Implied Contract: When Actions Speak Louder than Written Words

 If you think you are not contractually bound to follow-through on a business deal because you did not sign a contract, you need to educate yourself about the legal theory of "Implied contract."  An "Implied contract" describes a set of circumstances in which a court can determine there is a binding, enforceable contract based upon the course of conduct of the parties. 

 There are circumstances where the course of conduct of the parties speaks louder than any agreement on paper.  A written contract can be ambiguous (resulting in contentious litigation in court over what the intentions of the parties were as reflected in the written contract).  An "Implied contract" lies with what the parties did to facilitate and perform a contract in addition to what the parties said in the course of their dealings. 

 Sometimes, actions really do speak louder than words.

 We represented a Connecticut non-stock corporation (not-for-profit organization) in the collection of a debt.  The defendant owed our client money for services rendered to a family member.  The defendant induced our client to provide services to his relative based upon the defendant's repeated promises to pay our client.  When services were no longer needed, the defendant decided he didn't need to pay our client.

Prior to suing, our client made numerous attempts to reach an amicable settlement.  The defendant rebuffed all attempts to settle.  The defendant challenged our client to sue him.  He stated that his attorneys "would welcome testing [our] legal theory of 'Implied contract' in court."   Reluctantly, our client sued the defendant.

 After the defendant's attorneys tested our legal theory of "Implied contract" in court, the defendant settled the case for 96.5% of the debt. 

 It turns out that the defendant and his attorneys were not the only ones who welcomed testing our legal theory of "Implied contract" in court.  Our client was ecstatic with the settlement and that, for once, justice did prevail. 


Image: A Handshake; from Wikimedia, Public Domain

Fighting Back Against Abusive or Harassing Collection Practices

 How can you fight back against abusive, harassing or misleading collection practices?  In Connecticut, an aggrieved debtor might turn to the state's abusive collection practices statute. 

 A debtor who proves his or her case may be entitled to actual damages, additional damages up to $1,000 and costs, including reasonable attorneys' fees.  Or, the abusive creditor may be persuaded in a proper case to negotiate a settlement. 

 In a recent case, our firm negotiated a favorable settlement on behalf of a client with the credit card subsidiary of a major national bank.  In addition to receiving money to settle the case, the client recouped all of his attorneys' fees and expenses.  Names are omitted here to preserve confidentiality.

 The client had moved out of the country for a job opportunity.  He sent a change of address letter to the bank.  He engaged a third-party debt-settlement firm to negotiate the satisfaction of a credit card debt.  He agreed to pay the negotiated settlement amount to satisfy the credit card debt and he did pay the settlement amount.  He was sued anyway.  When commencing the suit, the bank directed a State Marshal to serve a summons and complaint at the client's vacant house in Connecticut -- literally thousands of miles from his then actual home. 

The Marshal was following the procedure for service at a defendant's "actual place of abode" according to statute

 Despite efforts to have the suit withdrawn -- service was improper and he was satisfying the debt anyway -- the bank's collection law firm continued the suit.  The client counterclaimed under the abusive practices statute.   

 That statute, in this case, was a useful tool for solving the real problem: getting the bank's (or its attorneys') attention.  There was not a lot of money involved, especially for a national bank.  And, the client intended to -- and did -- satisfy the debt.  There should have been no dispute.  Ultimately, the bank, through its attorney, did pay a bit of attention -- enough to settle the case "amicably."


Image: Google Images, Public Domain, Boxer John Lawrence Sullivan


What's In a Name? It Should Be The Truth


"Branding" is a hot buzzword these days.  Consultants try to teach organizations that are new at it  (like small law firms, such as ours, and small businesses in general) how to establish a "brand."  More experienced organizations understand the value of their established brands and will vigorously defend them with all the legal means available.  Two recent examples involve the State of Vermont and the Taco Bell fast food chain.

The State of Vermont recently directed its legal ire against hamburger giant McDonald’s for the use of the word “maple” in the name of their new breakfast offering, McDonald's Fruit and Maple Oatmeal.   According to Bloomberg news reports, Governor Peter Shumlin said the only actual maple ingredient in the product was extracted from the bark of a bush that is a distant relative of the maple tree.  The MacDonald's product allegedly did not comply with Vermont's maple laws, which are very specific in the way in which the word “maple” is allowed to be used:  Vermont is very protective of its " maple" brand. As  Kelly Loftus of the Vermont Agency of Agriculture said, "It is illegal to use the word 'maple' for a product unless the sweetener is 100 percent pure maple. Artificial maple flavoring should be clearly and conspicuously labeled on the principal panel with the term 'artificial flavor'."

