Tag Archives: breach of contract

They stopped paying so can I pick up my items now?

Posted on by
Reply

This is the question:

I live in PA. and I have entered into a contract with another party. I retain ownership of a piece of equipment as it is in my name. The equipment is in physical possession of the other party in the contract. We have each signed a legal contract stating that the other party will pay stated amount of money by a certain date every month. However there was nothing put into the contract regarding what would happen if the party failed to pay either the amount agreed upon or the due date to be paid. My question is this, because the equipment is still in my name do I have the right to go and remove the said equipment because the othewr party has breached the contract.

This is my answer:

Unfortunately, no, you cannot enter someone else’s property and remove any property without his/her permission.  To recover the property, you need to file a lawsuit for breach of contact, and repossession of the property.  Because your contract does not specify what happens when one party fails to pay as promised, case law tells us what to do.  In this case, you are entitled to money damages equal to the entire contract or you can recover the equipment. If you contract allows you to recover attorney and court fees, you can add this figure to your damages. Once you have a judgment, then you must file a Writ of Execution to recover the equipment. Depending on your county, you will need to hire the Sheriff to visit the property to recover the equipment. I recommend talking to a lawyer before you act; otherwise you may be liable for trespass.

When does a tweet become a contract? the $1 million dollar reward

Featured

Posted on by
3

An artist’s promises on Twitter to pay $1mm for returning his missing laptop. A stranger returns the laptop. Does the artist have to pay the stranger $1mm? In Pennsylvania, probably yes.

Artist Ryan Leslie lost his laptop while on tour in Germany. This is the tweet : “I’m absolutely continuing my Euro tour plus raised the reward for my intellectual property to $1mm. Click to watch: http://on.fb.me/bCBnrM””. Does this 160-character statement make a contract? Would a reasonable person read this tweet, and believe all she has to do is find the laptop and she will become a millionaire? Well, Armin Augstein has filed a lawsuit in New York claiming that Leslie’s tweet is a binding contract.

While New York law will determine the lawsuit’s outcome, let’s imagine what would happen if Augstein sued Leslie in Pennsylvania. The contract in dispute is called a unilateral contract; it means that Leslie made a promise and all that is requried to convert this promise into a contract is that the other party must merely act—or in this case—find the laptop. Ordinarily, a contract requries two parties to commuincate with each other. (this is called a bilateral contract). If this situation were a bilateral contract, Leslie would make an offer by tweet; someone would accept his offer by tweet, and a contract is born.

However, a unilateral contract is different. The person accepting the offer does not have to communicate his/her acceptance. The person accepts the contract by acting.1 The law will examine the tweet for “some language of commitment or some invitation to take further action without further communication.”2 The threshold question is: would a reasonable person read the tweet and understand that she would receive one million dollars if, without further communication with Leslie, she found the laptop. Without this language, the law may find this tweet was merely an advertisement or invitation to begin negotiations. So, in short, if Leslie were sued in Pennsylvania, he may lose a million dollars. My best advice to Leslie: settle early before your legal bill also reaches a million dollars.

There, of course, is a separate issue of whether Leslie is morally or ethically responsible for paying the promised million. I believe the answer is yes. I think Leslie is a sophisticated public figure, and New York Law School agrees with me. He understands the power of Twitter and the media. He is a Harvard-graduate at the age of 19 and a Grammy-award nominee. He should have known better. Thus, the court should hold him accountable for the promises he makes in public.

Sharmil McKee
sm@mckeeoffice.com
Business Attorney
Philadelphia, PA
———–
1. Bauer v. Pottsville Area Emergency Med. Serv., Inc., 758 A. 2d 1265 (Pa. Super. 2000).
2. Bourke v. Kazaras, 746 A.2d 642, 644 (Pa. Super. 2000).

Spike Lee makes more money overseas: understanding breach of contracts

Posted on by
Reply

A French court awarded Spike Lee $46 million for a breach of contract.  In 2007, Lee and TF1 Droits Audiovisuels executed a contract where TF1 agreed to distribute Lee’s film “Miracle at St. Anna” worldwide, except in the U.S., Canada, and Italy.  When TF1 failed to honor it’s promises, Lee sued.  Even though TF1 claimed that they could not distribute the film because Lee failed to deliver the film, the court did not agree.  In the end, the court ruled that TF1 was at fault for breaching the agreement,
and ordered TF1 to pay $46 million in Euros to the film’s producers.
Lee will collect $1.5 million of the judgment.

