Attorney Fees in Contracts

Sample Contract Language
attorney fees

I’ve advised clients on whether to sue for breach of contract many times over the past several years. In most cases the other side had clearly breached the contract, and my clients would have a solid case. However, they often decide not to bring suit, because the cost of suing would be excessive compared to the amount at stake.

As I discuss in my 2013 post Recovering Attorneys’ Fees, parties to litigation generally have to pay their own legal fees even if they win the litigation. So if someone has a $10,000 claim and it would cost $5,000 to sue, they’re probably not going to sue because it wouldn’t be worth it financially.

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Court Holds Panera Bread to Its Bonus Program

U.S. 8th Circuit Contract Cases
Panera Bread

The 8th Circuit held yesterday that Panera Bread breached contractual obligations owed to its general managers when the company unilaterally placed a cap on their bonuses. The case is unusually interesting in that it deals with a number of contract issues, including unilateral versus bilateral contracts, what constitutes consideration supporting contracts with at-will employees, commercial frustration, novations, and more. The case is Boswell v. Panera Bread Company. [click to continue…]

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Drafting Clearer Contracts 2017

Miscellany
Drafting Clearer Contracts

Yesterday, I finally had the opportunity to attend Ken Adams’s Drafting Clearer Contracts seminar, when he brought his world tour to St. Louis. I’ve known Ken from the blogosphere and Twitter for several years, but we’d not met until this week. I thoroughly enjoyed the seminar and came away inspired and motivated to continue to up my contract-drafting game.

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Whelan Security Co. v. Kennebrew Update: Noncompetes in Missouri

Missouri Contract Cases
noncompetition agreement

In this 2013 post, I blogged about Whelan Security Co. v Kennebrew, an important Missouri case involving an employee noncompetition agreement. In that case, the Missouri Supreme Court enforced a general noncompetition agreement and modified a non-solicitation agreement against out-of-state former employees.

Specifically, the Court held that a general restriction on competition within a 50-mile radius was enforceable. However, a covenant restricting the employees from soliciting the employer’s customers for two years after termination of employment was too broad as written, because the covenant was not limited geographically and there was no other language that would have limited the scope of the provision (such as restricting the prohibition to customers with which the employees had contact during the course of their employment). The Court modified the covenant accordingly. The Court also held that a covenant restricting the employees from soliciting prospective customers was too broad, not to mention the fact that the Missouri Supreme Court questioned in Healthcare Services of the Ozarks, Inc. v. Copeland whether an employer has a legitimate interest in prospective customers.

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Signing a Personal Guarantee Can Be Surprisingly Costly

Missouri Contract Cases
personal guarantee

When you own a small business, signing personal guarantees often seems like a necessary evil. Unless your company has strong credit, landlords, lenders, and others will often require you to personally guarantee your company’s obligations to them. One of the most harrowing experiences I had when I set up my own law firm was signing a merchant services agreement so I could accept payment by credit card — which of course required a personal guarantee.

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Signing Quotations

Battle of the Forms
battle of the forms tips

I’ve advised people for years not to sign the other side’s purchase orders, acceptances, quotations, and other ordering documents unless the documents have been fully negotiated. That’s because it puts you at a huge disadvantage in the battle of the forms.

I’ve also advised people to negotiate terms that are essential–even if they don’t sign a fully-negotiated contract–and have both parties sign a document setting out those terms, because you can’t win the battle of the forms. So if–as a seller–a 12-month limited warranty and liability cap in the amount of your product’s purchase price are important to you, you should make sure that you and your buyers sign contracts agreeing to those terms. Otherwise, you’ll probably end up with a broad, four-year warranty and unlimited liability (the defaults under Article 2 of the Uniform Commercial Code, which governs contracts for the sale of goods). [click to continue…]

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Revisiting Liquidated Damages

Missouri Contract Cases
liquidated damages or penalty

Last week I discussed a case in which a Missouri appellate court upheld personal guarantees when the purported guarantors had signed a promissory note under the words “Personal Guaranty and Acceptance of Terms.” In that same case, the court held that a “late fee” was an unenforceable penalty, rather than an enforceable liquidated damages clause.

I’ve discussed liquidated damages provisions in these virtual pages before. In Liquidated Damages Provisions Can Be Your Friend, But Don’t Overreach, I talk about the difference between enforceable liquidated damages provisions and unenforceable penalties. So many people followed Google to that piece looking for sample contract language that I later posted a Liquidated Damages Clause Example.
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Revisiting Personal Guarantees

Missouri Contract Cases
personal guarantee

There are a surprising number of cases dealing with whether people who purportedly signed a personal guarantee actually agreed to personally guarantee a contract.

Many of the issues I’ve seen arise when someone signs at the bottom of a contract as “guarantor” rather than signing a separate guarantee document. There’s nothing wrong with doing that, but it can cause issues. For example, I discussed a case in 2012 involving a corporate officer who signed a credit application that contained guarantee language. The officer signed the document only once, the signature did not indicate whether he was signing in his individual capacity or on behalf of the company, there was only one signature line, and the guarantee language did not clearly evidence that a personal guarantee was intended. The court held that the officer had not agreed to personally guarantee the company’s obligations and stated:

When considering whether a signatory to a contract intended to sign the agreement in his corporate or individual capacity, the determinative question is whether, in view of the form of the signature to the agreement, the language of the so called guaranty clause is sufficient to manifest a clear and explicit intent by [the signatory] to assume a personal guaranty contract. … Accordingly, our courts have adopted the policy that in order to hold a corporate officer individually liable in signing a contract of guaranty … the officer should sign the contract twice[,] once in his corporate capacity and once in his individual capacity…. By signing the contract twice, the officer executing the contract for his corporation clearly manifests his intent to assume personal liability. [citations and internal quotation marks omitted]

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Be Careful about Contractual Duties to Provide Insurance

Missouri Contract Cases
insurance requirements

When someone takes on a contractual obligation to provide insurance, that duty can preclude them from looking to the other party for damages covered by the required insurance.

In Storey v. RGIS Inventory Specialists, Kenneth Storey leased property to RGIS. The property was destroyed by a fire allegedly caused by one of RGIS’s employees. The lease required RGIS to repair damages to the leased premises caused by the negligence or intentional acts or omissions of RGIS, its agents, servants, or employees. Storey sued RGIS for damages resulting from the fire. The court dismissed Storey’s case on a summary judgment motion.

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Revisiting “No Reliance” Language in Contracts

U.S. 8th Circuit Contract Cases
https://www.facebook.com/BlueMavenLaw/

A (fairly) recent 8th Circuit case reminded me of the importance of including “no reliance” language in even simple contracts.

Exploring the idea of drafting simplified contracts for simple situations, I posted a sample contract for a sale of goods a couple of years ago. The idea was to draft a B2B contract that would afford minimum effective legal protection in situations where there’s no special reason to think that the agreement would be litigated. A reader left the following comment and I revised my form agreement in response: [click to continue…]

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