bags annually thereafter. During the first 18 months, P.B. purchased only 38,296 Orgo Bags. PSI directed the Chinese manufacturer to mitigate its losses and liquidate any materials it had purchased for the Orgo. The failure of the Orgo cost PSI $506,129.44. In 2019, PSI sued P.B., Aldez, Copek, and Byrne, alleging breach of contract, promissory estoppel, fraud, silent fraud, negligent misrepresentation, innocent misrepresentation, and non-acceptance of conforming goods under the U.C.C. The court dismissed Copek, Byrne, and Aldez but permitted some claims against P.B. to continue.In 2021, PSI sued Aldez for breach of contract, promissory estoppel, and nonacceptance of conforming goods, arguing that in the 2019 suit, its claims were pleaded directly against Aldez, whereas in the 2021 suit, it sought to pierce P.B.’s corporate veil and hold Aldez vicariously liable. The district court dismissed, citing res judicata. The Sixth Circuit affirmed. The complaint does not allege any wrongdoing by Aldez and corporate veil piercing is not a cause of action under Michigan law; the 2021 suit’s complaint fails to state a claim. View "Product Solutions International, Inc. v. Aldez Containers, LLC" on Justia Law
Taizhou Yuanda Investment Group Co., Ltd. v. Z Outdoor Living, LLC
Taizhou, a Chinese manufacturer, entered into a Cooperation Agreement with Z Outdoor, a Wisconsin company owned by Casual Products: Taizhou would manufacture outdoor furniture and other related items for Z Outdoor to sell to customers. Z Outdoor eventually stopped paying Taizhou. The Cornings, on behalf of Z Outdoor, made false statements about future business, forthcoming payments, and causes for the delays. Taizhou continued to fill customer orders without receiving compensation. In 2018, AFG (a Wisconsin LLC also owned by Casual) started submitting purchase orders to Taizhou. AFG never signed the Cooperation Agreement. Taizhou filled the orders and sent AFG invoices. AFG eventually stopped paying Taizhou and made false statements regarding payment delays. The total due from Z Outdoor and AFG accrued to $14 million for purchase orders sent, 2017-2019.The district court entered a default judgment against the corporate defendants on Taizhou's contract claims but ruled against Taizhou on unjust enrichment, fraud, and conversion claims, finding the fraud and conversion claims barred by Wisconsin’s economic loss doctrine and q “mere repackaging of Taizhou’s ‘straightforward breach of contract claim.’” The Seventh Circuit affirmed. Any fraud was interwoven with the Cooperation Agreement, so the economic loss doctrine applies. To the extent the damages amounted to lost profits or lost business, those are also economic losses under Wisconsin law. View "Taizhou Yuanda Investment Group Co., Ltd. v. Z Outdoor Living, LLC" on Justia Law
Fire Protection Service, Inc. v. Survitec Survival Products, Inc.
The Supreme Court held that the application the Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act, Tex. Bus. & Com. Code 57.001-.402, in this case did not violate the constitutional prohibition against retroactive laws in Tex. Const. art. I, 16.In the 1990s, Fire Protection Service, Inc. (FPS), orally agreed to be an authorized dealer and servicer of the life rafts manufactured by Survitec Survival Products, Inc. Nearly six years after the promulgation of the Act, which prohibits a supplier from terminating a dealer agreement without good cause, Survitec notified FPS that it was terminating their relationship. FPS sued for a violation of the Act. The district court entered judgment for Survitec. On appeal, the Fifth Circuit certified a question to the Supreme Court. The Supreme Court answered that the application of the Act to the parties' agreement does not violate the retroactivity clause in article I, section 16. View "Fire Protection Service, Inc. v. Survitec Survival Products, Inc." on Justia Law
Posted in: Business Law, Commercial Law, Constitutional Law, Contracts, Supreme Court of Texas
Lyles v. Santander Consumer USA Inc.
The Court of Appeals answered a certified question of law by holding that Md. Code Comm. Law (CL) 12-1018(b) requires a credit grantor that is found to have knowingly violated Credit Grantor Closed End Credit Provisions (CLEC), CL 12-1001 et seq., to forfeit three times the amount of interest, fees, and charged collected in violation of the subtitle.This case concerned a borrower who purchased a motor vehicle and financed it by closed end credit pursuant to an agreement governed by CLEC. The federal district court issued a certified question of law regarding the calculation of damages under CL 12-1018(b). The Court of Appeals held that, based upon prior caselaw regarding CLEC, a plain language analysis of CL 12-1018(b), and a review of the pertinent legislative history, CL 12-1018(b) requires a credit grantor who has knowingly violated the CLEC to forfeit three times the amount of interest, fees, and charges collected in violation of CL 12-1018(b). View "Lyles v. Santander Consumer USA Inc." on Justia Law
Posted in: Commercial Law, Contracts, Maryland Court of Appeals
EdgengG (Private), Ltd. v. Fiberglass Fabricators, Inc.
In this commercial dispute, the Supreme Court affirmed the final judgment of the superior court in favor of Defendants based on Plaintiffs' failure to comply with orders to provide discovery, holding that there was no error.The parties in this case executed a contract providing that Defendants would sell finished fiberglass products manufactured by Plaintiffs. Plaintiffs later filed a complaint alleging that Defendants had failed to pay upon delivery of goods and that Defendants conspired to deprive Plaintiffs of profits and sales commission. The trial justice eventually granted Defendants' motion for entry of final judgment, referencing Plaintiffs' failure timely to respond to discovery requests and their failure to comply with superior court orders. The Supreme Court affirmed, holding that the trial justice did not abuse his discretion when he dismissed Plaintiffs' complaint and entered judgment in favor of Defendants. View "EdgengG (Private), Ltd. v. Fiberglass Fabricators, Inc." on Justia Law
Posted in: Commercial Law, Contracts, Rhode Island Supreme Court