Category Archives: Litigation

10 Step Checklist for Material Suppliers Filing a Mechanic’s Lien in Missouri

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Material Suppliers often face collection issues due to contractors running up accounts and running out of funds on large projects. This can happen for any number of reasons including the contractor’s failure to properly bid the job, issues with cash flow, or complaints regarding the quality or condition of the materials supplied.

Regardless of the reason, suppliers find themselves in collection situations quite frequently, and in many cases, the only manner in which the supplier can collect is by filing a mechanic’s lien on the owner’s property.  In an effort to provide general guidance relating to Missouri mechanic’s liens, we have prepared a checklist that suppliers can reference which utilizes and references or is based upon Missouri’s lien statutes and case law.

It is always advised to seek the counsel of an attorney licensed in the state of Missouri who is familiar and knowledgeable regarding the lien laws.  A mechanic’s lien filing can be a meticulous and difficult process. You should proceed with caution and strongly consider using this checklist as a general reference rather than utilizing it to prepare your own lien.

Step 1. Determine whether the work or material furnished is considered lienable under Missouri Mechanic’s Lien Laws

Ordinarily, common sense will dictate whether work performed or materials supplied are lienable.  However, to make a few examples, Missouri case law describes the following items as those which may give rise to the assertion of a lien: lumber, paneling, sheet rock, tape, paint, paint brushes, sandpaper, saw blades.

Many of the foregoing items would give rise to an invoice that would not likely necessitate a lien due to their modest cost.  However, if a material supplier provides any appreciable amount of product or supplies, which are later incorporated into the subject property, there is a high probability that the supplier has a lienable claim. R.S. Mo. § 429.010

Step 2. Determine the Date that Indebtedness Accrued and Ensure Timely Filing of Lien

The date indebtedness accrued is typically treated as the last day the claimant provided labor or materials to the property that is the subject of the lien. R.S. Mo. § 429.080. “It shall be the duty of every original contractor, every journeyman and day laborer, including persons who use rented machinery or equipment in performing such work or labor, and every other person seeking to obtain the benefit of the provisions of sections 429.010 to 429.340, within six months after the indebtedness shall have accrued.” R.S. Mo. § 429.080.

Step 3. Obtain Legal Information Pertaining to the Subject Real Estate

Typically a title report or letter report is obtained from a local title company. This report is necessary for the preparation of the lien (it is not always necessary for the preparation of the notice but can be helpful in compiling the necessary information). Some of the important reasons to obtain the title report is to ascertain the identity of the owner of record and the exact legal description of the subject property.

Step 4. Determine the Classification of the Entity/Individual with Whom You Have Contracted

Construction projects can have numerous different trades and contractors.  It is important to establish your classification as a supplier or subcontractor or whatever you may be. If the claimant is a subcontractor or supplier (or any person on the project other than the original contractor), the claimant, in order to properly preserve its lien rights, is required to prepare a notice of intent to file a mechanic’s lien statement and serve it on the owner. Said notices are to be served within six months from the date indebtedness accrued less ten days pursuant to R.S. Mo. § 429.100. This notice is sometimes referred to in the industry as a Notice of Intent to File a Mechanic’s Lien.

For Suppliers of Rental Equipment, the claimant must comply with a number of rigid requirements set forth in R.S.Mo § 429.010, and said claimant should refer to the rental equipment supplier lien filing article, which references other statutes because the checklist set forth herein is not adequate to satisfy the rental equipment supplier lien claimant’s requirements. However, in an effort to give a rough overview, the following relates to liens involving rental of machinery/equipment:

  There shall be no lien involving the rental of machinery or equipment unless:

  • (1) The improvements are made on commercial property;
  • (2) The amount of the claim exceeds five thousand dollars; and
  • (3) The party claiming the lien provides written notice within fifteen business days of the commencement of the use of the rental machinery or equipment to the property owner that rental machinery or equipment is being used upon their property. Such notice shall identify the name of the entity that rented the machinery or equipment and the machinery or equipment being rented.

Step 5. Ensure the 10 day Notice of Intent to File a Mechanic’s Lien Contains the Required Elements

Notice of Intent to File a Mechanic’s Lien should contain the following information:

  1. The name of the person or persons to whom notice must be given
  2. The name of the claimant
  3. A description of the improvement (e.g., performed electrical work in the entirety of the two-story brick building)
  4. The location of the property, preferably the legal description that will be used in the lien statement
  5. The name of the person or persons with whom the claimant made the contract
  6. The amount of the claim
  7. The basis of the claim (i.e., whether for labor, for materials, or for labor and materials)
  8. A statement that, unless the account is paid before a specified date (which should be a date at least ten days after the date of service of the notice but in no event later than the date the lien statement must be filed), a lien statement will be filed
  9. The date of the notice
  10. The signature of the claimant–see Towner v. Remick, 19 Mo. App. 205 (W.D. 1885), and Schulenburg v. Bascom, 38 Mo. 188 (1866) (requiring the claimant’s name and signature); Miller v. Hoffman, 26 Mo. App. 199, 202 (E.D. 1887) (upheld a notice signed “Miller & Fathman, by Julian Laughlin, their attorney”)
  11. The return of service

 Step 6. Check the records of the clerk of the circuit court for other Lienholders or Individuals/Entities with Equitable Interests in the Property

It is well-advised to determine whether any other claimants maintain a lien or other equitable interest against the subject property. From a practical standpoint, many times the letter report or title report will identify those interested parties.  However, it is important to conduct your own investigation as your claim progresses to ensure that each interested party becomes a party to your enforcement lawsuit. If so, the claimant should be joined in that suit in order to properly adjudicate each interested party’s rights with respect to the lien. § 429.270

Step 7. Prepare and Timely file a Mechanic’s Lien Statement with the Clerk of the Circuit Court in the County where the Property is Located

Lien Statement should contain (§429.080):

  1. “[A] just and true account of the demand due . . . after all just credits have been given”
  2. “[A] true description of the property, or so near as to identify the same, upon which the lien is intended to apply”
  3. “[T]he name of the owner or contractor, or both, if known to the person filing the lien”
  4. Verification by the claimant or some credible person for the claimant

Step 8. Bring a Lawsuit to Foreclose on the Mechanic’s Lien within Six Months of Filing the Statement of Lien

The claimant must file a petition in the circuit or associate circuit division to foreclose the mechanic’s lien within six months from the date the lien statement was filed by the claimant. §429.170.

Step 9. Ensure that process is served as soon as possible to avoid vitiation of the lien due to failure to prosecute. §429.170

 Step 10. Take judgment on the Foreclosure of the Mechanic’s Lien Claim

After presenting the evidence and allowing the court or jury to review the merits of the case, you will request that the judge or jury render a judgment/verdict in your favor to take judgment in the case.

Conclusion

The foregoing steps merely provide to suppliers to provide some structure in pursuing claims for unpaid materials. However, the list is not exhaustive and lien filing process may include additional steps that are not covered herein. While this article may be helpful in many respects, it should not be used as a substitute for retaining competent counsel to assist with the preparation of a lien filing, including the notice provisions, as often that poses the greatest difficulty for clients. If you need assistance with filing your mechanic’s lien, please do not hesitate to contact our firm, and we can discuss your options and how to best proceed.

St. Louis Business Litigation Lawyer

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Business and Commercial Litigation

Litigating a business dispute can often get messy.

In many instances businesses or commercial entities litigate over disputes or issues that often arise from the obligations or duties set forth in the contract between the parties.

These contracts often involve a lot of money, and in many cases a number of parties could be involved, especially when the transaction involves commercial entities.

We have sorted through some incredibly complex cases, and our attorneys know the procedure and the caveats of trying commercial litigation cases.

Our litigation attorneys represent a number of participants in the commercial context, including:

  • borrowers,
  • lenders,
  • suppliers,
  • vendors,
  • purchasers
  • collection agencies,
  • other law firms,
  • manufacturers,
  • limited liability companies,
  • distributors,
  • corporations
  • other commercial entities.

Success in Litigation Comes from Preparation

So how do our attorneys obtain a successful outcome for our clients?

While the outcome of a case can never be guaranteed, we understand the importance of preparing for trial and the advantages of using every tool at our disposal.

Long before the jury is called in, lawyers are battling intensely in the trenches.  This includes discovery strategy, motion work, and any other litigation tactics you can implement into the case.

The attorney who prepares the most and dominates the discovery and motion phases of the case lays the groundwork for success at trial.

Success in the motion phase of the litigation gives the attorney and his client the opportunity to better proceed with their case because they will be able to introduce evidence without a problem or even win the case summarily in some instances.

Regardless, the discovery phase and motion work allow the attorneys to create leverage for their client or require the opposing side to produce evidence or admissions that can change the posture of the case.

Discovery documents and information are used as evidence. 

The important and relevant information (and documentation) obtained during the discovery phase of the litigation is used at the trial.

Without conducting discovery, the parties may be left with some unwanted surprises at trial.  For that reason, it is important to leave no stone unturned by thoroughly propounding discovery on the opposing party.

Motion Practice

Motions give the attorney the ability to limit the other side’s ability to present evidence or to limit the issues the opposition plans to argue.

There are thousands of types of motions that can be filed throughout the course of a case. A good attorney will learn the background and preferences of the judge to determine whether a motion is worth filing and whether that motion will be fruitful.

In circumstances where the motion will merely annoy the judge or will not accomplish any real objective, the attorney is best advised to refrain from preparing and filing such a motion—for several reasons, it saves the client money, and the attorney does not go into the courtroom to argue a losing motion.

Some lawyers have the philosophy that if you lose one motion, you are now associated as a loser in the eyes of the judge.

Those same attorneys believe you should only proceed with a motion if you believe there is a high probability for success. Otherwise, you are setting yourself up for failure in several other aspects of your case.

Conclusion

There are obvious advantages that accompany a knowledgeable and well-prepared attorney. As discussed above, adequate preparation and an aggressive, thought-out pre-trial strategy can be critical to the client’s success.

Our attorneys know how to prepare, and we’ll be intimately familiar with the facts and legal issues surrounding your case, and we’ll employ vigorous litigation techniques to defend the rights of your business.

If you have a dispute that arises out of a commercial transaction, and you need legal assistance, our attorneys are more than happy to advise or litigate, whatever the situation necessitates.

Please contact us today to discuss how to proceed.

Missouri Mechanic’s Liens: Determining the Last Day Work was Performed

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A mechanic’s lien must be filed within the time prescribed by statute, or it will not be valid.

So, how long does a contractor performing work in Missouri have to file a mechanic’s lien?

R.S.Mo. § 429.080 governs the time in which a mechanic lien must be filed and states, in pertinent part, that it must be filed: “[w]ithin six months after the indebtedness shall have accrued …” R.S.Mo. § 429.080 (2014) (emphasis added).

Thus, the next logical question is, when does the indebtedness accrue?

“The date the ‘indebtedness has accrue[s’] is the last day work was performed…When a job is finished and indebtedness has accrued is a question of fact.” Midwest Floor Co. v. Miceli Dev. Co., 304 S.W.3d at 247.

When is Work Lienable?

It is important to recognize the rigidity of the deadline as a contractor could be precluded from filing a mechanic’s lien if it is not timely filed.  The right and power to file a mechanic’s lien is created by statute, and thus the “lien claimant must substantially comply with statutory requirements.” Midwest Floor Co. v. Miceli Dev. Co., 304 S.W.3d 243, 246 (Mo. Ct. App. 2009.

Accordingly, a contractor should know exactly what Missouri uses as the last day that work is performed. “If labor is performed after it is accepted as substantially complete under the contract, the work will not be lienable. See S & R, 610 S.W.2d at 694 (holding that if labor is done after the owner accepts the work as substantially complete under the contract, the work will not be lienable).” Brown v. Davis, 249 S.W. 696, 698 (Mo.App.St.L.1923).

“A subcontractor cannot, after the termination of an account, extend the mechanic’s lien filing time by rectifying some fault of his in performing the contract.” S & R Builders & Suppliers, Inc. v. Marler, 610 S.W.2d 690, 693 (Mo. Ct. App. 1980).

