A recent Tennessee case highlights the importance of paying attention to how you or how the other party signs his or her name to a contract. The case involved a construction contract for a residence. Here are the facts:
• John Wise, III formed Wise Construction Company, LLC–a Tennessee LLC
• Wise entered into a construction contract to perform work on the Defendants’ home
• The construction contract signed by the parties was a form contract
• Nowhere on the construction contract did the name Wise Construction, LLC appear
• The place on the contract for the signature of the “contractor” was signed by “John Wise, III”
• In a couple of places on the contract, the words “Wise Construction” appeared, but appeared without the “LLC” designation
• The construction contract did contain the license number for Wise Construction, LLC
• Under the signature of John Wise, III on the contract, there was no indication that he signed the contract in a representative capacity on behalf of the LLC
• The name of the LLC did not appear anywhere on the change orders for the project
• After the construction contract was signed, the defendants made checks payable to “Wise Construction Company” and some of those checks were endorsed by “Wise Construction, LLC”
• After problems between the parties arose, the defendant homeowners sent a letter to Mr. Wise at Wise Construction, LLC
The contractor brought a breach of contract lawsuit for unpaid work. The Defendants took the position that the contract was between them and John Wise, individually, and not Wise Construction, LLC. Why would this position make a difference if the money was, in fact, owed? Because, as alleged by the defendant homeowners, if John Wise was the party to the contract, he could not collect because he was an unlicensed contractor (which he was as the LLC held the contractor’s license).
The Tennessee Court of Appeals held that the construction contract was ambiguous because it referred to two different parties: John Wise, individually, and “Wise Construction.” The court then held that the defendant homeowners had knowledge that Mr. Wise was doing business as an LLC so the contract was between the homeowners and Wise Construction, LLC.
One judge on the three judge panel dissented from the opinion. To that judge, the evidence established that the contract was between Mr. Wise individually and the defendant homeowners. In my opinion, the dissent got it right, and it appears that the majority stretched contract law so that the contractor could recover for the $150,000.00 plus of work he performed, but for which he was not paid.