Tennessee Business Litigation Lawyers Blog

Articles Posted in Real Estate Litigation

Contract Clauses Which Prohibit Oral Modifications: How Effective Are They in Tennessee?

Published on: September 18, 2015 | by J. Ross Pepper

Many Tennessee breach of contract cases involve written contracts which contain clauses which provide that no modifications or amendments to the contract are valid unless they are in writing and signed by both parties. How effective are such clauses? Can a party successfully prove that a contract was verbally changed or modified even if it contained a “no oral modification” provision?

Clauses which require modifications to be in writing do not always foreclose the possibility that one of the parties can successfully prove that the contract was, in fact, orally modified. An opinion that gives some pretty good perspective on how such clauses might play out in breach of contract cases is Crye-Leike, Inc. v. Carver (Tenn. Ct. App. 2011).

In the Crye-Leike case, the seller (“Seller”) of a home entered into an “Exclusive Right to Sell Agreement” (the “Agreement”) with a real estate agency (“Agency”). The Agreement was an exclusive six-month listing agreement. It provided that the Agency was entitled to a commission from any sale to anyone during the six-month period or from a sale to someone who was shown the home during the six-month period who purchased the home within ninety days after the Agreement expired.

Are Forum Selection Clauses Enforceable in Tennessee?

Published on: August 26, 2015 | by J. Ross Pepper

Forum selection clauses are prevalent in contracts entered into by Tennessee companies and residents. Often, the purpose of a forum selection clause in a contract is to force another party to litigate in a particular court in a particular state. For example, companies which are based somewhere other than Tennessee, but which sign contracts with Tennessee businesses, frequently put forum selection clauses in their contracts. They do so to ensure that, if they have to sue the Tennessee business or, if the Tennessee business decides to sue them, the lawsuit can only be brought in their home state.

If you are a Tennessee business or resident and have signed a contract with a forum selection clause, how likely is it that a Tennessee court would not uphold the forum selection clause? In my experience, in many cases, that result is not very likely.

Forum selection clauses are considered enforceable in Tennessee, and Tennessee courts will uphold them except in limited circumstances. Here they are:

If the Tennessee business or resident who signed the contract cannot secure effective relief in the other state;
If the other state would be a substantially less convenient place for trial;
If the contract containing the forum selection clause or the forum selection clause itself was obtained by duress, abuse of economic power, misrepresentation or some other unconscionable means; or
If, for any other reason, it would be unreasonable or unfair to enforce the forum selection clause.

Parol Evidence Rule Torpedoes Subcontractor’s Lawsuit Against Contractor

Published on: July 13, 2015 | by J. Ross Pepper

A recent Tennessee breach of contract case involving a construction contract should be required reading for all subcontractors who do work in Tennessee. In all of the cases I have read over the years involving disputes between contractors and subcontractors about change orders, extras, and the scope of work, this case, Preston McNees Specialty Woodworking, Inc. v. Daniel, sums up as well as any the pitfalls that await subcontractors who perform extra work or work beyond the defined scope.

Using Accord and Satisfaction as a Defense in Tennessee Breach of Contract Cases

Published on: June 4, 2015 | by J. Ross Pepper

A review of Tennessee case law, published and unpublished, demonstrates that the affirmative defense of accord and satisfaction is asserted far more often than it is successful. Nevertheless, it can be effective. Whether an accord and satisfaction defense is successful is dependent on the unique facts of each case, and, of course, on the reaction of the particular judge or jury to those facts.

The defense is used mostly in commercial litigation, though it pops up in tort cases from time to time in disputes about settlement agreements. Since it is an affirmative defense, the burden of proving it is on the defendant. As well, whether there has been an accord and satisfaction is a jury question (provided that the defense survives summary judgment).

The defense of accord and satisfaction arises where a party who owes some obligation or debt to another gives something other than, or less than, what the party who is owed the obligation believes it is entitled to receive. The giving of the something other than, or less than, is the accord part of the defense. The giving part of the defense, or the accord part, is usually a cinch to prove.