Last Day Work was Performed Case Summaries

The following is directly quoted from Manning Const. Co. v. MCI Partners, LLC, 419 S.W.3d 134, 139 (Mo. Ct. App. 2013) regarding that last day work is performed and is organized to facilitate legibility:

  • See, e.g., United Petroleum, 218 S.W.3d at 482 (“work performed by a subcontractor that is not intended to simply extend the mechanic’s lien account filing time but is necessary to complete the project in a workmanlike manner operates to extend the lien deadline if it is reasonably within the purview of the original contract” (emphasis added));
  • E. Birk & Son Plumbing & Heating, Inc. v. Malan Constr. Co., 548 S.W.2d 611, 616 (Mo.App.1977) (finding that later work extended lien-filing deadline where “[i]t cannot be denied that this work was essential for the completion of the project, and was not performed for the mere purpose of preserving a mechanic’s lien, but, rather, was reasonably within the purview of the original contract”);
  • Brown v. Davis, 249 S.W. 696, 697–98 (Mo.App.1923) (“It could not be said as a matter of law that the plaintiff performed the [later] work … merely for the purpose of extending the time for filing his lien …”);
  • Badger Lumber Co. v. W.F. Lyons Ice & Power Co., 174 Mo.App. 414, 160 S.W. 49, 53 (1913) (affirming trial court’s holding that later supply of materials to construction project extended deadline for lien filing as to earlier-supplied materials, where “the court, in its findings of fact, states that these items were not charged to the account by appellant for the purpose of extending the time for filing its lien, but were sold in good faith for the purpose of being used, and the same were used, in the construction of the building in question”);
  • Fire Extinguisher, 65 S.W. at 323 (noting evidence that “the [later] work done by the plaintiff … was not a mere scheme on its part to extend the period for filing the lien,” and that owner’s knowledge of, and acquiescence in, later work was “not [intended] as making a new contract for extending the period of limitations”);
  • see also School Dist. of Univ. City ex rel. H & M Mech. Corp. v. Reliance Ins. Co., 904 S.W.2d 253, 256 (Mo.App.E.D.1995) (applying mechanic’s-lien principles to suit on construction performance bond; “Where the reason for the furnishing of small additional items is only to circumvent the notice provision, the time for filing will not be extended.”).

Manning Const. Co. v. MCI Partners, LLC, 419 S.W.3d 134, 139 (Mo. Ct. App. 2013).

Definitions of Unlawful Acts under the Missouri Merchandising Practices Act

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Definitions of Unlawful Acts under the Missouri Merchandising Practices Act

Unlawful Act or Practice

Definition

Authority

Deception

 “Deception is any method, act, use, practice, advertisement or solicitation that has the tendency or capacity to mislead, deceive or cheat, or that tends to create a false impression.–Reliance, actual deception, knowledge of deception, intent to mislead or deceive, or any other culpable mental state such as recklessness or negligence, are not elements of deception” 15 CSR 60-9.020

Fraud

 “It is a misrepresentation for any person in connection with the advertisement or sale of merchandise to make any fraudulent assertion. — An assertion is fraudulent if the person intends his/her assertions to induce a consumer to purchase merchandise, and the person: (A) Knows or believes that the assertion is not in accord with the facts; or (B) Knows that he does not have a reasonable basis for his/her assertion” 15 CSR 60-9.100

False and Misleading Statements

 “A seller shall not make a representation or statement of fact in an advertisement that is false or has the capacity to mislead prospective purchasers.” 15 CSR 60-7.020

False Pretense

 “False pretense is any use of trick or deception, forgery, or false and fraudulent representation, statement, pretense, instrument or device with the intent to defraud–Reliance and injury are not elements of false pretense” 15 CSR 60-9.050

False Promise

 “False promise is any statement or representation which is false or misleading as to the makerís intention or ability to perform a promise, or likelihood the promise will be performed.” 15 CSR 60-9.060

Half-Truth

 “It is a misrepresentation for any person in connection with the advertisement or sale of merchandise to omit to state a material fact necessary in order to make statements made, in light of the circumstances under which they are made, not misleading.” 15 CSR 60-9.090

Misrepresentation

 “A misrepresentation is an assertion that is
not in accord with the facts”		 15 CSR 60-9.070; see Restatement,
Second, Contracts, section 159; Packard v. K
C One, Inc., 727 SW2d 435 (Mo.App.,
W.D. 1987).

Unfair Practice

“An unfair practice is any practice which—
(A) Either—1. Offends any public policy as it has been established by the Constitution, statutes or common law of this state, or by the Federal Trade Commission, or its interpretive decisions; or 2. Is unethical, oppressive or unscrupulous; and
(B) Presents a risk of, or causes, substantial
injury to consumers–Proof of deception, fraud, or misrepresentation is not required to prove unfair practices”		 15 CSR 60-8.020

Concealment of Material Fact

 “Concealment of a material fact is any method, act, use or practice which operates to hide or keep material facts from consumers.” 15 CSR 60-9.110 (1)

Suppression of Material Fact

 “Suppression of a material fact is any method, act, use or practice which is likely to curtail or reduce the ability of consumers to take notice of material facts which are stated.” 15 CSR 60-9.110 (2)

Omission of Material Fact

 “A seller shall not omit any material fact in an advertisement.” — “[A]ny failure by a person to disclose material facts known to him/her, or upon reasonable inquiry would be known to him/her.” 15 CSR 60-7.030; 15 CSR 60-9.110 (3)

Sources:

http://www.sos.mo.gov/cmsimages/adrules/csr/current/15csr/15c60-7.pdf

http://www.sos.mo.gov/cmsimages/adrules/csr/previous/15csr/15csr0611/15c60-8.pdf

http://www.sos.mo.gov/cmsimages/adrules/csr/current/15csr/15c60-9.pdf

Illinois Construction Law FAQs

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General Construction Law Questions

What is the required compliance with Illinois Contracts for the Construction of Buildings? Substantial or Strict Compliance?

Illinois Courts have held that: “persons contracting for the construction and erection of monuments to perpetuate the memory and mark the resting place of their dead are entitled to insist upon a strict compliance with the specifications as to design and character of workmanship.” Oakes v. Barbre, 127 Ill. App. 208, 210 (Ill. App. Ct. 1906)

However, contracts for the construction of a building typically only require substantial compliance.  See generally Oakes v. Barbre, 127 Ill. App. 208, 210 (Ill. App. Ct. 1906); Fitzgerald v. Neville, 210 Ill. App. 659, 659 (Ill. App. Ct. 1918).

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Can a General Contractor bind a Subcontractor to perform the Work at the Bid Price?

Yes if the general contractor relies on the subcontractor’s bid, then the general contractor can estop the subcontractor from backing out of such bid on the basis of promissory estoppel.  Illinois Valley Asphalt, Inc. v. J.F. Edward Construction Co., 413 N.E.2d 209 (3d Dist. 1980).

“The elements of promissory estoppel [in Illinois] are: (1) a promise unambiguous in terms; (2) reliance on such promise by the party to whom it is made; (3) this reliance is expected and foreseeable by the party making the promise; and (4) the one to whom the promise is made must rely on the promise to his injury.” Illinois Valley Asphalt, Inc. v. J. F. Edwards Const. Co., 90 Ill. App. 3d 768, 770, 413 N.E.2d 209, 211 (1980).

Another way of defining the elements of promissory estoppel is the following: “a plaintiff must show (1) that the defendant made a promise unambiguous in its terms, (2) that the plaintiff relied on the promise, (3) that this reliance was expected and foreseeable from the defendant’s position, and (4) that the plaintiff’s reliance on the promise was detrimental.” Pickus Const. & Equip. v. Am. Overhead Door, 326 Ill. App. 3d 518, 523, 761 N.E.2d 356, 361 (2001).

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What does a Contractor have to Prove to be entitled to Additional Compensation on a Construction Project?

“[A] contractor must prove the following elements by clear and convincing evidence to recover additional compensation for extra work on a construction contract: (1) the work was outside the scope of the construction contract; (2) the extra items were ordered by the owner; (3) the owner agreed to pay extra, either by his words or conduct; (4) the extras were not furnished by the contractor as his voluntary act; and (5) the extra items were not rendered necessary by any fault of the contractor.” 209 N. Walnut, L.L.C. v. Origin Fire Prot., Inc., 2013 IL App (2d) 120831-U, ¶ 29(citing A.W. Wendell & Sons, Inc. v. Qazi, 254 Ill.App.3d 97, 104 (1993)).

“The contractor sustains this burden by proving that the extra work was requested by the owner, and there is no evidence indicating that the work was necessary or voluntarily performed due to fault by the contractor.” 209 N. Walnut, L.L.C. v. Origin Fire Prot., Inc., 2013 IL App (2d) 120831-U, ¶ 29(citing A.W. Wendell & Sons, Inc. v. Qazi, 254 Ill.App.3d 97, 104 (1993)).

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What is a Pay-If-Paid Clause in Illinois Construction Law?

“[A] pay-if-paid clause, as the name suggests, provides that a subcontractor will be paid only if the contractor is paid and thus ensures that each contracting party bears the risk of loss only for its own work. A typical clause of this type might say: ‘Contractor’s receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor; the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes the risk.’” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).

What is a Pay-When-Paid Clause in Illinois Construction Law?

“A pay-when-paid clause governs the timing of a contractor’s payment obligation to the subcontractor, usually by indicating that the subcontractor will be paid within some fixed time period after the contractor itself is paid by the property owner.” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).

“A typical clause of this type might say: ‘Contractor shall pay subcontractor within seven days of contractor’s receipt of payment from the owner.’” Id. (citing Robert F. Carney & Adam Cizek, Payment Provisions in Construction Contracts and Construction Trust Fund Statutes, 24 CONSTRUCTION LAW, Fall 2004, at 5, 5.).

“These clauses address the timing of payment, not the obligation to pay. They do not excuse a contractor’s ultimate liability if it does not receive payment by the property owner, so they do not transfer the risk of ‘upstream’ insolvency from contractor to subcontractor and on down the chain.” Beal Bank Nevada v. Northshore Ctr. THC, LLC, 2016 IL App (1st) 151697, ¶ 24, 64 N.E.3d 201, 209, appeal denied sub nom. Beal Bank Nevada v. FCL Inv’rs, Inc., No. 121523, 2017 WL 598624 (Ill. Jan. 25, 2017).

Illinois Prompt Payment Act

What is the Illinois Prompt Payment Act?

The Illinois Contractor Prompt Payment Act states that if a contractor performs work in accordance with that required of him/it under the contract, and payment for the same is undisputed, the owner must pay said contractor within 15 days.

Contractors are required to pay subcontractors within 15 days as well.  The date the 15 days begins to run is the date that a pay application is completed, submitted, and accepted.  The Prompt Payment Act also allows the claimant to collect 10% interest.

If proper notice is provided (7 days written), the unpaid contractor may cease performance of work until payment is made by the obligated party.

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When did the Prompt Payment Act become part of Illinois law?

In 2007, the Illinois Contractor Prompt Payment Act, which was denominated House Bill 743, passed both houses and was sent to Rod Blagojevich, the governor at the time, for signature.  The Contractor Prompt Payment Act is officially set forth under 815 ILCS 603/1 et seq.

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Home Repair and Remodeling Act

What is the Home Repair and Remodeling Act?

The Home Repair and Remodeling Act is governed by (815 ILCS 513/1 through 999 (West 2006)).  “The Act requires that for any repair or remodeling work over $1,000, ‘a person engaged in the business of home repair or remodeling shall furnish to the customer for signature a written contract or work order.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009) (citing 815 ILCS 513/15 (West 2006)).

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What are some of the Requirements for Individuals or Contractors governed by the Home Repair and Remodeling Act?

The policy behind the Home Repair and Remodeling Act is to protect customers from unfair or deceptive practices.  Thus, the Act demands that individuals or contractors performing repair or remodeling work in Illinois follow certain statutory requirements.

