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Unconscionability, Waiver, Limitation Of Liability: Part II

Q– What can be done if my contract is unconscionable?

If a portion of the contract, or the entire contract, is found to be unconscionable, the court has several choices:

  1. Refuse to enforce the entire contract
  2. Sever out the unconscionable portion from the contract
  3. Limit the application of the unconscionable provision

Q—Is a Waiver a defense available to the Defendant? What is it?

Another contract defense often seen by Texas Collection attorneys is the contractual defense of waiver.  Waiver is usually defined as an intentional relinquishment of a known right and is either made expressly or indicated by conduct, that is inconsistent with an intent to claim such right.  Ulico Cas v. Allied Pilots 262 SW3d 773 (Tex. 2008). For instance, conduct such as prolonged silence or inaction may amount to a waiver. 

Waiver may be implied only to prevent fraud or inequitable consequences as plaintiff’s intent is the primary factor in determining waiver, in the absence of some clear intent, whether expressed by conduct, words or acts.  Should a defendant breach the contract, the plaintiff may later affirm such contract action and thus waive its waivered defense, by plaintiff either showing a conscious intent to do so or by acting to induce detrimental reliance on the part of the defendant. Consolidated v. Southern Steel 699 SW2d 188 (Tex. 1985).

Certain Texas collection cases have indicated that there are certain acts that do not necessarily constitute waiver, as follows:

  1. Plaintiff’s acceptance of defendants late performance, for instance, the defendant’s late payments may constitute waiver
  2. If a plaintiff continues his performance after defendant’s breach, that may be a waiver.
  3. If a plaintiff shows honest efforts to induce the defendant to perform the contract, then that will not necessarily constitute a waiver.

Q– What is a limitation-of-liability provision in a written contract?

Another contract defense is the limitation-of-liability provision.  Here, defendant asserts that his liability is limited by the contract itself.  These provisions are only enforceable if the agreements do not “violate public policy”.  Whether public policy has been violated in this context, a court may look at if there is any disparity in bargaining power between the parties. Allright v. Elledge 515 SW2d 266 (Tex. 1974).

 

QUANTUM MERUIT – I didn’t get a contract signed; can I still sue for the services I provided?

Today’s Blog addresses the Texas debt collections issue of QUANTUM MERUIT—an equitable theory of recovery, intended to prevent unjust enrichment, when there is AN IMPLIED AGREEMENT TO PAY FOR SERVICES RECEIVED. In re Kellogg Brown 166 SW3d 732 (Tex. 2005), also Barnett v. Coppell 123 SW3d 804 (Dallas, 2003). If an express written agreement covers the transaction in dispute, quantum meruit cannot be brought or used by the Texas collections attorney, because QM is an independent theory that does not arise from a contract.

The elements of QM are as follows: 1- Plaintiff provided valuable services or materials; 2- the services or materials were provided for Defendant; 3- Defendant accepted the services or materials; 4- Defendant had reasonable notice that Plaintiff expected compensation for the services or materials furnished Excess Underwriters v. Frank’s casing Crew 246 SW3d 42 (Tex. 2008). Upon a jury trial concerning QM, the Texas Pattern Jury Charge can be found at PJC 101.42.

Q- what are some Texas cases denying quantum meruit damages?

A few cases have addressed situations where QM was not available. The first was LTS Group v. Woodcrest 222 SW3d 918 (Dallas 2007, no pet.) where the Dallas Court correctly ruled that “the expectation of a future business advantage or business opportunity, cannot form the basis of a cause under QM”. However, LTS was decided because of the inadequate proof provided by the furnisher of the services. The furnisher, LTS, only testified, when asked about the basis for its opinion as to the value of the services provided, that ‘most brokers get about 4%.’ The Court said that testimony constituted “no evidence” of the value of the services provided nor was it any evidence of the reasonable value of the work provided, and also quoted the M.J. Sheridan case 731/620 (Houston 1st 1987).

Word to the wise in Dallas commercial collections actions would be, make sure you prove up your QM damages, thoroughly. The LTS cases, above, was later cited by the Houston 1st Dist. case of Green Garden v. Schoenmann 2010 Tex App. LEXIS 8887 (Nov. 2010). In Green it was argued that a QM recovery is not available when a party provides services “merely in hopes of obtaining a future business relationship”. The Houston Court however, stated the Tx. Supreme Court view that “in certain circumstances, a party who provides services with an expectation of entering into a future business agreement may seek recovery of the value of said services” under QM if there is sufficient evidence of the remainder of the QM elements. Vortt Exploration v. Chevron 787 SW2d 942, (Tex. 1990). InVortt, the Tx. Sup. Ct. also noted that the parties had been negotiating for 4 years to reach a joint operating agreement, and services were provided only in the expectation that such agreement would be reached. Under those circumstances a QM claim was allowed.

