Tennessee Business Litigation Lawyers Blog

Home Construction Contract Case: Tennessee Court Of Appeals Upholds Nashville Chancery Court

Published on: July 24, 2012 | by J. Ross Pepper

A recent opinion of the Tennessee Court of Appeals in a construction defect case between a homeowner and a contractor is worth the read for any lawyer or homeowner contemplating a breach of contract case against a contractor. The opinion touches on two areas of the law that might be implicated in any construction defect case where breach of contract and/or negligence are alleged: (1) the amount of damages a homeowner might be able to recover for a contractor’s defective work; and (2) a homeowner’s right to the remedy of rescission of the contract in a breach of construction contract case.

The opinion gives a plenary explanation and description of the contractor’s work which was alleged to have been incomplete, defective, and below standard (which is too detailed and lengthy to be repeated in this blog). In a nutshell, the facts of the defective construction case were as follows:

• Homeowner retained Contractor to remodel her residence

Tennessee Law Regarding Implied Contracts

Published on: July 16, 2012 | by J. Ross Pepper

In Tennessee, as in many other states, the law is not so technical as to deny a party a right to recover on a breach of contract claim just because the party’s contract was not expressed adequately either in writing or verbally. Where the facts make it clear that parties had an agreement (which is supported by mutual consideration and sufficiently definite), a party to that agreement might be able to recover– even without an express contract.

It is always best to have an express written contract. If you don’t have an express written contract, the next best thing to have is an express oral contract with someone who is truthful, and who will not deny the terms of your agreement. If you have neither an express oral nor a written contract, your only chance of recovery, in a breach of contract case, may depend on Tennessee common law regarding implied contracts.

Tennessee law recognizes two types of implied contracts: contracts implied in fact, and contracts implied in law. What is the difference? Contracts implied in fact arise when the court determines that the parties’ conduct shows mutual assent to a contract even though they never expressly agreed (either verbally, or in writing). Contracts implied in law can be created by a court to avoid an injustice even where there was neither an express agreement between the parties, nor conduct of the parties upon which the court can base an implied contract.

Enforcing Mechanics and Materialmen’s Liens In Tennessee

Published on: July 2, 2012 | by J. Ross Pepper

To say that Tennessee law which governs the rights of contractors and subcontractors to place liens on property is complex and full of potential pitfalls is an understatement. If you are owed money for work or materials, you should consult with a qualified, experienced construction lien attorney as soon as you suspect you may not be paid and may need to use your lien rights. We had one case a few years back where our subcontractor client could have recovered substantially more money if it had only acted a couple of weeks sooner.

In Tennessee, both general contractors (also referred to as “prime contractors”) and subcontractors (also referred to as “remote contractors”) have lien rights in certain situations. To be enforceable and effective, these lien rights must be properly asserted and perfected under the statutes which govern mechanics and materialmen’s liens (“construction liens”) in Tennessee. The rationale behind giving lien rights to contractors and subcontractors is that they should have greater rights and a better chance of collecting their debt than a party to a typical contract because their work or materials increased the value of the owner’s real property.

Keep in mind that, if you are a contractor or subcontractor, even if you never file a lien, you may be able to collect your debt from the party with whom you contracted. Where mechanics and materialmen’s lien make a critical difference for contractors and subcontractors are in those situations in which they have provided work or materials and the party who agreed to pay them cannot or will not pay them. In many of those situations, provided that the contractor or subcontractor has jumped through all of the construction lien law “hoops,” it can recover from the owner of the property with respect to which it provided work or supplied materials.

“Getting It In Writing:” When Is It A Must In Tennessee

Published on: June 27, 2012 | by J. Ross Pepper

When do you have to have a written contract? What if you, or the other party, never signed anything? If you don’t have a written agreement or a signature does that mean that there is not a legally enforceable contract? As a general rule, unwritten contracts are legally enforceable in Tennessee. Furthermore, the lack of a signature on a written agreement does not necessarily mean that the agreement is not enforceable.

Frequently, the biggest problem with unwritten agreements (sometimes called “verbal” or “oral” contracts) is not their legal enforceability, but proving them. If it is your word against someone else’s, it can be tough to carry your legal burden of proof when you are trying to enforce an oral contract.

There are some agreements which Tennessee law requires to be written and which Tennessee law requires to be signed by the party against whom the agreement is being enforced. The agreements that must be in writing are set forth in what is referred to, in legal jargon, as the “statute of frauds.” In Tennessee, as a general rule, you must have the following agreements in writing and signed by the party against whom you want to enforce the agreement:

Tennessee Supreme Court Holds Statute Of Frauds Applies To Settlement Agreement

Published on: June 20, 2012 | by J. Ross Pepper

In a recent opinion in a real estate litigation case which originated in Murfreesboro, the Supreme Court of Tennessee examined the Tennessee statute of frauds and made two significant rulings about its application. The case involved a settlement agreement which was made after a breach of contract suit had been filed to settle that suit.