One of these requirements deals with the contract. The contract that is furnished to the customer must include certain disclosure requirements, such as the cost and contact information for the company performing the work as well as its address. See Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009); (815 ILCS 513/15 (West 2006)).

Construction companies or individuals performing work that is governed by the Act are also required to “provide to [] customers a copy of the ‘Home Repair: Know Your Consumer Rights’ pamphlet prior to the execution of any home repair and remodeling contract.” See Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009); (815 ILCS 513/20 (West 2006)).

In addition to providing a copy of the pamphlet, the Act makes it “unlawful for any person engaged in the business of home repairs and remodeling to remodel or make repairs before obtaining a signed contract or work order [when the amount of the work is] over $1,000.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 670 (2009)(citing 815 ILCS 513/30 (West 2006)).

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What is the Purpose of the Home Repair and Remodeling Act?

The purpose of the Home Repair and Remodeling Act is “to improve communication between consumers and persons engaged in the business of home repairs or remodeling in order to ‘increase consumer confidence, reduce the likelihood of disputes, and promote fair and honest practices in [the repair and remodeling] business in this State.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1085, 920 N.E.2d 665, 672 (2009) (Quoting 815 ILCS 513/5 (West 2006)).

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What happens if the Individual or Contractor fails to Substantially Comply with the Home Repair and Remodeling Act?

The contractor or individual could potentially forfeit their right to collect on the Project.  For example, in Smith v. Bogard, the Illinois Court of Appeals, of the Fourth District, “held that the contractor’s failure to provide a written contract or work order and the consumer-rights brochure prior to beginning construction defeated his legal and equitable claims for recovery.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1088, 920 N.E.2d 665, 673 (2009).

In other situations, however, the Illinois Court of Appeals has found that failure to substantially comply does not bar recovery.

The Illinois Court of Appeals for the First District did not follow the Smith decision and instead permitted the contractor to recover under a quantum meruit theory.

While the court held that the agreement was not enforceable because of the writing requirement,  “the court [also] concluded that the writing requirement of the Act did not foreclose an equitable theory of recovery between, in that particular case, an honest contractor and a ‘sophisticated’ consumer.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 673 (2009)(citing K. Miller Construction, 394 Ill.App.3d at 250, 332 Ill.Dec. 857, 913 N.E.2d at 1149–50).

“[T]he Second District considered whether a contractor’s failure to provide the homeowners with the consumer-rights brochure in violation of section 20 of the Act (815 ILCS 513/20 (West 2006)) forfeited his legal and equitable causes of action.” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 673 (2009).

“The court concluded that a contractor’s failure to provide the brochure may provide a homeowner with a cause of action under the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 through 12 (West 2006)) but does not ‘vitiate the contractor’s right to recover either in equity or in law.’” Behl v. Gingerich, 396 Ill. App. 3d 1078, 1089, 920 N.E.2d 665, 674 (2009)(quoting Artisan Design, 397 Ill.App.3d at 328, 337 Ill.Dec. at 247, 922 N.E.2d at 370).

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Quantum Meruit

What is Quantum Meruit in the Illinois Construction Law Context?

Quantum meruit is a quasi-contract claim based on principles of equity (fairness).  When work is performed and Illinois courts deem that there was not a valid, legally binding contract, then out of principles of fairness, the courts will consider whether the person or entity performing the work should be entitled to payment.

The courts describe the conferring of a benefit on another, and whether an award is warranted: “‘[O]nly if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. The mere fact that a person benefits another is not of itself sufficient to require the other to make restitution therefor.’”  Housewright v. Vinyard, 2013 IL App (3d) 120666-U, ¶ 37 (quoting Rutledge v. Housing Authority of the City of East St. Louis, 88 Ill.App.3d 1064, 1069 (1980) (quoting Restatement of Restitution § 1, Comment c (1937))).

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How can Quantum Meruit be established on an Illinois Construction Project?

A party can establish a claim for quantum meruit through evidence of actual expenditures on labor, including time sheets and testimony, as to actual labor used and amounts paid for materials. BRL Carpenters, Ltd. v. American National Bank & Trust Co., 126 Ill.App.3d 137 (1984). However, “[p]roof of a bill for a particular amount, without more, is not evidence of the value of services rendered or materials furnished.” Keno & Sons Construction Co. v. La Salle National Bank, 214 Ill.App.3d 310, 312 (1991). Absent a detailed breakdown of costs, there is no way to determine the extent of recovery to which the claimant is entitled. Id. Housewright v. Vinyard, 2013 IL App (3d) 120666-U, ¶ 37.

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7 Provisions that Should be in Every Construction Contract

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Have you ever read through a contract and afterwards wondered to yourself what you just read?

Contracts are often rife with boilerplate provisions that usually have little or no significance to the average person. The common response is that this is a bunch of legal jargon—that’s why I hired a lawyer.

The lawyer is supposed to take care of those things and interpret that language to make sure the other side isn’t pulling a fast one on me. Although many of these provisions are seemingly useless, some of them might have a significant impact if there is a dispute and the parties wind up in litigation.

For those individuals looking to better understand some of those alleged boilerplate provisions, we’ve put together a list of common contractual provisions, specifically geared towards assisting parties to construction contracts.

We’ve attempted to explain these provisions, including why they might be important and what each provision ultimately attempts to accomplish.

The following is a table of contents in the event that you would like to skip to a certain provision:

Force Majeure Clause (Act of God)

Force majeure is derived from the French language, meaning “superior force.” This typically refers to an event that is not typically anticipated and is not under the control of either party.  Sometimes these events are referred to as acts of God.  Although denominated “acts of God,” these acts include natural disasters like tsunamis, floods, hurricanes, and tornados, but they also can include human intervention such as strikes, riots, fires, wars, and the like.

A force majeure clause can often absolve the parties from their contractual obligations in the event that an Act of God occurs.  Accordingly, it is often wise to include the same in your contract to prevent an inequitable outcome.

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No Third Party Beneficiaries

A third party beneficiary is a person who is not a party to the contract at issue, but the contract will benefit said person either intentionally or incidentally.  A no third party beneficiary provision precludes any third parties from coming in and asserting rights in the contract and/or enforcing provisions against the parties named in the contract.

Typically the parties do not intend to benefit a third party and if they do, the parties they will expressly include such language in the contract.  The third party beneficiary is typically referred to as an intended third party beneficiary under such circumstances.  However, in certain situations, Missouri courts will find that an incidental third party beneficiary has certain rights that flow from the contract.

In order to avoid this unwanted outcome (or if it is wanted, then you should include an express provision in the contract), the attorneys drafting the contract should include a provision prohibiting the rights of any third party beneficiary.

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Liquidated Damages Clause

“Liquidated damages are a measure of compensation which, at the time of contracting, the parties agree shall represent damages in a case of breach.” Paragon Grp., Inc. v. Ampleman,878 S.W.2d 878, 880 (Mo. App. E.D. 1994).

A liquidated damages clause is particularly important in the construction industry and thus is found quite often in construction contracts.

However, in order for the liquidated damages clause to be enforceable, there are a number of different elements that must be satisfied.

To enforce a liquidated damages provision in Missouri, the claimant must first show some harm. “In Missouri, before triggering a liquidated damages provision, our courts have ‘consistently’ held that the party requesting enforcement of the liquidated damages provision ‘must show at least some actual harm or damage caused by the breach.’” Arcese v. Daniel Schmitt & Co. (Mo. App., 2016)(citing Grand Bissell Towers, Inc., 657 S.W.2d at 379; see also Phillips v. Mo. TLC, LLC, 468 S.W.3d 398, 400 (Mo. App. S.D. 2015) (“While it is not necessary to actually prove damages in the same amount as stated in a liquidated damages provision, we have reasoned that without evidence of damages, a liquidated damages clause actually becomes a penalty and is unenforceable.”) (internal citations and quotation marks omitted).

“Although proof of a precise dollar amount is unnecessary, ‘it nevertheless must be shown that some harm or damage, in fact, occurred.” Arcese v. Daniel Schmitt & Co. (Mo. App., 2016) (quoting Valentine’s, Inc. v. Ngo, 251 S.W.3d 352, 355 (Mo. App. S.D. 2008) (quoting Goldberg, 672 S.W.2d at 179).

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What is a Penalty Clause in the Liquidated Damages Context?

“[A] penalty [clause] is not a measure of compensation for contract breach, but rather, a punishment for default or a security for actual damages sustained due to non-performance which incorporates the idea of punishment.” Arcese v. Daniel Schmitt & Co. (Mo. App., 2016)(quoting Goldberg v. Charlie’s Chevrolet, Inc., 672 S.W.2d 177, 179 (Mo. App. E.D. 1984); see also Star Dev. Corp. v. Urgent Care Assocs., Inc., 429 S.W.3d 487, 491 (Mo. App. W.D. 2014).

“Ordinarily, ‘penalty clauses’ are disguised as liquidated damages clauses. The mere branding of a provision in a contract as one of ‘liquidated damages’ does not, however, make it so. If, in fact, said provision is a penalty, the labeling of the clause is of no consequence. Accordingly, the import of construing purported liquidated damages provisions cannot be overstated, in that, generally, liquidated damages clauses are valid and enforceable, whereas “penalty clauses” are invalid and unenforceable.” Arcese v. Daniel Schmitt & Co. (Mo. App., 2016)(internal citations omitted).

“In Missouri, we have adopted the rules of the Restatement of Contracts for determining whether a liquidated damages clause is in fact a penalty. See, e.g., Corrigan Company Mechanical Contractors v. Fleischer, 423 S.W.2d 209, 213-214 (Mo.App.1967).

These rules are: ‘(1) An agreement, made in advance of breach, fixing the damages therefor, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless (a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and (b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation.’ Restatement of Contracts § 339 (1932).” Grand Bissell Towers, Inc. v. Joan Gagnon Enterprises, Inc., 657 S.W.2d 378, 379 (Mo. App. E.D., 1983).

If the liquidated damages provision is not drafted properly, it will be subject to attack and may not hold up in court.  Accordingly, a well-versed attorney should draft any liquidated damages clause to ensure that it will withstand scrutiny if attacked by the opposing party. To the contrary, if you are defending a claim or offset based on liquidated damages, please contact one of our attorneys to learn about your legal rights.

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Counterparts (Facsimile Signing)

A counterpart signature provision is typically used as a convenience when the parties are not in the same physical location, oftentimes a counterpart facsimile provision specifically permits and validates the signing of the contract in counterparts that are faxed to the other party to the contract.

This provision may only provide a small benefit that may never matter for all practical purposes. However, if one of the parties puts the authenticity of the contract or signatures in question, the counterparts facsimile signing provision may serve as an additional safeguard to prevent any questions regarding the validity of the signatures.

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Interpretation & Headings of Contract

This clause basically states that the headings have no bearing on the content contained thereunder, and the contract should be interpreted based on the language in the body.

From a practical standpoint, most courts will not take into consideration the headings in determining the intent of the parties, as questions of ambiguity are resolved based on the parties’ meeting of the minds (their intent).  Thus, the headings should not matter when a court interprets the same.

However, if the opposing party is arguing that the heading’s title affects the interpretation, a court could adopt such argument and agree that the headings are also language in the contract.  Because the headings also are language in the contract, said language could have a bearing on the contract’s interpretation.

Thus, instead of leaving things to chance, the simple inclusion of an interpretation and headings of contract provision could prevent an improper interpretation of the terms contained in your agreement.

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Severance Provision

The severance provision usually looks something like this:

The provisions of this Agreement are severable. If any portion, provision, or part of this Agreement is found to be, determined, held, or adjudicated to be invalid, unenforceable, or void for any reason whatsoever, any such portion, provision or part shall be severed from the remaining portions, provisions or parts of this Agreement and shall not affect the validity or enforceability of any remaining portions, provisions, or parts.

As one may infer from the foregoing provision, the purpose of the severance provision is to ensure that the contract is not rendered null and void in its entirety due to one invalid or unenforceable provision.  Judges have tremendous power to interpret and make a determination regarding the terms and conditions of a contract.  If a judge decides that one provision is not enforceable, it should not wholly invalidate the contract.

