Justia Contracts Opinion Summaries

Defendants Sedo, Inc. ad its founder, president and sole shareholder Goran Lucic, appealed a district court ruling that held both the company and Mr. Lucic liable to Plaitiff Holloway Automotive Group d/b/a Holloway Motor Cars of Manchester for breach of contract. Upon review, the Supreme Court affirmed the trial court's enforcement of a liquidated damages provision in the parties' contract, but concluded that the district court lacked jurisdiction to "pierce the corporate veil." Accordingly, the Court reversed the district court's award against Lucic as well as the award of attorney's fees.

The president of a company signed a commercial credit application, which contained language immediately above the signature line stating that the individual signing the contract personally guaranteed amounts owed to the vendor. The company defaulted on the balance of the account, and the vendor filed suit against both the company and the president. The trial court granted summary judgment to the vendor, holding that the president had signed the contract both personally and in a representative capacity. The court of appeals reversed, holding that the president had signed the contract only in a representative capacity. The Supreme Court reversed, holding that the application contained clear and unambiguous language sufficient to bind the president as an individual guarantor of the contract.

Plaintiffs are producers of coal bed methane gas; defendant is large coal-mining company. Gas extraction firms need access to coal from which to extract gas and coal companies need to have gas removed from their mines before mining. To form an alliance for that purpose, plaintiff began by acquiring options to buy coal-mining rights; it planned to sell the options in exchange for the right to extract gas from its partner's coal. The parties signed memorandum of understanding, which stated that it did not constitute a binding agreement, and, later, a non-binding letter of intent. Plaintiff began transferring coal rights to defendant as contemplated by the letter of intent, but defendant delayed reciprocating. Ultimately defendant announced that it was terminating the letter of intent. The trial court entered summary judgment for defendant on a fraud claim. The Seventh Circuit affirmed, stating that "when a document says it isn't a contract, it isn't a contract" and that plaintiff did not establish promissory fraud or justifiable reliance.

Gene Shields, an agent for State Farm Insurance Companies, opened an account with Bankcorp Bank. The owner of the account was State Farm. Shields's office manager subsequently diverted funds that were due to be deposited into the account, and Shields allegedly suffered at least $77,925 in losses as a result of over 100 overdrafts on the account. Shields sued Bancorp Bank for negligence in failing to notify him of overdrafts. Bancorp moved to compel arbitration based on the account's arbitration clause. The circuit court denied the motion to compel, and Bancorp appealed. At issue on appeal was whether the parties' 2005 agreement to modify the contract entered into by the parties in 1982 controlled when Shields signed the agreement but State Farm was not a party to the contract. The Supreme Court affirmed, holding that the 2005 agreement, which contained the arbitration provision, was not binding because the agreement was entered into in contravention of the rights of the account owner, State Farm.

The manufacturer notified franchise dealers that it was discontinuing the Sterling (a subsidiary of Daimler) line of trucks. The letter offered dealers the opportunity to continue as a service dealership under a new agreement. Plaintiff, a dealer, was warned that, following the termination of the existing agreement, if it did not sign the general release and agree to terminate its Sterling franchise, Daimler Trucks would not renew its Detroit Diesel Direct Dealer Agreement. Daimler later terminated that agreement, which plaintiff alleges prevented it from obtaining parts at wholesale and performing warranty work on Detroit Diesel engines. Plaintiff alleged violations of the Motor Vehicle Franchise Act, 815 ILCS 710/1 and claims of breach of contract, tortious interference with contract, and fraud. The circuit court dismissed all but two counts. The appellate court affirmed, holding that the circuit court lacked subject matter jurisdiction to hear several counts under the Act, because those counts should have been brought before the Motor Vehicle Review Board. The Supreme Court affirmed.

A group of investors (Borrowers) bought a golf course by contributing part of the purchase amount in cash and financing the remaining balance through a nonrecourse loan with Community Bank of Nevada (CBN). To facilitate the sale, William Walters entered into a separate guaranty with CBN where he personally guaranteed the loan. Prior to the Borrowers' default and the eventual foreclosure of the golf course, Walters filed a complaint against CBN, asserting causes of action for declaratory relief and breach of the implied covenant of good faith and fair dealing. CBN counterclaimed, asserting breach of guaranty against Walters. The district court granted summary judgment in part to CBN, concluding that no genuine issues of material fact existed as to Walters' guaranty liability to CBN. Walters filed a petition for a writ compelling the district court to vacate its partial summary judgment in favor of CBN and to preclude CBN from recovering any amount from Walters under his guaranty. The Supreme Court denied the writ, holding (1) CBN complied with the deficiency application requirements of Nev. Rev. Stat. 40, and (2) CBN was not attempting double recovery because double recovery was not an issue in this case.

The parties to this lawsuit claimed rights to a punch press used in the manufacturing business of now-defunct Vitco Industries. Plaintiff, Gibraltar Financial Corporation, held a perfected security interest in Vitco's tangible and intangible property, including its equipment. Defendants, several entities including Prestige Equipment, who had acquired the press, and Key Equipment Finance, claimed that the security interest did not cover the press because the press was not Vitco's equipment, but rather, the press had been leased to Vitco by Key Equipment. The trial court granted summary judgment in favor of Defendants after concluding that the lease was a true lease. The court of appeals affirmed. The Supreme Court reversed, holding that genuine issues of material fact existed regarding whether the press was leased. The Court noted that no evidence was on the record relating to the economic expectations of Vitco and Key Equipment at the time the transaction was entered into. Remanded.

Plaintiff brought a class action against the Bank, alleging that the Bank breached its contract by charging interest in excess of the rate specified in the promissory note. The court affirmed the district court's grant of the Bank's motion to dismiss where the district court correctly concluded that the relevant provisions were clear, did not conflict with one another, and adequately disclosed the interest to be charged.

The companies are direct competitors in importing and distributing pharmaceutical ingredients manufactured in China. Plaintiff claimed that defendant intentionally interfered with one of its contracts and sought damages. In court-ordered settlement negotiations, plaintiff demanded $675,000. Defendant made a counter-offer, demanding that plaintiff pay it $444,444.44 in order to settle the case and avoid a motion for sanctions and a suit for malicious prosecution. The court noted that the peculiar amount was due to the fact that the number four is considered an unlucky number in Chinese culture because it is homophonous with the Chinese word for death, but concluded that it was not a death threat and declined to impose sanctions. The court later entered summary judgment for defendant. The First Circuit affirmed the court's refusal to impose sanctions under FRCP 11. Plaintiff's claims were not patently frivolous.

In a loan-and-supply contract, plaintiff agreed to provide defendant with a $150,000 loan that would be gradually forgiven over five years as defendant purchased specified quantities of motor-oil products from plaintiff. The typewritten contract included a handwritten note stating that the "Agreement will terminate after 225,000 gallons and 225,000 filters of Exxon/Mobil is purchased or 60 months, whichever comes first." Defendant stopped buying products from plaintiff after only two years, having purchased only 55,296 gallons and 61,551 filters. The district court entered summary judgment for plaintiff. The Seventh Circuit affirmed, rejecting an argument that the handwritten provision relieved plaintiff of any liability after 60 months (after July 1, 2008) regardless of the amount of product it purchased.