The film is about the story of four black American soldiers who get trapped in an Italian village during WWII.  The movie is based on a book written by James McBride, which tells the untold story of African American’s contributions in WWII.  In the U.S., the film grossed $7 million but cost $45 million to make.

This award is a relief for Lee because reportedly, he is having trouble
finding financing to produce Inside Man 2.

What can you, as a business owner, learn from Lee’s lawsuit?  When deciding to execute an agreement, examine contract laws from other countries.  In the U.S., no state allows recovery for moral prejudice.*  However, in France, this is a valid cause of action.

 

*I am only licensed in  Pennsylvania, so I can only attest to Pennsylvania’s contract law.  Nevertheless, I have colleagues in other jurisdictions; I have never heard of a claim for moral violations.  If I am wrong, please post a comment.
Has someone breached or violated your agreement? Call us for a free
consultation. Sharmil McKee @ 215-242-5260.

 

~~~~~~~~~~~

Sharmil McKee

Business Attorney

Philadelphia, PA

http://blog.mckeeoffice.com

 

 

 

 

Warner Bros sued for stealing The Last Samurai

Posted on by
Reply

Two brothers are claiming that Warner Bros stole their screen play to develop and produce “The Last Samurai”. The basis of the Benay brothers’ claim is that Warner Bros breached an implied contract to pay if they used the script. Of course the brothers filed their lawsuit in California, so California law will determine the outcome of the case. But let’s imagine what would happen if Pennsylvania law determined the outcome.

In this case, the brothers pitched and presented the script to Warner Bros’ screenwriters around 1996.  The screenwriters read the script around the same time. Warner Bros began producing the movie a short time later. Presumably, the parties did not discuss price, because a month after the presentation, Warner Bros declined to accept their script.

In Pennsylvania, to determine whether a contract exists, the law will objectively examine the parties actions. It doesn’t matter whether Warner Bros truly believed a contract did not exist if its outward actions reasonably suggested to the Benay brothers that a contract existed. One material fact that is missing from the brothers’ claim of implied contract is price. How much did Warner Bros’ offer for the script?

No agreement which could be inferred from the conduct of the parties in this case regarding a material element of the arrangement, specifically the fee agreement. This is the conclusion a court reached to resolve a breach of implied contract dispute between an employee search firm and an employer. The search firm claimed that the employer owed it a commission for hiring its candidate. The court disagreed and found that no contract existed between the search firm and the employer because the parties‘ did not agree on price. The case is Ameripro Search, Inc. v. Fleming Steel Co, 787 A.2d 988 (Pa. Super. Ct., 2001). If we apply this ruling to the Benay brothers’ claim, then they will likely lose.

What can you learn from this case? If you have intellectual property that you want to protect while discussing it with a potential buyer, then execute a written contract. Be clear about what you expect from the other side in exchange for viewing your idea or property. Discuss what the buyers expect to receive in exchange for viewing your ideas. Discuss confidentiality issues prior to sharing your property. The contract does not need to be long. It is enforceable as long as it accurately reflects your agreement. Perhaps if the Benay brothers had discussed their expectations prior to presenting their script, then this lawsuit would be unnecessary.

Sharmil McKee | Business Lawyer | blog@mckeeoffice.com

Dr. Dre sues Record label: Did he wait too long?

Posted on by
Reply
Dr. Dre

Dr. Dre or Andre Young

Last month, Dr. Dre (a/k/a Andre Young) sued WIDEawake Death Row Records for unpaid royalties and copyright infringement.  Dr. Dre claims that WIDEawake is a holding company for Death Row Records, after Death Row Records filed bankruptcy. Dre also claims that WIDEawake began re-producing and releasing copies of his album, Chronic.  According to the complaint, Dre and Death Row had an agreement where he sold his copyright to Death Row, but Death Row agreed to pay Dre if it ever transferred the copyright to someone else. Thus, Death Row’s transfer to WIDEawake Records violates this agreement and infringes his copyright.   Here is the complaint.

Interestingly, Dre is also suing WIDEawake for missing royalty payments since 1992.  This lawsuit was filed in California, so California law will decide this dispute.  But let us imagine if the lawsuit were filed in Pennsylvania Is Dr. Dre’s claim barred by statutes of limitation?