For that reason, a severance provision should be included in every contract.

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Choice of Law or Forum Selection Clause

A choice of law provision designates the jurisdiction or the substantive law that governs the contract.  Also, using a forum selection clause the parties can choose the forum where the case will be resolved.  As a caveat, this provision may be superseded by a statute in certain limited circumstances such as when a consumer transaction is involved.

Consumer statutes, like the Fair Debt Collection Practices Act (“FDCPA”), protect the consumer from selecting a venue that will frustrate their ability to defend their rights in the event a dispute arises.  Accordingly, the statute makes the proper venue the county where the contract is consummated. Any deviation from this venue could be deemed a violation of the FDCPA. However, the case law defining such FDCPA violations is mixed and very gray.  Thus, you are always advised to consult with an experienced consumer protection attorney to determine whether your contract is safe with respect to the stringent FDCPA protections.

Any companies drafting a contract should choose the jurisdiction of their state law, which is Missouri for the vast majority of the readers of this article. Choosing the substantive law of your home state (or the state of your lawyer) would allow your company to have an upper hand because your lawyer should be well-apprised as to the substantive law of that particular state.  Further, if you choose the venue in which your lawyer is located, you will have another advantage as your lawyer will be familiar with the procedural process, and hopefully the judges, in such venue.

Accordingly, it is well-advised to include a jurisdiction and forum selection clause in every construction contract.

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Alternative Dispute Resolution Clause

This can be a lifesaver provision against a consumer.  Under alternative dispute resolution (“ADR”) or arbitration, the consumer waives their right to a jury usually, and in such a case, the risk and cost of the litigation is much less.  This gives the consumer much less leverage, especially in the construction context because a claim based on violations of the Missouri Merchandising Practices Act (“MMPA”) is probably in play.

When a consumer brings an MMPA claim the ante is raised because the MMPA (statute) allows the judge to award attorney’s fees in the event that the trier of fact finds that the contractor violated the MMPA.  Because a jury could rule in either party’s favor and because of the substantial risk involved, many contractors are forced into settling the matter, instead of the possible alternative of: betting the business on winning the litigation.

If the case proceeds through alternative dispute resolution, there are much less formalities and the rules of procedure (and rules of evidence) are limited to allow an expedited disposition of the case.  For that reason, ADR is often more economical and reduces certain ploys used by plaintiffs’ attorneys to create settlement leverage by capitalizing on the slow, and sometimes over formal, judicial process.

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Time is of the Essence

In a construction contract, a time is of the essence provision makes the completion of duties and the timing of the contractual obligations material to the laboring party’s performance. In the event the laboring party does not complete the performance, the party is in breach of contract or will be subject to liquidated damages (if such a clause is contained in the contract).

Because parties will often lose money if a project is not completed timely (due to lost business opportunities, lost profits from non-use of the facilities, etc.), the contract, especially in the construction industry, should include a time is of the essence provision.  For those parties who stand to potentially lose money because of a time is of the essence provision (general contractors and subcontractors), you may wish to negotiate such clauses out of the contract.  This must be addressed prior to execution of the contract.

In any event, these provisions can be critically important and can be very costly to the parties if they are inserted or deleted from the contract, depending on the factual scenario.

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Indemnity Provision

An indemnity provision is when one party in the contract agrees to pay for or answer for liability incurred by another.  It’s basically another way of saying that the party who is to indemnify is to reimburse the other for any expenses that are incurred (based on whatever the triggering event is).

Contractual indemnity is when the parties expressly agree to the same in the contract.  Equitable or non-contractual indemnity is when Missouri courts find that one party, based on principles of equity, ought to pay for the other party’s liability.

For contractual indemnity provisions, Missouri courts have “recognize[d] that indemnity contracts are of two kinds, those against loss and those against liability. Burns & McDonnell Engineering Co., Inc. v. Torson Const. Co., Inc., 834 S.W.2d 755 (Mo. App.W.D., 1992) (citing Superintendent of Ins. v. Livestock Mkt. Ins. Agency, Inc., 709 S.W.2d 897, 903 (Mo.App.1986)).

“In either case, the cause of action accrues when the covenant is breached.” Burns & McDonnell Engineering Co., Inc. v. Torson Const. Co., Inc., 834 S.W.2d 755 (Mo. App.W.D., 1992) (citing Superintendent of Ins. v. Livestock Mkt. Ins. Agency, Inc., 709 S.W.2d 897, 903 (Mo.App.1986)).

  • Indemnity against loss accrues when the indemnitee sustains actual loss.

This contemplates actual payment by the indemnitee for the obligation which the party has been found liable. Ruysser v. Smith, 293 S.W.2d 930, 933-34 (Mo.1956); Moberly v. Leonard, 339 Mo. 791, 99 S.W.2d 58, 63 (1936).

  • Indemnity against liability accrues as soon as liability occurs, and no actual loss need be shown.

Indemnity against liability “cannot accrue until an indemnitee’s liability has become ‘fixed and established.’” Burns & McDonnell Engineering Co., Inc., 834 S.W.2d at 758; see Moberly, 99 S.W.2d at 63.

The mere assertion of a claim against the indemnitee does not “fix and establish” liability, but only subjects the party to potential liability to be determined with the outcome of the lawsuit. Therefore, a cause of action for indemnity against liability cannot accrue until the claim against the indemnitee is completely resolved. Only then is the party’s liability “fixed and established.” Burns & McDonnell Engineering Co., Inc. v. Torson Const. Co., Inc., 834 S.W.2d 755 (Mo. App.W.D., 1992).

According to the foregoing Missouri law, the drafter of an indemnity contract or even a simple indemnification provision within a different contract should consider the objective of the parties, and for what specific situations they would like indemnification.

Some contracts are a combination and have clauses that indemnify against loss and liability. A more specific description of a clause that is intermixed as such is described and articulated in the Burns & McDonnell case:

“[T]he contract provides that Torson will indemnify and hold Burns harmless against all “‘damages, losses and expenses, including attorney’s fees.’” Id.

“This language contemplates indemnification for ‘loss.’ The contract also agrees to indemnify and hold Burns harmless against all “claims.” The use of the word ‘claims,’ while not expressly so designating, indemnifies Burns from any liability which it might incur.” Id.

“The word ‘liability’ is a broad legal term and includes ‘almost every character of hazard or responsibility, absolute, contingent or likely’; and the “condition of being actually or potentially subject to an obligation.” Black’s Law Dictionary 823 (5th ed. 1979). The term also applies to ‘unliquidated claim[s].’ Id. As used in indemnity contracts, the term ‘claim’ has been interpreted as referring to indemnity against liability.” Id.

“A third party claim for indemnity may be filed before the [claim] accrues, in order to accommodate and facilitate the whole litigation between the parties.” Burns & McDonnell Engineering Co., Inc., 834 S.W.2d at 758; see also Bond Diamond Co. v. Wilson, 325 S.W.2d 63, 66 (Mo.App.1959); Rule 55.32(f).

Accordingly, the specific language used in the indemnity contract or provision can make a significant difference in the rights of the parties and when the lawsuit can be filed.  This could make a difference as to whether the party can even invoke the indemnification provision.  Therefore, it is well-advised that any person searching for an indemnity contract or an agreement containing such a provision, should contact an attorney experienced with drafting and litigating indemnity provisions.

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Conclusion

To sum up this article, every construction contract should have certain provisions in order to safeguard the parties and to ensure that the other provisions in the contract function as they should.

The following are the 7 clauses that should be in every contract:

  1. Force Majeure Clause (Act of God)
  2. No Third Party Beneficiaries
  3. Counterparts (Facsimile Signing)
  4. Interpretation & Headings of Contract
  5. Severance Provision
  6. Choice of Law or Forum Selection Clause
  7. Time is of the Essence

While a contract can be valid and binding without these clauses, in a case where there is a close call or the contract is under heavy scrutiny, these provisions might make the difference between protecting and losing your rights under the contract.

That’s why it is important to consult with a knowledgeable attorney and retain him/her to draft your contract to assure that your legal rights are protected.

If you know of any contractual provisions that should be in a construction contract, or in any contract for that matter, please let us know in the comments section.

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7 Most Common Claims in Missouri Real Estate Litigation

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Are you looking to buy or sell a home? Are you a real estate agent assisting someone with purchasing or selling a home?

Are you prepared to go to court after the closing?

Given the complexity of Missouri real estate laws and the inordinate amount of issues that can arise, buyers, sellers, and real estate agents face a real threat of becoming a party to litigation after participating in Missouri real estate transactions.  Even those parties who comply with all laws and regulations face exposure to litigation merely by virtue of their involvement in the transaction.

This guilt-by-association-esque approach may not seem right, but it is an unfortunate reality when something goes awry in a real estate transaction.  While there is no guarantee that you will not be named as a defendant in a lawsuit, there are certain things that can be done to greatly reduce the probability of winding up in litigation.

Based on my experience litigating these cases, the 7 most commonly alleged claims involving Missouri real estate transactions are set forth in this article.  The prudent real estate agent, homebuyer and/or home seller will educate themselves regarding these claims to know the potential pitfalls, so they are in a better position to avoid exposure to liability and the unpleasantries that accompany a lawsuit.

The table of contents on this page enumerates the 7 claims that are most common when litigating real estate transactions.  Each claim is discussed more fully under its respective heading.

1. Fraud

The elements of a fraud claim in Missouri are: “(1) a representation;  (2) its falsity;  (3) its materiality;  (4) the speaker’s knowledge of its falsity;  (5) the speaker’s intent that it should be acted on by the person and in the manner reasonably contemplated;  (6) the hearer’s ignorance of the falsity of the representation;  (7) the hearer’s reliance on the representation being true;  (8) his right to rely thereon;  and, (9) the hearer’s consequent and proximately caused injury.”  Droz v. Trump, 965 S.W.2d 436 (Mo. App.W.D., 1998); see also Green Acres Enterprises, Inc. v. Nitsche, 636 S.W.2d 149, 153 (Mo.App.1982); Hanrahan v. Nashua Corp., 752 S.W.2d 878, 883 (Mo. Ct. App. 1988).

Fraud is a term used in everyday speak.  We know the meaning, but most people don’t know the 9 elements in Missouri that make up a fraud claim.  While these are merely technical elements in Missouri law, in laymen’s terms, fraud is synonymous with lying.  Thus, even if you don’t choose to memorize the above elements, just remember that if you don’t lie, you probably won’t find yourself on the other end of a fraud claim (no guarantees, but it should greatly reduce the probability).

Statute of Limitations

  • 5 year or 15 year Statute of Limitations (depending on tolling)—S.Mo. § 516.120(5)

R.S.Mo. § 516.120(5) states: “[a]n action for relief on the ground of fraud, the cause of action in such case to be deemed not to have accrued until the discovery by the aggrieved party, at any time within ten years, of the facts constituting the fraud.”

“[T]he cause of action does not accrue from discovery of the fraud. If ten years elapse without discovery of the fraudulent acts, the statute of limitations begins to run and after five years the cause of action is barred, even if the fraud has not yet been discovered. Id. at 798. This means that the latest a fraud claim may be brought is 15 years after the fraud occurred.” State ex rel. Stifel, Nicolaus & Co., Inc. v. Clymer, 522 S.W.2d 793, 798 (Mo. banc 1975).

Thus, an action for fraud accrues not when the damage occurs or can be ascertained, but when “facts constituting the fraud are discovered.” Schwartz v. Lawson, 797 S.W.2d 828, 832 (Mo.App.1990). The statute of limitations begins to run at the time a cause of action in fraud accrues, which is when plaintiff “discovered or in the exercise of due diligence, should have discovered the fraud.” Gilmore v. Chicago Title Insurance Co., 926 S.W.2d 695, 698 (Mo.App.1996)(citing Burr v. National Life & Accident Insurance Co., 667 S.W.2d 5, 7 (Mo.App.1984)). “The plaintiff maintains the duty to make inquiry to discover the facts surrounding fraud. Where the means of discovery exist, the plaintiff will be deemed to have known of the fraud so as to begin the running of the statute.” Burr v. National Life & Acc. Ins. Co., 667 S.W.2d 5 (Mo. App.W.D., 1984).