The plaintiff (“Buyer”) and the defendant (“Seller”) entered into a real estate contract. The Buyer paid the Seller $10,000.00 in earnest money. After the real estate contract was entered into and the earnest money paid, the Buyer discovered that the Seller had conveyed one-half of her interest in the property at issue to her niece (“Niece”).

The Buyer sued the Seller and her Niece for breach of contract, fraud, and negligent and intentional misrepresentation. Seller filed a cross claim against Niece alleging that the Seller’s transfer of her one-half interest in the property to Niece was the result of undue influence and requesting that the transfer be set aside.

Recent Will Contest And Undue Influence Case Involving Caretakers: Tennessee Court of Appeals Holds No Claim Because No Confidential Relationship

Published on: June 12, 2012 | by J. Ross Pepper

In what might be described as a “battle of the caretakers” undue influence and will contest case, the Tennessee Court of Appeals decided in favor of the proponents (and beneficiaries) of the will, and against the relatives who claimed that the will was the result of undue influence. What makes the case unique is that the undue influence was allegedly exerted, not by the beneficiaries of the will at issue, but by caretakers who did not benefit one bit from the will.

The case was brought by a Nephew of the Deceased (who made the will), and the Nephew’s Wife. To summarize their claim, the Nephew and his Wife alleged that caretakers for the Decedent so poisoned the Decedent’s relationship with them that the Decedent changed his will.

Here are more facts of the case:

Supreme Court Of Tennessee Issues Opinion In Case Involving Mistake Of Insurance Agent

Published on: June 1, 2012 | by J. Ross Pepper

In a case decided by a 3-2 vote which involved coverage under a commercial liability insurance policy issued by Allstate, the Supreme Court of Tennessee held in favor of an insured finding that the insurance company was responsible for a mistake by one of its agents in Tennessee. The case falls in the category of an insurance agent mistake case, many of which type cases end up in Tennessee courts.

Here are the key facts of the case:

• The Plaintiff in the case was a customer of Allstate Insurance Company who owned and insured six vehicles under a commercial policy with Allstate

Evaluating Breach Of Contract Cases In Tennessee (Part Two)

Published on: May 24, 2012 | by J. Ross Pepper

What amount of damages a party has incurred as the result of a breach of contract is important to evaluate as thoroughly as possible at the outset of any breach of contract case. Sometimes, the best defense to a breach of contract case is proving that the plaintiff did not suffer damages, or did not suffer the amount of the damages claimed.

There are lots of potential defenses that a defendant with a skilled and experienced breach of contract lawyer can successfully use to defend the damages aspect of a breach of contract case. Similarly, a skilled breach of contract lawyer representing a plaintiff can often find ways to maximize the plaintiff’s damage award in a breach of contract case. Because of the investment of time and money a breach of contract case can take, it is always in a client’s best interest to insist on an opinion about damages at the outset.

In our practice, we are confronted sometimes with potential clients who have cases where proving that the other side is liable to them for breach of contract is a cinch, but for whom it is not worthwhile to bring a legal action. Why may it not be worth it for these clients to bring lawsuits? Answer: Attorneys’ fees and expenses. If the maximum recoverable damages in a case are $10,000.00, but it will cost that amount, or very close to it, to litigate the case to settlement or judgment, in many situations, it is better to forego a lawsuit.

Evaluating Potential Breach Of Contract Cases In Tennessee (Part One)

Published on: May 12, 2012 | by J. Ross Pepper

While the types of contracts and businesses involved in breach of contract cases vary widely, as a general rule, the basic principles of contract law that Tennessee courts apply in breach of contract cases are pretty much the same in most cases. One exception to that general rule is breach of contract cases governed by the Uniform Commercial Code, as adopted in Tennessee, which, generally speaking, applies only in cases involving the sale of goods.

There are innumerable factors that need to be considered in evaluating breach of contract cases, and this blog is not nearly comprehensive enough to be taken as a complete and definitive checklist for evaluating potential breach of contract cases.

In evaluating a breach of contract case, it may be productive to break the potential case down into two broad areas for evaluation: (1) Liability; and (2) Damages. (Part Two of this blog addresses damages).

Recent Nashville Case Discusses Call Option And Stock Appraisal

Published on: May 4, 2012 | by J. Ross Pepper

In a recent decision of the Tennessee Court of Appeals in a breach of shareholders agreement lawsuit appealed from the Chancery Court of Davidson County, Tennessee, the appeals court decided that the Davidson County trial court should not have dismissed the shareholder’s claim that the call option provisions of the shareholders’ agreement had been breached. Here are the facts:

• The Plaintiff in the case was an employee, officer, director, and minority shareholder of the corporation (“Corporation”) which was closely held

• The Plaintiff was asked to sign an employment agreement which contained non-compete and non-disclosure provisions

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