Also, if the service provider provides the services, for the provider’s own benefit, no QM claim will be allowed. Again, the services, and evidence about them, must be provided to the Defendant.

Contact Us

If you have any questions about this topic, or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

 

What sort of defenses should I expect? What damages can I recover?

Q- what sort of defenses should I expect him to try?

Defenses sometimes asserted include Limitations, unclean hands, voluntary payment by Plaintiff, or pleading that the money is stolen money, even from a good-faith purchaser for value. Texas Bank v. Custom Leasing 498 SW2d 243 (Tyler 1973), and also ‘Unclean hands’, may include factors showing that Plaintiff’s conduct indicate a lack of good faith, or lack of ordinary care. Where Defendant shows that Plaintiff paid with full knowledge, with no acts of fraud or duress, ‘voluntary payment’ is a valid defense.

Q- what damages can I recover?

You can seek return of the property, plus actual damages. These actuals are the measure necessary to fully compensate Plaintiff for all injuries sustained, not merely the market value. Reuber Chevrolet v. Grady Chevrolet (Dallas 2009). Also recoverable are the ‘loss of value’ which includes fair market value plus interest at the highest legal rate. Khorshid v. Christian (Dallas 2008). Here, Plaintiff recovers for the time period, while he was deprived of it’s use. In some cases the ‘intrinsic value’ of the property not returned is an additional measure of damages. Lost profits are also recoverable; courts consider the particular circumstances of each case here. Bures v. 1st National (Corpus Christi 1991). Plaintiff must prove Defendant had notice of the lost profits; generally ‘Lost Profits’ is a larger subject for another Blog post.

Contact Us

If you have any questions about this topic, or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

 

Defendant is Holding My Money; How Do I Get it Back?

This cause of action, in Texas collections, used to be called ‘assumpsit’. It is an equitable claim that usually should be pleaded in the alternative to another claim such as ‘conversion’ which will be discussed later.

This theory is usually applied to prevent unjust enrichment, and is based on a debt not evidenced by a writing, such as contract, promissory note, etc. So we’re talking here about an oral agreement. The theory asks whether Defendant is holding money that belongs to Plaintiff, and therefore, for Dallas collections lawyers, it is less restricted to technical rules and formalities. Staats v. Miller 243 SW2d 686 (Tex. 1951). If the money, in good conscience and equity belongs to Plaintiff, Plaintiff prevails in ‘money had and received’.

Whether Defendant has obtained the money wrongfully is irrelevant to this inquiry, wrongfulness is not the premise, but instead, the question asks whether Defendant received money, and that Plaintiff is the owner of the money, so it rightfully belongs to Plaintiff.

Q- what is what he is holding, is not exactly ‘cash’?

“Money” as used here, includes actual money itself, but also the equivalent of money such as property received as money and/or property converted into money before the lawsuit. Thus, the proceeds of a sale are included, including where parties agree beforehand to divide up proceeds from a sale, or, if property is on consignment. Very often, in Texas collections actions, this is an appropriate theory to collect on a dishonored check. It is also used when money has been paid by mistake. Also refunds being held; Tanglewood v. City of Texarkana 996 SW2d 330 (Texarkana 1999).

Damages recoverable include the amount of money being withheld, obviously, but also, upon proof of fraud and/or malice, exemplary damages are recoverable. Injunctive relief is also available, costs and interest, but not attorney’s fees. Edwards v. Mid-Continent (Dallas 2008); also Nowak v. Los Patios (San Antonio 1995).

Contact Us

If you have any questions about this topic, or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

 

I was about to get a contract signed, but another company then ‘interfered’; can I sue that other company that caused the contract to not be entered into?

Closely related, is a cause of action based upon tortious interference with prospective relations. Under this theory, there will be shown a reasonable probability that the creditor would have entered into a business relationship with a third person, but the Defendant intentionally interfered with such relationship and such conduct was independently tortious or unlawful, also proximately causing actual damages to Plaintiff. In this situation, often the Plaintiff will establish that it had a business relationship that had not yet been reduced to contract or some continuing business relationship, that was not formalized by a written contract. Defendant need not prove that the contract would have been made ‘but for’ the interference. Coinmatch v. Aspenwood 417 SW3d 909 (Tex. 2013). The Restatement of Torts, gives examples of prospective contracts subject to tortious interference claims such as:

  1. Obtaining employment or employees
  2. The opportunity to buy or sell land or services
  3. Relations leading to potentially profitable contracts
  4. Options to renew or extend contracts

Again, for Texas debt collections lawyers, the creditor will show that the Defendant intentionally interfered with the formation of a relationship, with actual knowledge of the business relationships.