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2. Violations of the Missouri Merchandising Practices Act

The Missouri Merchandising Practices Act is an act designed to protect consumers by leveling the playing field and incentivizing attorneys to take such cases where consumers are harmed.  In order to incentivize attorneys to take these cases, the Missouri legislature included the potential for recovery of attorney’s fees and punitive damages if violations of the Act are found.

Generally, consumers are not equipped to foot an expensive litigation bill, but with the potential for attorney’s fees, some attorneys are more inclined to take the case on a contingency basis (that mean’s that the client only pays attorney’s fees if the client succeeds).  This attorney’s fees possibility heightens the recovery potential and gives the consumer more leverage.

“Section 407.020 of the Missouri Revised Statutes, commonly known as the “Missouri Merchandising Practices Act,” provides that, ‘[t]he act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice, or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce … is declared to be an unlawful practice.’ The scope of the MPA is broad. Section 407.025 provides a civil cause of action to consumers who purchase goods or services and suffer damages due to any of the aforesaid unlawful practices.” In re McClelland, 06-41720, 2008 WL 5157685 (Bankr. W.D. Mo. June 20, 2008).

One case simplifies the foregoing paragraph in a succinct manner, “[i]n a private lawsuit for violation of the Missouri Merchandising Practices Act (MMPA), plaintiffs must demonstrate that they:

  • (1) purchased merchandise…from defendants;
  • (2) for personal, family, or household purposes; and
  • (3) suffered an ascertainable loss of money or property;
  • (4) as a result of an act declared unlawful under the Merchandising Practices Act.”

Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 773 (Mo. banc 2007); Edmonds v. Hough, 344 S.W.3d 219 (Mo. App.2011)(spacing and emphasis added).

The following is a more descriptive breakdown of each element necessary to satisfy the Missouri Merchandising Practices Act (“MMPA”).

(1) purchased merchandise…from defendants

R.S.Mo. § 407.010 (4) defines merchandise as the following: “any objects, wares, goods, commodities, intangibles, real estate or services.”

Based on the definition alone, the first element of the MMPA is satisfied because real estate is considered merchandise. Accordingly, the first element is satisfied by virtue of the type of transaction. Due to the long reach of the MMPA, there is potential that the legislature may amend the MMPA to narrow it.  Particularly with the Republican administration in 2017, there is a chance that the MMPA could be greatly limited.

However, at this point, it is difficult to say whether that limitation would involve the definitions section or would limit the reach of the MMPA as to whom it applies (i.e., only merchants).

It should be noted, though, that because the aim of the MMPA is to protect consumers, and because the MMPA allows buyers of residential real estate (typically consumers) to bring an MMPA claim against sellers of residential real estate (oftentimes consumers), the leverage contained in R.S.Mo. § 407.025, which potentially allows for the recovery of attorney’s fees and punitives, not only works for consumers, but also works against them.

The contrary argument to this policy stance is that most real estate contracts that are drafted by sophisticated parties (which are most contracts used by real estate agents and brokerage firms these days) contain a clause which awards attorney’s fees to the prevailing party.  However, the distinction lies in the vast reach of the violative acts (which are discussed below under element 4 of the MMPA) versus the requirements that the party prevail on the breach of contract claim.  To capitalize on the attorney’s fees provision in the real estate contract, the prevailing party would, presumably, have to prevail on the breach of contract claim.  Because the prevailing party would have to prove breach, this would require a greater burden than merely proving that the party violated an act under the MMPA.

The opposing side would then argue that the safeguard under the MMPA is that the judge ultimately decides whether attorney’s fees are awarded at the conclusion of the case.  Thus, if the court believes in equity that attorney’s fees are warranted, then reasonable fees will be awarded.

A contractual provision providing for the award of attorney’s fees, does not allow for such flexibility.  In any event, the foregoing discussion merely elucidates the advantages and disadvantages of modifying the extent that the MMPA applies to real estate transactions, the application to transactions in which a consumer is the seller, and how attorney’s fees may affect/undermine the legislature’s intent.

(2) for personal, family, or household purposes

This element is very factually based.  If the purpose of the transaction is personal and will be used as the buyer’s principal residence, then it satisfies this element.  If the purchase of the property is to be used as rental property, there is a legitimate question as to whether this element is satisfied.

There is a high probability that the court will find that this element is not satisfied for rental property because it is for commercial purposes and is not used for personal, family or household purposes.

(3) suffered an ascertainable loss of money or property

As it pertains to the MMPA, the Missouri Court of Appeals stated that “[t]he defrauded party should be awarded the difference between the actual value of the property and the value if it had been as represented, measuring the damages at the time of the transaction.” Schoenlein v. Routt Homes, Inc., 260 S.W.3d 852 (Mo. App., 2008).

(4) as a result of an act declared unlawful under the Merchandising Practices Act

The following are the unlawful acts seen most frequently in the real estate context:

a) Misrepresentation

A misrepresentation is defined as “an assertion that is not in accord with the facts”

When proving a misrepresentation pursuant to the MMPA, a plaintiff does not need to prove

  • Reliance,
  • Knowledge that the assertion is misleading/false, or
  • Any culpable mental state. 15 CSR 60-9.070

b) Half-Truth

A half-truth in its simplest form is defined as a situation where a party “[o]mit[s] to state a material fact necessary in order to make statements made…not misleading.” 15 CSR 60-9.090

c) Omission of a Material Fact

An omission of a material fact is defined as “any failure by a person to disclose material facts known to him/her, or upon reasonable inquiry would be known to him/her.” 15 CSR 60-9.110 (3)

When proving an omission of a material fact pursuant to the MMPA, a Plaintiff does not need to prove:

  • Reliance, or
  • Intent. 15 CSR 60-9.110 (4)

d) Unfair Practice

An unfair practice is any practice that:

1A. Offends any public policy as it has been established by

  • Constitution
  • Statutes
  • MO Common law
  • Federal Trade Commission & interpretive decisions

or

1B. Is unethical, oppressive, or unscrupulous           

and

2. Presents risk or causes substantial injury to consumers

15 CSR 60-8.020

Statute of Limitations

  • 5 Year Statute of Limitations—S.Mo. § 516.120(2)

“The statute of limitations [for violations of the MMPA] begins to accrue when the Plaintiff has

[1] knowledge of the wrong and at least nominal damage, or

[2] knowledge that puts plaintiff on notice to inquire further.”

 Ball v. Friese Constr. Co., 348 S.W.3d 172 (Mo. App., 2011)(emphasis and spacing added).

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3. Breach of Contract

“The essential elements of a breach of contract action include: (1) the existence and terms of a contract; (2) that plaintiff performed or tendered performance pursuant to the contract; (3) breach of the contract by the defendant; and (4) damages suffered by the plaintiff.” Martha’s Hands, LLC v. Rothman, 328 S.W.3d 474, 479 (Mo. Ct. App. 2010)(citing Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo. banc 2010)).

A breach of contract in a real estate scenario can be the seller or buyer suing the opposing party (buyer or seller) on the basis that their actions constituted a breach of contract.  In a similar vein, the buyer or seller may sue their real estate agent or the brokerage firm, usually, whichever entity/person was named on the buyer or seller’s agency agreement.

While the agent has statutory duties s/he must carry out, the agency contract often incorporates a number of said duties as well as its own independent duties (typically).  Violation of the statutory duties incorporated into the contract could be the basis for the breach of contract claim.  In the event the MMPA claim is not sufficient or groundless against the real estate agent, the breach of contract claim might be the only avenue of recovery.

Statute of Limitations

  • 5 Year Statute of Limitations—S.Mo. § 516.120(1)

“The statute of limitations begins to run “after the causes of action shall have accrued.” § 516.100. But a “cause of action shall not be deemed to accrue when the wrong is done or the technical breach of contract or duty occurs, but when the damage resulting therefrom is sustained and is capable of ascertainment.” Id. A cause of action is capable of ascertainment “‘when a reasonable person would have been put on notice that an injury and substantial damages may have occurred and would have undertaken to ascertain the extent of the damages.'” State ex rel. Old Dominion Freight Line, Inc. v. Dally, 369 S.W.3d 773, 778 (Mo. App. S.D. 2012) (quoting Powel v. Chaminade Coll. Preparatory, Inc., 197 S.W.3d 576, 584 (Mo. banc 2006)). “‘At that point, the damages would be sustained and capable of ascertainment as an objective matter.'” Id. (quoting Powel, 197 S.W.3d at 584-85).” N. Farms, Inc. v. Jenkins (Mo. App., 2015).

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4. Breach of Fiduciary Duty

The agent’s statutory duties include the duty of care and loyalty, which are the essence of a fiduciary duty.

To establish a claim for breach of a fiduciary duty, a plaintiff must prove: (1) the existence of a fiduciary duty between the plaintiff and the defending party; (2) “‘that the defending party breached the duty'”; and (3) “‘that the breach caused the [plaintiff] to suffer harm.'” Henry v. Farmers Ins. Co., 444 S.W.3d 471 (Mo. App., 2014)(citing W. Blue Print Co. v. Roberts, 367 S.W.3d 7, 15 (Mo. banc 2012)).

“Whether a fiduciary duty exists is a question of law, while the breach of that duty is for the trier of fact to decide.” W. Blue Print Co. v. Roberts, 367 S.W.3d 7, 33 IER Cases 1397 (Mo., 2012).

It should be noted that the seller does not have a fiduciary duty to the buyer, and the buyer does not have a fiduciary duty to the seller.  Thus, these would not be valid claims against the other party.  These claims should be reserved to be alleged solely against the real estate agents and/or brokerage firms, depending on whether the situation lends to such claim.

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(4); N. Farms, Inc. v. Jenkins (Mo. App., 2015).

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5. Negligent Misrepresentation

The elements of negligent misrepresentation are: “(1) speaker supplied information in the course of his business or because of some other pecuniary interest; (2) due to speaker’s failure to exercise reasonable care or competence in obtaining or communicating this information, the information was false; (3) speaker intentionally provided the information for the guidance of a limited group of persons in a particular business transaction; (4) listener justifiably relied on the information; and (5) that as a result of listener’s reliance on the statement, he/she suffered a pecuniary loss.” White v. Bowman, 304 SW 3d 141 (Mo. App., 2009).

A negligent misrepresentation claim is the hedge for a fraudulent misrepresentation claim.  In real estate litigation, usually a negligent misrepresentation claim is brought against the seller (if it deals with misrepresentation) and the seller’s agent and/or the listing agent, again, depending on what the facts the case indicate.

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(4); Branstad v. Kinstler, 166 S.W.3d 134 (Mo, 2005).

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6. Negligence/Negligence Per Se

In a negligence action, the plaintiff must allege and prove facts which show: “1) the existence of a duty on the part of the defendant to protect plaintiffs from injury; 2) failure of defendant to perform that duty; and 3) injury to plaintiffs resulting from such failure.” Hill v. Gen. Motors Corp., 637 S.W.2d 382, 384 (Mo.App. E.D.1982) (citing Scheibel v. Hillis, 531 S.W.2d 285, 288 (Mo. banc 1976)). “The particular standard of care that society recognizes as applicable under a given set of facts is a question of law for the courts. Whether a defendant’s conduct falls short of the standard of care is a question of fact for the jury.” Harris v. Niehaus, 857 S.W.2d 222, 225 (Mo. banc 1993). Thompson v. Brown & Williamson Tobacco Corp., 207 S.W.3d 76 (Mo. App., 2006).

Negligence Per Se is a variation of negligence in which the duty is set by statute rather than by common law.  “Negligence per se arises when the legislature pronounces in a statute what the conduct of a reasonable person must be and the court adopts the statutory standard of care to define the standard of conduct of a reasonable person.” Dibrill v. Normandy Assoc. Inc., 383 S.W.3d 77, 84 (Mo.App. E.D.2012).