Generally, the law only allows 4 years to sue for breach of contract.  And on the surface, it looks like Dr. Dre would be out of luck here.  On the other hand, Pennsylvania does have a 15-year statute of limitation for initiating an action for escheat.  Escheat refers to any abandoned unclaimed property that should be turned over to the State Treasury.  If Dre argues that his royalty payments should have escheated to the State, then he can survive the Statute of Limitation issue.  When Death Row filed bankruptcy, conceivably, his unclaimed royalties could have been sent to the State Treasury.

In addition, Pennsylvania also extends statute of limitations for action based on a contract written under a seal.  This section specifically ignores the general 4 year statute of limitations for initiating a breach of contract action.

Also, if Death Row Records concealed their breach from Dre, then the law excludes this time frame from the computation of the statute of limitations.

And finally, Dre can always argue that the contract was continuing, so the statute of limitations did not start.  The Pennsylvania Superior Court states that when a contract does not fix a certain time for payment or the termination of the contract, then the contract will be treated as continuous.  Thus, the statute of limitations does not start until the termination of the contractual relationship between the parties.  (For those who are interested, the case is Crouse v. Cyclops Industries, 704 A.2d 1090 (Pa. Super., 1997)

However, I believe Dre’s best claim is the conversion of his copyright.  He could enforce his rights under Section 203 of the U.S. Copyright Act, which returns his copyright to his ownership.  This is what Jack Kirby’s family has done with Marvel Comics.  This would certainly create some negotiating leverage enabling Dre to collect a settlement from WIDEawake.

UPDATE: (June 11, 2010) – The court dismissed Dr. Dre’s copyright infringement claim. The court reasoned that WIDEawake’s alteration of Dre’s album was cosmetic and did not violate his copyright, trademark, or right to publicity. The court also noted that WIDEawake used an old photo of Dre, instead of a current photo. A current photo would have implied that Dre endorsed this re-released album. The court allowed his remaining breach of contract claim for unpaid royalties to continue.

 

Sharmil McKee | Business Attorney | blog@mckeeoffice.com

Collections Checklist: How to collect past-due accounts

Posted on by
Reply

While having a small accounts-receivable balance indicates good financial management, (around 1.5% to 2.5% of your gross income), collecting past-due balances is a displeasing aspects of business. Studies show that 75% of receivables that are 3 months delinquent are paid. However, this number drops to 56% after 6 months. Therefore your delay in collecting past-due accounts will reduce your chance of receiving payment. This checklist should help you reduce the stress of collecting past-due accounts:

  • For example, offer a 2% discounts for accounts paid within 10 days rather than 30 day.
  • Encourage customers to pay sooner by offering discounts for early payments. Most clients pay their bills and will pay if they have the funds.
  • After 30 days of no payment, add a service charge. Contact your attorney to ensure that you do not exceed your state’s usury statutes and federal law.

Step one:

Make a personal visit to the customer to discuss past-due accounts. Remember, that you value the client-relationship. Call your customer when personal visits are not possible. Appeal to your customer’s business sense while respecting the valuable client relationship. For example, try “I’m the smallest of the smallest. I can’t play the role of bank because I am so small.” When you talk with your customer, offer some solutions. Give your client a way out of this uncomfortable situation.

Step two:

Play “good cop/bad cop”. Ask your secretary or partner to call on your behalf. Ideally, the client will be so grateful to talk to you, the “good cop”, that he/she will settle the account so they will not have to talk with the “bad cop”. This allows you to maintain the client relationship, while collecting your account.

Step three:

Send a series of reminder letters. The first letter should include the following statements:

  • concern that your valued client has allowed his/her account to lapse
  • acknowledge your goal of providing high-quality services
  • you are aware of his/her delinquent account status
  • contact you promptly or his/her credit status is in jeopardy (include your contact information)
  • the total amount due
  • pay this amount to avoid sending the account to a collection attorney. Say, “we regret having to take this action, but must do so”
  • Thank you in advance for settling this matter



Your subsequent letters should include several choice boxes:

  • I am sending a check on _________
  • This is part of the bill to show good faith
  • Here’s the whole amount; now stop calling me