Start with a Trial Lawyer

Published on: May 29, 2015 | by J. Ross Pepper

When you are faced with a lawsuit or have filed a lawsuit, do yourself a big favor, hire a Tennessee lawyer with trial experience (aka a “Tennessee trial lawyer”) at the outset of your legal matter. Having practiced trial law and handled litigation and arbitration matters for nearly 25 years, I have seen people’s cases hurt because they waited to bring in a trial lawyer with the hope that things would just get worked out. I have also seen clients end up with bad results because they never retained a lawyer with trial experience.

I have a friend who is a successful businessman who does a substantial amount of business outside of Tennessee. He was owed some money from a company in Louisiana, but the Louisiana company denied that he was owed anything. He hired a lawyer in Louisiana. (I was not aware of his situation until well after the fact).

My friend paid the lawyer for many months as the case proceeded to trial. My friend thought that his case was one of clear liability, and it sounded to me like it was. For some reason, although he kept paying his lawyer and waiting for the other side to come to its senses and settle, the other side never made a settlement offer.

Contract Modifications: The Consideration Problem

Published on: May 5, 2015 | by J. Ross Pepper

For any contract in Tennessee to be valid, it must be supported by mutual consideration. What does mutual consideration mean? Very generally speaking, it means that both parties to the contract must have agreed to pay something, give something, do something, refrain from doing something, or assumed some obligation.

The requirement of mutual consideration applies not only to original contracts, but also, to modifications of original contracts. In Tennessee, if a contract is modified such that a new obligation is imposed on one of the parties, the modification will not be valid unless the other party also assumed some new obligation. This rule is sometimes referred to as the preexisting duty rule.

Here is the quintessential example of a contract modification that would not be valid because of a lack of consideration on the part of one party. Contractor agreed to remodel a structure for Owner. Contractor and Owner entered into a written contract with a specified scope of work and price. Three fourths of the way through the remodel, at a time the Contractor knows that Owner is vulnerable because Owner needs the remodel to be completed, Contractor informs Owner that he needs more money because the remodel was more work than he thought it would be. Owner balks, but Contractor informs Owner that he will walk off the job leaving the work unfinished which, of course, would force Owner to find another contractor to complete the job and would delay completion. Owner then agrees to pay ten percent (10%) more than he originally agreed to pay.

Which Statute of Limitations Applies: Six Year for Breach of Contract, or Three Year for Injury to Property?

Published on: February 13, 2015 | by J. Ross Pepper

The Supreme Court of Tennessee recently clarified how to determine whether the three year statute of limitations for injuries to property or the six year statute of limitations for breach of contract applies to a case. Which statute applies can be outcome determinative, so, understanding the Court’s holding in the case is a necessity for Tennessee lawyers who handle breach of contract cases and tort cases.

In the case, Benz-Elliott v. Barrett Enterprises, LP (Tenn. 2015), the Plaintiff filed a complaint containing a claim for breach of contract as well as tort claims for fraud and negligent misrepresentation. The tort claims were dismissed at the trial court level; did not become an issue on appeal; and, are irrelevant for analysis of the case.

The Plaintiff’s breach of contract claim stemmed from a written agreement wherein the Plaintiff agreed to sell some land to the Defendant. The Plaintiff owned ninety one acres of land which adjoined the Defendant’s land. The Defendant wanted to purchase four acres of the Plaintiff’s land. The Plaintiff was agreeable to selling so long as she could reserve the ownership of some of the land so that she would have access to the land she was not selling.

Summary Judgments in Tennessee: The Basics

Published on: January 26, 2015 | by J. Ross Pepper

In many, if not most, of the cases in which I am involved, I end up explaining to clients what a summary judgment motion is and how a summary judgment might affect their case. The concept of a summary judgment is a pretty simple thing. If a summary judgment is entered by the judge, then, barring a reversal of that ruling, the case will never go to trial before a judge or jury. A summary judgment ends the case.