To prevail on a negligence per se claim, “the following four elements [must be] met: (1) There was, in fact, a violation of the statute; (2) The injured plaintiff was a member of the class of persons intended to be protected by the statute; (3) The injury complained of was of the kind the statute was designed to prevent; and (4) The violation of the statute was the proximate cause of the injury.” King v. Morgan, 873 S.W.2d 272, 275 (Mo.App. W.D. 1994).

“If a submissible case is made under a negligence per se cause of action, a plaintiff could recover if a jury concluded that a statute was violated and the violation was the proximate cause of the injury.” Sill v. Burlington N. R.R., 87 S.W.3d 386, 392 (Mo. Ct. App. 2002)(citing Vintila v. Drassen, 52 S.W.3d 28, 37 (Mo.App. S.D.2001). Thus, “if the [jury] instruction were based upon the theory of negligence per se, the jury would begin their inquiry with the question of proximate cause.” Id.

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(2) & (4); Kueneke v. Jeggle, 658 S.W.2d 516 (Mo. App. E.D., 1983); Nuspl v. Missouri Medical Ins. Co., 842 S.W.2d 920 (Mo. App. E.D., 1992).

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7. Unjust Enrichment

Unjust enrichment is brought in a majority of lawsuits and usually acts as the catch-all claim.  Unjust enrichment is an equitable claim created in the law, which seeks to arrive at an outcome the represents principles of fairness.

Most diligent attorneys bring this claim in addition to the other relevant claims to ensure that the claimant can maintain his/her cause of action even if the court decides that no contract existed between the parties (or that there is no claim at law).

The elements of an unjust enrichment claim are: “the plaintiff must prove that (1) he conferred a benefit on the defendant; (2) the defendant appreciated the benefit; and (3) the defendant accepted and retained the benefit under inequitable and/or unjust circumstances.” Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. Ct. App. 2010); see also Hertz Corp. v. RAKS Hospitality, Inc., 196 S.W.3d 536, 543 (Mo.App. E.D.2006); Graves v. Berkowitz, 15 S.W.3d 59, 61 (Mo.App. W.D.2000). Even if a benefit is “conferred” and “appreciated,” if no injustice results from the defendant’s retention of the benefit, then no cause of action for unjust enrichment will lie. Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. Ct. App. 2010)(citing White v. Pruiett, 39 S.W.3d 857, 863 (Mo.App. W.D.2001)).

Statute of Limitations

  • 5 Year Statute of Limitations—R.S.Mo. § 516.120(1).

“Section 516.120(1) provides a five-year statute of limitations for ‘[a]ll actions upon contracts, obligations or liabilities, express or implied….’ An action for unjust enrichment is based on an implied or quasi-contractual obligation. Landmark Sys., Inc. v. Delmar Redev. Corp., 900 S.W.2d 258, 262 (Mo.App. E.D.1995). Such actions are subject to the five-year statute of limitations in Section 516.120(1). See Koppe v. Campbell, 318 S.W.3d 233, 240 (Mo.App. W.D.2010).” Royal Forest Condo. Owners’s Ass’n v. Kilgore, 416 S.W.3d 370 (Mo. App., 2013).

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Conclusion

Real estate transactions can give rise to various causes of action.  While there are no magic steps one can take to avoid a lawsuit, informing one’s self about the most common claims in Missouri real estate litigation may allow the reader to take preventative steps to reduce the possibility of litigation.

The following are the 7 most common claims that are brought in Missouri cases involving real estate matters:

  1. Fraud
  2. Violations of the Missouri Merchandising Practices Act
  3. Breach of Contract
  4. Breach of Fiduciary Duty
  5. Negligent Misrepresentation
  6. Negligence/Negligence Per Se
  7. Unjust Enrichment

While many of these claims are discussed above, one takeaway is that the truth almost always prevails. Thus, if there is some question as to the legality of certain actions, remember most people are best served by taking the higher road and erring on the side of disclosure or taking preventative measures and addressing all problems up front, rather than dealing with bigger issues after the fact.

If you have issues involving a real estate transaction or if you just have questions about a potential situation that could arise, please do not hesitate to contact our attorneys.  We’d be more than happy to assist you in any way that we can.

Please let us know real estate claims that you’ve dealt with and any feedback regarding the same in the comments section.

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41 Contracts Our Attorneys Draft, Review, and Litigate

Contract Law, Litigation, St. Louis Construction Law Attorney Shares, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Types of Contracts in Missouri

Our attorneys are experienced in handling a variety of different matters relating to contracts.

To give our clients an idea of how we can assist them with their contract needs, we have prepared a list of the contractual agreements that we have litigated or prepared for clients in the past.

We’ve also attempted to give a general description of the various agreements, so our clients and any viewer of this website will be informed regarding the types of agreements that are at their disposal.

Our attorneys are on call to answer questions about any of the agreements set forth below, and we’d be happy to draft any of these agreements or another document that is suited for your particular situation.


Acquisition Agreements

Acquisition is the gaining of wealth or control over new assets or things.  Any time that a business or assets of a business are acquired, the purchaser and/or seller would be well-advised to consider an acquisition agreement.

An acquisition agreement sets forth the terms of the transactions to eliminate uncertainty amongst the buyer and seller and facilitates the fluidity of the sale/purchase.  Many questions arise when business or commercial entities make purchases including the price, the payment terms, financing, and minor details governing the acquisition.

Ordinarily, acquisition agreements deal with acquiring equity or wholly purchasing other companies.  A number of the important negotiating points deal with closing conditions, indemnity, disclosure of liabilities, and other points that greatly affect the value of the acquisition.

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Agent or Agency Agreements

An Agency Agreement typically sets forth the role and duties of an agent to a principal.  There are numerous situations when this type of agreement may be necessary, but it is frequently seen in the real estate context as described in the brokerage agreement section.  However, it is not limited to this context.  Agency agreements are common throughout all industries.  In fact, any time that a third party (agent) is acting on behalf of a principal, there is usually some type of agency relationship.  An agency agreement is a way to memorialize that and expressly grant or limit powers which the agent has.  It is also important because it defines the duties and obligations of the agent to the principal and vice versa.

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Amendments or Modifications to a Contract

Amendments or modifications to a contract are pretty self-explanatory.  A change order would be a more specific example of an amendment or modification to a contract.  Also, in real estate transactions, the parties will often amend the contract to add conditions precedent to the sale or contingencies which make the contract dependent on a certain occurrence.  One specific example would be the contingency that the buyer has to sell their own house before the contract is binding on both parties.  Our attorneys are experienced in drafting various types of modifications or additions/deletions to contracts, and we are prepared to assist you with your situation.  Please contact one of our attorneys if you need help amending or revising a contract that doesn’t exactly fit your situation.

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Asset Purchase Agreements

Asset Purchase Agreements are a type of acquisition agreement as described above.  As most people are aware, assets are those things of value owned by a company like cash, equipment, inventory, real estate, accounts receivable, and the goodwill of the company.

When dealing with asset purchase agreements in their simplest form, it usually governs the acquisition of equity and/or stock in a company.  Many of the considerations deal with an overview of the financials of the company (assets) that the prospective buyer is looking to acquire.

The solvency of the company is obviously a major factor.  However, solvency can be described in two different ways: (1) the company cannot pay debts as they come due or (2) the liabilities of the company outweigh the assets.

The type of insolvency sometimes is of no import to investors as the purchaser/investor believes that s/he can turn the business around with a new marketing or operations model or an injection of financing will give the company the necessary cash to continue operations in order for it to realize profits from an earlier investment.  In a similar but nuanced viewpoint, some investors merely want to use the acquisition for a limited purpose as a certain product line owned by the company warrants the purchasing of the entire company.

For more information regarding asset purchase agreements see the description under Acquisition Agreements.

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Bill of Sale

A bill of sale is usually a document that evidences a transaction of personal property between two parties.  Oftentimes a bill of sale is incredibly simple.  Sometimes it conveys title, but not in every scenario. One of the most common situations where individuals will encounter a bill of sale is in the purchase or sale of a motor vehicle.  It should be noted that in Missouri and Kansas a bill of sale does not convey title.  Instead, the title of the vehicle must be assigned to the purchaser. The bill of sale merely evidences the details of the transaction (and typically serves to satisfy the statute of frauds requirement for a sale of goods over $500).

The department of revenue for each state usually has a form that can be used as the bill of sale, which contains the basic details of the transaction including make, model, and year of the vehicle as well as the mileage and other details relevant to the transaction.

In the event that you need a bill of sale for a specific situation our lawyers can prepare numerous types of bills of sale specifically customized for your situation.

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Broker-Carrier Agreements

A broker-carrier agreement usually deals with the transportation of employees or other individuals or personal property by a broker.  In this case the broker acts as the carrier for the principal in which the broker agrees to transport and the principal or the owner agrees to make payment for the broker providing logistics and/or actual physical transportation services.

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Broker (Real Estate) Agreements

Most individuals have dealt with broker real estate agreements.  A lot of times these will be called an Exclusive Limited Agent Buyer’s Agreement or Exclusive Limited Agent Seller’s Agreement.  These are just fancy names that set forth the real estate agent’s commissions, duties to, and rights against the client (purchaser or seller, depending on the principal). Real Estate broker agreements are probably the most common, but broker agreements are not strictly limited to such context.

Really, any situation where a broker or agent is acting as an intermediary creates a broker arrangement.  In such a case, the parties should consider defining their rights and duties toward each other to avoid falling at the whim of Missouri’s statutory scheme, which may not reflect what the parties intended to be the agreement.

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Business Contracts

Business Contracts come in all shapes and sizes.  Business contract is such a general description of a contract that it could really refer to anything.  Throughout this webpage, there are numerous contracts that relate to the business context.  Thus, business contract can only be defined generally as a contract that governs some type of operation, action, or transaction that arises out of, relates to, or refers to a business or commercial context.

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Change Order

A Change Order is basically a change or a modification to an original contract.  Change orders can be for the extension or reduction of time, the increase or decrease in the cost of certain items, increasing or decreasing the scope of the work, value engineering, may account for delay days or extra work requested by the owner.

A change order does not have well-defined requirements.  It must be supported by consideration as other contracts, but apart from the basic contractual requirements, change orders may come in any shape or form.  In fact, there is case law in Missouri that allows a contractor to recover on the basis of equity if extra work is performed by agreement but the change order was never reduced to writing (even if the original contract requires all change orders to be in a signed writing).

Change orders are most frequently seen in the construction industry.  Owners often avail the the reduction in price due to limited mobilization and overhead (contractors are already out on the project, so they can perform additional work for a more economical price).  One of the most common contexts where we see change orders that cause problems is when there is a remediation project for fire, water or mold damage, and the homeowner wants an addition or extra work performed on their homes.

Many times the homeowner does not realize the incredible expense that additional construction work will cost and refuses to pay.  On the other hand, some contractors take advantage of the homeowner and charge exorbitant rates.  In any case, litigation is quite common in such scenarios.

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Confidential Disclosure Agreements (CDA)

A Confidential Disclosure Agreement  or CDA or Confidential Agreement (CA) is one party’s promise to refrain from disclosing information that is confidential to the other party, such as trade secrets, classified information, or proprietary information.

In many situations where the company deals with sensitive or confidential information that is critical to the success of the company, the employment agreement will include a clause or even a separate contract that pertains to confidential disclosure or non-disclosure agreements. Confidential disclosure agreement is a close relative to the non-disclosure agreement, or even a twin, depending on the language used.

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Construction Contracts

Construction Contracts come in all shapes and sizes.  Depending on the type of project, owner requirements, or general contractor capabilities, a contract specifically catered to the situation may be necessary.

The following are a number of different types of contracts which may be used on a construction project and can be prepared by our attorneys for your use.