Step four:

File suit in small claims court. In Philadelphia, the maximum amount allowed for small claims is $10,000. Corporations and associations with less than a $2500 claim do not need an attorney to represent them in small claims court. If the past-due amount is more than allowed by the small claims court, then contact your attorney to file a lawsuit to collect the account.

Follow these steps and you should be able to collect your past-due accounts while preserving your customer relationship.

Sharmil McKee | Business Lawyer | blog@mckeeoffice.com

　
 
 
 
 
 
 

 

Jill Scott Sued by Record Label: defending contract lawsuits

Posted on by
2

 

 Jill ScottJill Scott is facing a possible multi-million dollar judgment.  Her record label, Hidden Beach, is suing her for breach of contract. They claim that she promised to produce 6 albums, but she has only produced 3 so far. They are seeking to recover the money they would have earned had she produced the final 3 albums. The lawsuit was filed in California, so California law will govern whether Hidden Beach will win or not. However, let us imagine what would happen if the lawsuit was filed in Pennsylvania.

In Pennsylvania, a plaintiff is entitled to recover the money that she expected to earn if the defendant fulfilled his contractual obligations. This law assumes that the plaintiff did not cause the defendant to breach (or break) his promises. Did Hidden Beach require Jill Scott to produce only a certain genre of music? Did they interfere with her ability to create music? Were they stealing money from her or failing to pay her as they promised? The law also assumes that the defendant could actual perform as promised, and that no outside forces prevented the defendant from performing. For example, did Jill Scott lose her voice or was she disabled?

On the other hand, Pennsylvania only permits the plaintiff to recover her actual losses. If Hidden Beach filed this lawsuit here, it would have to prove to a reasonable certainty that had Jill Scott produced the final 3 albums, they would have been successful, profitable albums. The law allows the defendant to reduce the plaintiff’s recovery by the value of defendant’s partial performance. Hidden Beach already earned millions from Jill Scott’s previous albums. So, this amount could be deducted from Hidden Beach’s claimed damages. In addition, the law requires the plaintiff to take reasonable steps to mitigate her damages. For example, Hidden Beach could be required to hire new talent to replace Jill Scott.

What can you learn from Jill Scott’s contract troubles? When negotiating your contract, always plan the exit. Resolve these two issues while you and the other side are still in the honeymoon stage: What happens if you cannot fulfill your promises? What happens if the other side cannot fulfill its promises?

Also, understand that you have several legal defenses to a breach of contract lawsuit in Pennsylvania. First, the law gives you time to perform your contractual obligations, if the contract does not specifically state a deadline. If the deadline has not passed, then you cannot legally breach the contract. Second, the plaintiff has a duty to mitigate her losses. If she does not take reasonable steps to stem her losses, you may only be responsible for a portion of her damages.

In addition, the plaintiff is only entitled to recover damages if she did not cause you to breach your obligations. If, for example, plaintiff interfered with your task, or created an unreasonably hostile environment, she is not entitled to recover damages. And finally, you can always challenge the plaintiff’s calculation of her damages. You are only responsible for damages that are a natural, foreseeable consequence of your action or inaction (like a series of dominoes falling).

I am sure you, astute reader, have figured out that I am a Jill Scott fan. I wish her great success.

Is your business being sued for a breach of contract? Contact us today to discuss your options. We offer free consultations.

Sharmil McKee | Business Lawyer | blog@mckeeoffice.com

Contracts: What you can learn from Conan O’Brian and NBC

Posted on by
1
Conan O'Brien

Conan O'Brien

A week ago, Conan O’Brian lost his job, as the host of the Tonight Show. Actually, it appears the Conan quit when the network (NBC) decided to move the show from 11:30 pm to 12:05 am. http://tinyurl.com/yz5xt7u  The network’s decision was made after examining Jay Leno’s rating of his 10 pm show. The poor ratings prompted the network to move Jay’s show to 11:35 pm and bump Conan to 12:05 am. Conan protested the move by quitting the show. Read his announcement letter here. http://tinyurl.com/ycv5vly  Many of Conan’s fans have hit the social networking sites to show their support; for example “I’m with Coco”on Facebook. http://imwithcoco.com  