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

What do I need to show, to prove someone knows they are interfering with my business?

Switching gears a bit from fraud is the cause of action for “tortious” interference with existing contract. The general elements of such cause of action are as follows:

  • A valid contract
  • 2) that the Defendant willfully and intentionally interfered with,
  • 3) proximately causing injury to Plaintiff and
  • 4) the Plaintiff incurred actual damage or loss.

The Plaintiff, obviously, must show it had a valid contract, not some other contract such as an unenforceable contract, or a terminable contract. The Plaintiff will plead and prove that the Defendant willfully and intentionally interfered with that contract. Browning v. Reyna 865 SW2d 925 (Tex. 1993). The Defendant may try to defend that he is a stranger to the contract, as the Defendant cannot tortiously interfere with its own contract. In these collection matters, the creditor or factor will establish that the Defendant either had actual knowledge of the contract, and that the Plaintiff was interested in it, or, the Defendant has knowledge of certain facts and circumstances that would lead a reasonably prudent person to believe there was a contract in which the creditor had an interest. In proving the Defendant’s interference with the contract, the Plaintiff will need to establish that such Defendant’s interference was intentional. Such interference does not necessarily require an intent to injure Plaintiff but it does require an intent to interfere. Greenville v. Automatic 465 SW3d 778 (Dallas 2015). A Defendant may be held liable if it is shown that such Defendant intentionally induced a third party to breach a contract with a creditor, or that the Defendant prevented performance by Defendant, by making the performance impossible, or more burdensome, difficult, or expensive. In this situation, the creditor in a tortious interference claim can recover damages for lost benefits under the contract, its lost profits, which must be proved by the creditor, as not a precise calculation of anticipated profits, but lost profits must be proved with reasonable certainty. Browning, above at p. 549. In certain cases, a Plaintiff can also recover exemplary damages, but not attorney’s fees. Plaintiff’s attorney should take enough time with his client, to show the Court, that the anticipated amount of lost profits is capable of being reasonably easy to calculate, not just speculation.

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

How Do I Prove the Fraud Element of Their “Intent”?

Next is the element of” intent.”  Defendant must intend that the creditor or factor rely on the representation.  Many Texas collection cases, and in addition, the treatise known as the Restatement of Torts, states that to prove intent, the creditor must establish that the Defendant desired to cause the consequences of its act or believes that the consequences were substantially certain to occur.  Fraudulent inducement, is an area ripe for litigation between factors and their client, or between a factor and the client’s customers,  in that, the Defendant usually must have a reason to expect that the creditor will enter into a binding agreement, based upon their false representation.  Reliance is also a key element and is usually discussed in terms of a creditor establishing in its lawsuit that it knew of the false representation and actually acted upon it.  In the fraudulent inducement area, the creditor or factor will prove that it actually entered into a binding contractual agreement, based upon the false representation.  Plaintiff’s attorney would be cautioned, in this area of the law, to affirmatively plead the words “induce” or “inducement” or possibly the fraud claim is waived.  Often factors will insert a provision into the factoring agreement that the factor is relying on the representations of its client, and the representations are being made to induce the factor to purchase invoices under the agreement.  Also, Plaintiff must establish that it justifiably relied on the representation by Defendant.

In proving that the creditor has been damaged, the factor or creditor will establish that the false representation by Defendant was the cause of injury.  It has sometimes been stated that the Plaintiff will prove that the Plaintiff was relying upon Defendant’s false representation “to the Plaintiff’s detriment.”  The creditor or factor must, obviously, plead and then prove that the Defendant’s fraud resulted in damages, and also, consequential damages to the creditor.

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

What if the false statement of a Defendant was just ‘an opinion’?

An opinion may also be fraudulent if the Defendant knows that the statement of opinion is false, or if the opinion stated is based upon or supported with false statements of fact, that is intertwined with misstatements of fact, or if the opinion is based upon the Defendant’s special knowledge and the Defendant should have known that the Plaintiff was justified in relying upon Defendant’s special knowledge.