1.      Unit Price Contracts

2.      Lump Sum or Fixed Price Contract

3.      Cost-Plus Contracts

4.      Time and Material Contracts

5.      Incentive Contracts

6.      Guaranteed Maximum Price Contracts

7.      Percentage of Construction Contracts

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Contract for Building & Sale of Residential Property

A contract to build and sell real estate to be used as a residence is common when a consumer hires a general contractor to construct a home for them.  The home purchaser would be well-advised to have an attorney draft the contract, paying close attention to the terms contained therein as the purchase of a new home is a major decision.  One that can greatly affect the life of the home purchaser, and the purchaser should have recourse in the event that the builder does not perform the work as agreed upon by the parties.

Equally, a home builder should have a contract for the construction and sale of a residence prepared in a manner favorable to the builder.  This is critical for the builder because there are numerous responsibilities and duties that should be accounted for in the contract in order to clarify the parties’ responsibilities.

Any additional work for which the builder is not compensated is lost money for the builder. The purpose of a builder or general contractor that constructs homes is to make a profit and a valuable final product for the home purchaser.  However, to ensure that the builder stays in business, there must be some element of profitability.  If the duties are not well-defined, and the builder has to continue to perform extra work without compensation therefor, the builder is losing money. For that reason, the contractor should have a contract drafted to protect its/his/her interests.

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Deed of Trust

A deed of trust is the name for a mortgage in Missouri.  Despite the common misconception, on a technical level, a mortgage is not used in Missouri.  Instead, we use a deed of trust.

The way a deed of trust works is as follows: when a bank or financial institution gives a loan to a borrower, so the borrower can buy the house, the bank wants to be able to reduce its risk and ensure that it gets paid back on its loan.  Accordingly, the bank wants some type of collateral to secure the loan.  The house serves as the collateral for the loan.  The deed of trust evidences the bank’s security in the house.

In order for the bank to put third parties on notice (put all the world on notice as the treatises and legal textbooks like to say) that it has first dibs on the house (the house is collateral and the bank has priority), the bank files a deed of trust with the local recorder of deeds office. Thus, as a matter of course, a deed of trust usually is executed at the same time that the bank issues a promissory note (loan) in order to make sure that it takes priority as a creditor in the event that the borrower defaults on the note.

There are a number of other differences between a deed of trust and a mortgage.  However, for the sake of brevity and to stay focused, the differences between mortgages and deeds of trust are explained in more intimate detail on the real estate section of this website.

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Employment Agreement

Whether a worker has an employment agreement or not really depends on the type of work.  Given the fact that Missouri is an employment at will state, employers are not really incentivized to enter into contracts with their employees.

In certain limited circumstances to give the employees peace of mind or to create a sense of security, the employer will enter into an employment agreement for a certain term.  Many of these contracts are based on contingencies, which often relate to performance.

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Equipment Use Agreements

Equipment Use Agreements are essentially rental agreements.  Equipment is usually personal property, articles, or goods used for some commercial or business operation.  This does not mean that equipment use agreements are not present in consumer transactions.  However, typically these types of agreements are witnessed more frequently when a business enterprise is renting equipment to carry out some particular commercial purpose.  These agreements are important as they can be based on time of usage, fixed time periods, fixed prices, and/or a number of other hybrids or unique methods of pricing.

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Exclusive Limited Buyer’s Agreements

This type of agreement is typically seen in the context of a homebuyer-real estate agent relationship.  The real estate agent wants to ensure that his/her commission is set forth in writing, and the agreement also typically includes the statutory and fiduciary responsibilities and duties owed to the homebuyer.

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Forbearance Agreement

A forbearance agreement is typically the prolongation of payment on a loan or the foreclosure of a property.  Forbearance in general refers to a situation where one party foregoes its legal right.

According to studentaid.ed.gov, with a forbearance “you may be able to stop making [student loan] payments or reduce your monthly payment up to 12 months.” However, it should be noted that interest will continue to accrue during the time period that the loan is in forbearance.  These types of provisions may be negotiated out of forbearance agreements, by an industrious lawyer, but the flexibility of the agreement varies from situation to situation.

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Guaranty (Personal Guaranty)

A guaranty or sometimes referred to as a personal guaranty is when a person agrees to pay for the debt of another.  These are usually required to create security for the lending of money or other property.  Accordingly, these are most common when dealing with banks or financial institutions where the lending of money is involved.  Additionally, when companies have a line of credit, the banks offering the line of credit want to secure it with a personal guaranty from a member or shareholder of the corporate entity.  Similarly, when someone has poor credit the lender will often require a co-signer or a personal guarantor before agreeing to lend the money.

The word co-signer is used loosely in most contexts.  However, from a technical standpoint it can mean either personal guarantor or surety.  For most people, this does not make a difference, but looking at it technically, a surety usually has primary liability and upon default, a creditor can go after the surety without first pursuing the borrower.

However, when a creditor wishes to pursue a personal guarantor, typically the law requires that the creditor have made a good faith attempt, or exhaust its legal remedies, to collect against the original borrower.  These two variations are sometimes semantics as the language of the guaranty may account for the situation and make any co-signer primarily liable.

Guaranty agreements come in various shapes and sizes.  Below are a few examples of different types of personal guaranty agreements:

  1. Absolute
  2. Conditional
  3. Continuing
  4. General
  5. Specific
  6. Special

If you need a guaranty drafted, we have attorneys with experience litigating and preparing various types.

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Independent Contractor Agreement (ICA)

Independent Contractor Agreement is a contract that sets forth the duties of an independent contractor and clarifies the relationship between the hiring company and the contractor.  An independent contractor is typically hired by a person or entity to perform a designated task, but legally, the hiring person/entity does not have control over the independent contractor.

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Employee v. Independent Contractor

Missouri courts state the following to determine “the existence of the independent contractor relationship, the common law of agency right to control shall be applied. The common law of agency right to control test shall include but not be limited to: If the alleged employer retains the right to control the manner and means by which the results are to be accomplished, the individual who performs the service is an employee. If only the results are controlled, the individual performing the service is an independent contractor.” Fritts v. Williams, 992 S.W.2d 375 (Mo. App. S.D., 1999).

The independent contractor agreement merely lays out the responsibilities and duties of the contracted party.  Additionally, it may be the employer or hiring party’s opportunity to include certain risk allocating provisions such as an indemnity clause.  An indemnity clause is further defined below under the common contractual provisions section.

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Lease Agreement

A lease is probably one of the most common agreements that a real estate lawyer has to draft.  There are certain critical provisions that a landlord will want in a lease.  A number of those provisions, though seemingly minor, can make a huge difference when dealing with a troublesome tenant.

Generally described, a lease is when an owner of real property agrees to convey the right of use of the property in exchange for rent payments, usually in the form of cash, but may also be in-kind (something of value other than cash).

For information about Landlord-Tenant Law in Missouri follow the foregoing link. 

Regardless of whether a lease is for commercial or residential rental property, there are a number of provisions that should be included in the lease to ensure that your rights are protected—no matter whether you are the landlord or the tenant.

If you need a lease drafted or revised, we are more than happy to assist you.  Also, in the event that you need to enforce the provisions of a Missouri lease, or if you need to evict a non-paying tenant, please contact one of our landlord-tenant attorneys today.

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Master Services Agreements

A master services agreement or master service agreement is a contract between two parties who usually have an ongoing relationship.  The master agreement sets forth the common terms that the parties have agreed upon, and it can be used as the basic foundation for any future agreements.  Thus, the provisions of the master services agreement are usually incorporated by reference into any of the future agreements between the parties.

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Memorandum of Understanding (MOU)

A memorandum of understanding is sometimes referred to as a letter of intent.  A letter of intent is a statement reduced to writing which details the preliminary understanding of two or more parties who plan to enter into a contract.

Many sources state that a memorandum of understanding is not binding.  However, Missouri courts often treat these agreements as contracts, and in most of the cases in which a memorandum of understanding is discussed, such document involves a school, city, or other governmental entity.  In other limited circumstances, the parties used the memorandum of understanding to divide their interests in a business or form a partnership.

A letter of intent that is signed by high school football athletes, committing to a university, are bound by signing the letter of intent.  According to www.nationalletter.org, an athlete agrees to attend the academic institution for a period of one year in exchange for the institution granting a specified amount of financial aid.

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Mortgage

A mortgage was generally defined above under deed of trust.  In Missouri a deed of trust is used, but the counterpart of the deed of trust is the mortgage, which is used in states like Kansas, Iowa, and Oklahoma.

From a practical standpoint the difference is slight and is predominantly felt in the foreclosure process.  A mortgage requires a judicial foreclosure (use of the court process to effectuate a foreclosure), whereas a deed of trust allows for a non-judicial foreclosure (where the property can be sold on the courthouse steps.

The mortgage basically represents the lender’s security in its collateral (the house).  Once the promissory note is paid in full, the lender must file a release of mortgage with the recorder of deeds which extinguishes the mortgage.  In most states, there are statutes which penalize any lenders who do not timely file releases of mortgage.

If you need a mortgage drafted or a subordination agreement prepared, we can help you do so.

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Non-Compete Contracts

Non-Compete Contracts are not as typical as including a mere non-compete covenant into a contract.  Typically, when there is danger of usurping the business from an employer, the employer, in order to protect itself, includes a non-compete clause into the contract.  The non-compete clause prevents the party subjected to such clause from engaging in the same type of business in the same geographic region for a certain time period.  Missouri courts typically require.

Missouri does not look favorably at non-compete agreements:

Contracts in restraint of trade are unlawful in Missouri. Section 416.031 RSMo (1994).3 “A promise is in restraint of trade if its performance would limit competition in any business or restrict the promisor in the exercise of a gainful occupation.” RESTATEMENT (SECOND) OF CONTRACTS Section 186(2) (1981). “Every promise that relates to a business dealing or to a professional or other gainful occupation operates as a restraint in the sense that it restricts the promisor’s future activity.” Id., cmt. a. Restrictive covenants limiting individuals in the exercise or pursuit of their occupations are in restraint of trade. Sturgis Equip. Co., Inc. v. Falcon Indus. Sales Co., 930 S.W.2d 14, 16 (Mo.App. 1996). Post-employment restrictions are generally considered restraints of trade. House of Tools & Engineering, Inc. v. Price, 504 S.W.2d 157, 159 (Mo.App. 1973). Healthcare Services of Ozarks, Inc. v. Copeland, No. 26410 (MO 7/27/2005) (Mo, 2005).

However, there are certain limited circumstances where Missouri courts have allowed them:

“there are two areas in which non-compete agreements may be enforceable. ‘A restrictive covenant in an employment agreement is only valid and enforceable if it is necessary to protect one of two well-defined interests, trade secrets and customer contacts, and if it is reasonable as to time and place.’” Healthcare Services of Ozarks, Inc. v. Copeland, No. 26410 (MO 7/27/2005) (Mo, 2005)(quoting in part Schmersahl, Treloar & Co., P.C. v. McHugh, 28 S.W.3d 345, 348 (Mo.App. 2000).

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Non-Disclosure Agreements  (NDA)

A non-disclosure agreement is one party’s agreement not to disclose trade secrets, innovative or sensitive information of a company.  These are typically signed by employees who work in industries where certain trade secrets carry significant value.

Non-disclosure agreements are also used in contexts where one person or entity is proposing a business plan, and said person or entity wishes to keep the information disclosed in the meeting confidential.  Hence non-disclosure agreements are sometimes referred to as confidential disclosure agreements.

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Operating Agreements

The Missouri Secretary of State defines operating agreement as: “an internal document (it is not filed with the Secretary of State or any other government agency) that establishes the rules and regulations for the conduct of the company’s business and affairs, and the rights, powers and duties of the company’s members, managers and employees. https://www.sos.mo.gov/business/outreach/startup_guide

Typically the operating agreement is responsible for defining:

  • The classes or groups of members and their rights and benefits;
  • Voting structure for company decisions;
  • Restrictions on transfer of membership interests;
  • Allocation of income and losses among the members; and
  • Tax elections for the company.

The above information is taken from the Missouri Secretary of State website discussing :  https://www.sos.mo.gov/business/outreach/startup_guide

An operating agreement is necessary and required by Missouri statute when forming a limited liability company (LLC).