But astute reader, I know you are asking, how can this happen when he had a contract? Easily — the parties built an exit plan into the contract. NBC and Conan, while negotiating the contract, addressed the question of ’what if we need to change Conan’s time slot because the ratings are poor?’. We will never know the actual answer to that question, unless we read their contract. However, rest assured that if NBC’s changing the show’s time slot breached the contract, Conan would have immediately filed an injunction and initiated a lawsuit. The latest rumors are that NBC will pay Conan $30 to $40 million in liquidated damages. http://tinyurl.com/yh99dtx Imagine the money the parties are saving by avoiding an expensive lawsuit.

What can you, as a business owner, learn about contracts from Conan?

The best contracts plan the end of the agreement, while the parties are in the honeymoon stage. In essence, the parties discuss the worst case scenarios during negotiations prior to signing the contract. I call this process—playing the ‘what if’ game. When you are negotiating a contract, always ask what happens if I can not finish what I promised to do? What happens if the other side cannot finish what they have promised to do? Most people spend a considerable amount of time, working out the details of what they plan to do. But they fall short of discussing the unpleasantness of broken promises. However, you dear reader, are ahead of the curve. If you plan the end of your contract before beginning your contract, you will avoid most of these unpleasantries and expenses.

Good luck.

Do you have questions about drafting a contract? Call us for a free consultation or chat live with a business attorney at www.mckeeoffice.com  

Sharmil McKee | Business Lawyer | blog@mckeeoffice.com

Fraud versus breach of contract – $5 million dollar question

Posted on by
Reply

Nicolas CageNicholas Cage is being sued for fraud. 

Red Curb Investments alleges that Nicholas Cage failed to repay a $5 million loan.  A loan is a contract where Party A agrees to lend money to Party B.  In exchange, Party B agrees to repay the money on a certain day.  When Party B fails to repay the money, he has breached the loan contract.  Now, you may be asking yourself, if Cage breached his agreement– why o why—are they suing him for fraud? That is a very good question, astute reader. 

The rationale lies in the damages that are available in court following a breach of contract compared to fraud.    In Pennsylvania, the plaintiff in a breach of contract lawsuit is only entitled to her actual damages and any consequential damages that she can prove.  Consequential damages can range from loss of profit to loss of product.  Punitive damages are not permitted in a breach of contract action.  However, the plaintiff in a fraud lawsuit is entitled to punitive damages which are not related to the plaintiff’s actual losses.  Punitive damages are designed to deter the defendant from future similar bad acts.  While Pennsylvanian law does not offer a formula to calculate punitive damages, it is often a function of the defendant’s financial abilities. 

Therefore, it appears that Red Curb is seeking punitive damages or an amount greater than their actual and consequential damages. 

Do you have a question about contracts? Chat online with a business attorney every Monday through Friday from 8 am to 8 pm at www.mckeeoffice.com.

Sharmil McKee | Business Attorney | blog@mckeeoffice.com

Blood and Contracts

Posted on by
Reply

 

R. Allen Stanford

R. Allen Stanford Took a Blood Oath to Hide a Scam

Is a contract written in blood enforceable in court? No. 

 It is hard to imagine that in 2009, people would ever resort to using blood to write contracts.  However, in 2009, the courts address two different contracts written in blood. The first was a $170,000 loan between two friends.  The loan agreement was written in blood on a napkin. The second was an agreement to commit a crime between two companies.  The company executives swore a blood oath in a brotherhood ceremony.  The court ruled the contracts are unenforceable.

What can you, as a small business owner, learn from these cases? First, a contract to commit a crime is not enforceable in court. Ever. Second, a valid contract does not need blood to be enforced by a judge.  Parties to a contract must exchange promises where each party agrees to give up something or do something.  This exchange is called “legal consideration”.  A simple example is a car purchase.  The car owner is giving up his car. The car buyer is giving up her money.  This is an exchange or legal consideration, so a judge would enforce this contract.  Without this exchange, the contract is merely a gift.  And gifts, even if written in blood, are not enforceable. 

Do you a legal question about contracts? We offer free consultations on this and other issues. Chat, live and privately, online with an attorney  every Monday through Friday from 8 a.m. to 8 p.m.

Sharmil McKee | Business Lawyer | blog@mckeeoffice.com