McDonald’s reportedly has acquiesced.  Bloomberg reports  that as of February 1, Vermont customers (and only Vermont customers) can now request that maple syrup or sugar be added to the oatmeal.

Taco Bell has also had to defend a cherished brand.  This time, it's not the use of the brand that is at issue; rather, the issue involves the sullying of a valuable brand name.  An Alabama law firm has filed a class action lawsuit against Taco Bell.  The company is being sued for false advertising for referring to its "seasoned ground beef" in its products.   The law firm has alledged that only 35% of the product is beef; the rest is filler, including something called “anti-dusting agent.”  MSNBC states that the lawsuit does not seek monetary damages, only that Taco Bell stop claiming that what they are selling is beef.

A statement on the Taco Bell website responds: “Unfortunately, the lawyers in this case elected to sue first and ask questions later -- and got their ‘facts’ absolutely wrong. We plan to take legal action for the false statements being made about our food."  While they refer to defending their food, they are really defending their Taco Bell brand.

I find these "brand battles" to be interesting and compelling.  I also find the legal and business lessons of these larger, more experienced organizations (whether a state or business entity) to be highly relevant and timely for all of us.

Another Reason to Settle

Plaintiffs that turn down a settlement tend to win less at trial than if they’d settled. This, is the conclusion of a recent study according to a post (“Go for That Settlement Study Says”) by Robert J. Ambroji on Legal Blog Watch, citing a story in the New York Times.

We tend to believe the conclusions despite our skepticism regarding most conclusions based on a single study. Why, do we give this particular study credibility? We concur with the LBW post:

Because a settlement is a product of mutual agreement. Both sides walk away from the table having made a bargain they both agree they can live with. By contrast, litigation is a crap shoot. Let someone else decide your fate, and more often than not you'll be unhappy with the outcome -- even if you "prevail."

Thus, even if the study statistically is wrong, there are other good reasons to reach a settlement. And, if the study, in fact, reflects the statistical reality, there is a substantial risk of ending up with less by going to trial.

The Times article is slanted so as to blame bad advice by lawyers for the study results. In my experience, the problem is much more often an emotional attachment to “the fight” by the clients. After all, even the Times notes that 80 to 92 percent of cases actually settle. Within the small minority of cases that go to trial, there are additional plaintiffs who should have settled. 

As the LBW post says: Go for it.

The Right to Refuse to Settle

The Delaware Business Litigation Report recently reported a case in which the Delaware Court of Chancery upheld the right to refuse to settle “Court of Chancery Upholds Right To Refuse To Settle”). One might wonder why that right was ever in question.

The case was somewhat complex and involved an insurer, a company, the company’s former directors and D&O coverage. The company wanted the former directors to settle so it could use their admission of liability, part of the settlement, as a legal “club” against the insurer. 

The Court did not think much of the company’s argument against its directors and upheld the directors’ right to refuse to settle. But,  the company’s position was at least based on a thought-out, rational legal strategy. I won’t actually comment further about that particular case, the text of which is available on the DBLR post.

I will comment on situations, encountered often, in which clients refuse to settle not because of any legal strategy, good or bad, but because of strictly emotional reasons. These situations are unfortunate.

Settlement puts the parties in charge. They can decide the terms by which their dispute be resolved. In a fully litigated case, the court decides for the parties. Often, unlike the Delaware case, there is no insurance involved and the parties exhaust themselves financially.

In our firm, we make it a practice to counsel litigation clients to start thinking about the acceptable terms of a settlement at the outset of a case. Of course, not every case can settle or, even when it can, not necessarily early on. Sometimes the parties need to go through discovery and pre-trial procedures to fully understand their positions. Sometimes, as was once pointed out to me by a judge’s clerk, the parties need to start spend money to fully realize the wisdom of a settlement. 

Most cases do settle. One of the challenges of litigation, however, is to bring around that client who for purely emotional, sometimes seemi