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Partnership Agreements

Pursuant to R.S.Mo § 359.011, a partnership agreement is “any valid agreement, written or oral, of the partners as to the affairs of a limited partnership and the conduct of its business.”

In essence, a partnership agreement defines the rights and obligations of partners.  It does not necessarily limited to only two partners.  Often times more than two people or entities can become partners.  The type of relationship typically depends on the structure of the business.

In Missouri a partnership is defined, under R.S.Mo § 358.060, as “an association of two or more persons to carry on as co-owners a business for profit and includes, for all purposes of the laws of this state, a registered limited liability partnership”

Missouri statutory scheme allows individuals to form general partnerships, limited partnerships, limited liability partnerships, and limited liability limited partnerships.  These forms all have different statutory default rules that are generally set forth under Missouri Chapters 358 and 359.

Usually when individuals or entities are interested in forming a partnership, they would like to have their own terms in place in order to supersede the default rules laid out in Missouri statutes.

This objective can be accomplished by hiring one of our attorneys to draft a partnership agreement for you.  For further counsel regarding your rights in forming a partnership or to have one of our attorneys draft an agreement for you, please contact us.

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Prenuptial (or Antenuptial) Agreement

A prenuptial agreement or sometimes referred to as an antenuptial agreement is entered into prior to marriage and is designed to pre-plan the division of property and marital support upon the termination of the marriage.

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Professional Services Agreement (PSA)

A professional services agreement (PSA) is used to enter into a contract with a person or entity providing professional services, such as a consultant, an attorney, an accountant, or some other professional, which provides services.

The services agreement typically requires the non-consulting party to allow access to its company information, documentation, and/or facilities to allow the service provider to access and perform the designated tasks.  The professional services agreement essentially delineates the duties and responsibilities of each party and attempts to clarify any potential gray areas relating to the relationship.

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Promissory Note

A promissory note is a loan in which one party lends money to another in exchange for a promise to pay the other back, usually with a certain fixed interest rate.

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Power of Attorney

A power of attorney is a document that can come in all shapes and sizes.  Often we see a power of attorney drafted in the context of an estate plan.  In such a case, typically durable powers of attorney are drafted in order for the power of attorney (powers granted to the agent/attorney-in-fact) to survive mental incapacitation in the event that the principal (person who appoints someone as their attorney-in-fact) cannot make decisions for himself/herself.

In other instances, commonly seen in the real estate context, a husband or wife, who may not be able to attend the closing and will grant their spouse the authority to sign on their behalf in their absence.  Usually the power of attorney will be limited in time and scope.  For example, the limited power of attorney may only last until a few days after the closing is scheduled to occur.  Other times the length of time is a fixed duration.

With respect to limiting the powers of the attorney-in-fact, the power of attorney may limit the powers to signing, authorizing certain transactions, or limit the powers to only dealing with certain limited entities or persons.

The most common in the real estate context is stated above, but the most common in the estate planning context are powers of attorney for health care and powers of attorney for financial decisions.  If you need a power of attorney, our lawyers are more than happy to discuss what may be best for your situation, and we can assist with the drafting of the same.

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Purchase Order

A purchase order is a statement in writing which documents the purchase of goods but allows the purchaser to make payment at a later time.

A purchase order usually includes:

  • Type or name of product
  • Quantity purchased
  • General terms and conditions
  • Special terms and conditions (specific to that purchase)

In order for a purchase order to become a contract, the buyer must accept the purchase order and the terms thereof.

Transactions that involve a purchase order are typically governed by the Uniform Commercial Code as they involve the sale of goods.  The Uniform Commercial Code is applicable in Missouri as it has been adopted by all 50 states, the District of Columbia, and the various U.S. territories. Accordingly, Missouri case law, in interpreting the Uniform Commercial Code, will presumably hold that a buyer impliedly accepts the terms and conditions of a purchase order by merely accepting the goods and failing to reject within a certain specified amount of time.

Accordingly, it is important to read any purchase orders, including the fine print.  If you don’t understand the language set forth therein, please contact one of our attorneys to assist you with understanding your rights and duties under said agreement.

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Real Estate Contracts

A majority of Missouri’s citizens will have reviewed and executed a real estate contract in their lifetime. Oftentimes the purchase of a home is the biggest decision in one’s life.  The real estate contract in chock full of legalese and boilerplate provisions, making it difficult to understand and know exactly what you’re getting yourself into with the home purchase.

However, usually when the real estate contract is supplied by a reputable real estate agent, the contract has been approved by the brokerage firm, and the use of which is required by said brokerage firm.  Accordingly, the terms of the contract are usually drafted to be fair for both the buyer and seller.

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Sale of Goods Contracts

Sale of goods contracts obviously deal with any transactions where the parties are buying or selling goods.  These transactions are governed by the Uniform Commercial Code, which applies in every state, the District of Columbia, and the U.S. territories, as briefly discussed above.

In certain situations, a sale of goods contract is required to be in writing signed by the party to be charged.  In the event, that the contract is not in writing and signed, the party attempting to defend the case may assert a defense called the statute of frauds.  This bars contracts for the sale of goods which equal or exceed $500.00.

The Missouri statute, which is applicable to this situation, section 400.2-201, states the following, in relevant part:

(1) Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.

Accordingly, it is important to make sure that your transaction, particularly when dealing with sales and purchases of goods, is in compliance with Missouri law.  One of our contract lawyers can assist you with drafting this type of agreement if you find yourself in that situation.

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Sales Commission Agreements

A sales commission agreement sets forth the commissions that an employer will pay the commissioned sales representative.  In a number of industries, especially in the financial industry, the sales commission agreement prevents a salesperson’s commission from becoming vested until a certain period of time passes or certain triggering event occurs.  For example, some companies will pay their sales representative on a monthly basis.

When the sale is made, the salesperson would receive his/her commission the following month.  However, the contract would require the sales representative to pay back any amount that is not vested in the event that the customer cancels the policy.  Usually the time period for vesting, which is included in the agreement, would take into consideration the amount of time the customer has to cancel or in which the right to revoke expires.

Salespersons should be aware of this and those companies, firms, and organizations employing a sales staff should ensure that their sales commission contracts contain clauses which account for any cancellation of policies or return of products if commission is distributed concurrently (or in close proximity thereto).

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Security Agreements

A security agreement is a document that represents a party’s interests in personal or real property. The agreement is considered “secured” because the return of payment is “secured” by some type of collateral.

For example, in some circumstances, the security agreement uses personal property as the collateral, such as a car.  Car dealerships usually would enter into a retail installment sales contract at that time, which would contain the financing terms as well as the language that would reflect the fact that the vehicle would be treated as the security.  The retail installment sales contract is the security agreement. In order to perfect the security agreement, a notation is put on the title that shows the lender’s interest in the vehicle.

When real property is used as security, typically the security agreement is called a deed of trust or mortgage.  As noted above in this article, in Missouri the security agreement used for homes is called the deed of trust.  This is entered into concurrently with the promissory note.  The lender is known as the mortgagee because the borrower is giving them a mortgage (deed of trust).  Thus, the borrower in that transaction, even when it involves a deed of trust, is known as the mortgagor.

The foregoing examples represent typical uses of a security agreement.  However, there are numerous types of security agreements. If you want to lend someone money, but you want to make sure that you are paid back on that loan, then you should consider securing the loan with some type of collateral.

Security agreements require that the document state:

  • It must state that there is a security interest;
  • It must describe the collateral; and
  • It must be signed by the borrower/debtor.

If you find yourself in a situation, where you want to lend money, and you need direction or a security agreement drafted, please contact one of our attorneys.

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Service Contract

A service contract is a broad name for an agreement which relates to the provision of services.  The services provided under the contract can range from strictly services, such as painting, landscaping, installation of electrical in a building, etc, to provision of services and materials, which could be the same type of contract, but would the owner would provide the materials in the former type of contract.

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Settlement Agreements

Any time parties are involved in a dispute, litigation, claims, or if they have any other theory of recovery against each other, the most efficient resolution is entering into a settlement agreement.  Presuming the attorney who drafts the settlement agreement properly prepares the same, any subsequent attempt at bringing a lawsuit would be barred by the settlement agreement.

In a typical settlement agreement the parties state the background of the dispute that gives rise to the settlement agreement, both parties usually deny any liability against themselves, and then the parties mutually waive future (and sometimes all) claims against each other.

The parties will also list out the terms of the settlement agreement, usually including the amount each party will be paying to the other, the terms of payment, and any other terms that would relate to dismissing the lawsuit.  Usually the settlement agreement will also include provisions which account for the default of any of the parties’ duties.

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Subordination Agreements

Our lawyers are well-versed in real property transactions and have dealt extensively with title companies, closing companies, and lenders. In certain situations, lenders will agree to make their loan junior to a new lender.  In these cases, a subordination agreement subordinates the senior loan to make it junior (typically to a new loan).

However, as a sidenote, it is not necessary that the loan is a newly originated loan as any loan can be subordinated so long as the lender or financial institution agrees to subordinate their loan.

After the subordination agreements are signed and notarized by the parties, they are usually filed in the recorder of deeds in the county in which the real property at issue is located.  The filing of the subordination agreement puts all the world on notice that the subordinated loan now takes a subordinate position to the other.

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Takeover Agreement

A takeover agreement is often used in the construction industry by and between a surety and a contractor.  When a contractor who purchased a bond defaults on their performance under a performance bond, the surety is then required to step in and the takeover agreement defines the duties and obligations of the surety to complete the performance of the original contract.  For the most part, the surety will typically hire another contractor to come in and complete the work and merely provides the financing.

As a sidenote, usually the defaulting contractor is required to indemnify the surety, but the defaulting contractor probably defaulted for a reason and may not be in a position to indemnify the surety.

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Transportation Agreements

Transportation is described as the movement of goods or people from one location to another. When employees wish to transport goods or persons, they usually have to enter into some type of agreement to effectuate this purpose.  Typically, the employer wants to delineate the services offered and limit liability to the extent possible.

In certain situations, where the entity or person providing the transportation is deemed to be a common carrier, any clauses that purport to limit liability may be against public policy.  An attorney that is astute in drafting transportation agreements, and who is aware of the case law articulating exculpatory provisions in carrier agreements, can potentially prepare a contract that will protect the carrier in a number of circumstances.

In any event, if you are an employer or looking to transport people or goods, you should have a contract in place that sets forth your duties, obligations, and limits your potential liability.  For assistance with drafting a transportation agreement, contact an attorney today.

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Construction Law Litigation

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Are you involved in a dispute on a construction project? Do you need an attorney to assist you with the litigation process?

Our attorneys handle a wide array of construction disputes, and we can probably help you with your case. We have represented owners, general contractors, subcontractors, sureties, design professionals, and a variety of other participants on a construction project.

The litigation process can be quite complex. When combined with construction, it is easy to imagine how incredibly complex certain issues in construction litigation can be. Some disputes have many moving wheels, which poses a heavy task for the lawyers who have to wade through all of the facts and the law.

As part of their tasks, our lawyers participate in all phases of litigation from preventative measures such as contract negotiations and drafting to project execution and advising mid-project to post-project litigation such as collection work and bond claims.

It is imperative for limited liability companies and corporations involved in the construction industry to have a lawyer who specializes in construction litigation as Missouri courts require that construction companies, if they are incorporated, must be represented by a lawyer.

Why can an individual not represent an entity in court?
An individual, even a member or manager of the limited liability company (“LLC”) is not permitted to represent the LLC because it would constitute the unauthorized practice of law by a non-attorney.

Accordingly, construction companies that are incorporated, or held by an entity, must retain counsel in order to present a defense. If counsel is not retained, the construction company will have a default judgment taken against it and would then have to hire an attorney to file a motion to set aside the default judgment.

This is not an outcome that you want to face as a business owner because additional work means additional billing by the attorney. The most economical solution in dealing with a construction law dispute is to nip the problem in the bud by addressing it head on. That does not suggest that it should be addressed with a hard head.

Instead, the mantra should be an ounce of prevention is worth a pound of cure. Get your attorney involved from the beginning of the project, so you can avoid failing into the litigation sandpit.