Especially in factoring litigation in Texas, a fraudulent misrepresentation may consist of a false promise by the Defendant of future performance. To prove a false promise of future performance, the factor must establish and prove that Defendant made a promise with no intention of performing it. This is not to be confused with a mere breach of contract which would be a situation where the Defendant enters into a contact and then later decides not to perform it. This theory is sometimes difficult to prove because the factor, or judgment creditor must show that the representation was sufficiently certain, and of a type that a person could reasonably and justifiably rely upon. Also, it is often difficult to show that the Defendant had no intention of performing the promises, when they made the promise. A mere breach is not sufficient to support this element. Texas courts have held that even slight circumstantial evidence of fraud, when considered with a breach of contract, is enough to find and infer intent not to perform.

Another sort of fraudulent representation is one made by conduct. Deceptive conduct is equivalent to a false statement of fact. In proving your fraud claim, the other element discussed previously, was that the false representation was made knowingly or recklessly. Again, either direct or circumstantial evidence may be alleged and proved to show that Defendant made a statement with or without knowledge of the representations truth. A “knowingly” representation is made by Defendant who is aware of the statement’s falsity or understands that it is false. A “reckless” representation is made if a Defendant makes the representation without any knowledge of its truth, and makes the representation as a positive assertion of fact. It has been stated that a representation is made recklessly when a Defendant knows that the Defendant does not have sufficient information or a basis to support the representation or if a Defendant realizes it does not know whether the representation is true or not.

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

I think my customer’s agent defrauded me; is my customer still liable for that? What is meant by “a material misrepresentation”?

Q—I think my customer’s agent defrauded me; is my customer still liable for that?

Obviously, the creditor should establish that Defendant is responsible for the false representation. Almost always, the named Defendant will be the person actually making the representation, but there are also a few limited situations where an employer may be vicariously liable, for the fraudulent act of its employee, or the Defendant may be vicariously liable for the act of another if that person benefitted from the fraudulent transaction and had knowledge of the fraud; also, an agent may be individually liable for his own act of fraud performed for its principal. NationsBank v. Dilling 922 SW2d 950 (Tex. 1996). As to a Dallas debt collection, only the principal’s conduct is relevant, not the agent’s conduct. Nations , above at p. 953.

Q—What is meant by “a material misrepresentation”?

Although it is usually the case that the Defendant is making a false representation directly to the creditor/factor, there are also situations when the Defendant may be named when it indirectly defrauds the creditor by making a false representation to a third party with the intention that it be repeated to the Plaintiff, or that the expectation is that the Plaintiff will act upon it. One of the elements is that the representation be “material.” This means that a reasonable person would attach importance to, and be induced to act upon the information, in determining whether to make a transaction.

Although it may seem obvious, courts have defined “false statement of fact” as ‘an untrue, deceptive or misleading statement, concerning a past or present fact’. State Nat’l. v. Farah Mfg.; 678 SW2d 681 (El Paso 1984). More problematic, especially in several Dallas collection cases I have had over the years, is whether the Defendant’s false statement is only of his opinion. Generally, an expression made by a Defendant that is purely his opinion, is not considered a false representation, and therefore, not fraudulent. In order to be considered a fraudulent misrepresentation, the Defendant’s statement must concern facts as opposed to mere opinion, judgment, probability, or expectation, however, the Texas Supreme Court recognizes several exceptions to that general rule, as follows:

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate

I’m a factoring company, and I’m not being paid; what are the elements of ‘fraud’?

We last discussed factoring agreements and breach of contract claims, in relation to Texas debt collection attorneys. Related to the factoring agreement, in collection on the contract, in the context of Texas debt Collection actions, the creditor will often discover fraud, sometimes referred as” fraudulent misrepresentation” or “fraudulent inducement”. First, let’s set forth the elements of a common law fraud cause of action, as follows:

  1. The Defendant made a material representation to the Plaintiff
  2. Such representation was false
  3. When the Defendant made such representation, he knew the representation was false; or
  4. The representation was made recklessly as a positive assertion, without Defendant’s knowledge of its truth
  5. Defendant’s made such representation, with an intent that the creditor act upon the representation
  6. Plaintiff reasonably relied upon such representation, thereby causing injury to the creditor. Exxon v. Emerald Oil 348 SW3d 194 (Tex. 2011).

More on FACTORING and BREACH OF CONTRACT, next week…

Contact Us

If you have any questions about business disparagement or need help with business debt collections in Dallas Texas, We Can Help – Give Us a Call:  214-752-8800 or Email Us: sam@samemerick.com

*The foregoing is not intended to provide specific legal advice, but instead only as a generalized discussion

Sam Emerick, Collections Attorney

Sam Emerick has over 35 years
experience in Commercial Collections Law,
Factoring Litigation and Wills, Trusts & Probate