Summary judgments (and summary judgment motions) fall into two broad categories: (1) Summary judgments (which are entered as the result of motions for summary judgment); and (2) partial summary judgments (which are entered as the result of motions for partial summary judgment). With some frequency, parties to a lawsuit will file motions for partial summary judgments. A motion for partial summary judgment requests that the judge end the case just as to some of the claims or causes of action by dismissing them, but not as to all of the claims or causes of action. For example, if a plaintiff has filed a complaint with three causes of action like breach of contract; fraud; and intentional interference with contract, the defendant may file a motion for partial summary judgment asking the judge to dismiss the fraud and intentional interference claims, but not the breach of contract claim. If the judge grants the motion for partial summary judgment and dismisses the fraud and intentional interference with contract claims, then only the breach of contract claim will proceed to trial.

It happens frequently that a party will file a motion for summary judgment on all claims, and the court will dismiss only some of the claims. In my practice, which is typical of most Tennessee trial lawyers with whom I have spoken, summary judgment motions are filed most of the time by defendants seeking to dismiss claims filed against them or some of the claims filed against them. However, plaintiffs (the parties who file lawsuits) may also file motions for summary judgment. I have been involved in quite a few cases where I represented a plaintiff, filed a motion for summary judgment, and the judge ruled that my client should be granted a summary judgment.

Recent Case Highlights a Way Around the Tennessee Statute of Frauds

Published on: January 19, 2015 | by J. Ross Pepper

In Tennessee, certain kinds of contracts are not enforceable unless (1) they are in writing and (2) they are signed by the party against whom enforcement is sought (the defendant, typically). Why? Because the Tennessee Statute of Frauds says so. (Keep in mind that most contracts in Tennessee are enforceable even if they are not in writing and even if they are not signed.)

For those types of contracts which must be written, such as contracts to buy or to sale real estate, you should not assume that you cannot enforce a contract because of the statute of frauds just because you do not have a formal agreement which has been signed. You may well be able to satisfy the statute of frauds if you have one or more different kinds of informal writings related to the sale, such as, for example, a signed check combined with an MLS Listing Sheet describing the property.

The Tennessee Prompt Pay Act: Using It to Recover Attorneys’ Fees in Construction Contract Cases

Published on: November 5, 2014 | by J. Ross Pepper

The Tennessee Prompt Pay Act allows a contractor or subcontractor who has not been paid to recover, in addition to the amount owed under its contract, an award of attorneys’ fees (and interest). The recovery of attorneys’ fees is not automatic, but depends on convincing the judge or jury that the other party, whether it was the owner, general contractor or another subcontractor, acted in bad faith. The Act only allows a court to award attorneys’ fees where the party who failed to pay acted in bad faith.

Before we take a look at what Tennessee courts require to prove bad faith, let’s consider some other requirements of the Tennessee Prompt Pay Act. Even if you can prove that an owner, contractor or another subcontractor has acted in bad faith, if your case does not fall within the protections of the Prompt Pay Act, you will not be able to use that Act to recover your attorney’s fees. For the most part, only in construction contract cases covered by the Prompt Pay Act does Tennessee law allow the prevailing party to recover attorneys’ fees by statute. There is an exception to that rule which occurs frequently: If parties to a construction contract have contractually agreed between themselves that, in the event of litigation or arbitration, the prevailing party is entitled to an award of attorneys’ fees, then they can be recovered even where no Tennessee statute permits their recovery.

The Prompt Pay Act does not apply to residential construction unless the construction involves more than four single-family units. To recover attorneys’ fees under the Prompt Pay Act, a contractor or subcontractor, as the case may be, must provide written notice to the party who has not paid by registered or certified mail, return receipt requested. The notice must state the provisions of the Act on which the unpaid party intends to rely and of that party’s intent to pursue remedies provided by the Act if payment is not made within the time designated in the Act.

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