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Summaries and analysis of recent Delaware court decisions concerning business-related litigation.
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Showing 233 posts in Breach of Contract.
Too frequently a plaintiff seeks to buttress its case by adding a fraud or tort claim to what is really just a breach of contract. But as this decision points out, just alleging the defendant did not intend to pay what was due when the contract was signed is not enough to support a fraud count. The decision is also very helpful in repeating the Delaware law on when a claim for breach of the covenant of good faith and fair dealing may be filed.
This is a great explanation of when a director is authorized to enter into an oral agreement that is enforceable, here to add two directors to a corporate board. To make the agreement depend on entering into a written contract, there must be a “positive agreement” that the oral agreement is not otherwise enforceable.
Some assume that a statute of limitations will not apply in the Court of Chancery. But as this decision illustrates, that is an oversimplification. The Court of Chancery may well use the same statute of limitations period applicable in an action at law, by analogy, under the equitable doctrine of laches. This is especially true when the claim is a legal one seeking legal relief. This decision also illustrates an important point regarding claim accrual. When a claim arises out of an obligation to make a series of payments over time, it is possible the Court will start to run the laches period from the first non-payment. In other words, subsequent non-payments might not constitute a new claim with a new limitations period or otherwise lengthen the time period to sue.
This decision interpreting a credit agreement’s terms is another reminder that an alleged oral modification to a written contract will not vary the contract’s terms when it has an integration clause and otherwise speaks to the subject of the modification.
This decision is an excellent explanation of the “bootstrapping doctrine” that seems to often befuddle litigants. Briefly, a plaintiff cannot “bootstrap” a breach of contract claim into a fraud claim except in certain limited circumstances that this decision explains. For example, misrepresentations made to induce a contract may form the basis for a fraud calm.
When is a corporate employee responsible for tortious conduct in that capacity? This decision answers that question in a very helpful way. For example, mere nonfeasance is not enough to impose liability on a corporate actor.
In this decision, the Court of Chancery declines to enforce an agreement to negotiate, applying Maryland law. The agreement set the rules of the road for any negotiations taking place between the parties, nothing more.
A material adverse change or effect clause permits a party to avoid its contractual obligations under certain circumstances. Delaware courts have addressed so-called “MAC” clauses in the merger agreement context on a number of occasions. Under that precedent, the party claiming a MAC has a high burden of proof and the alleged adverse change to a company’s business must be unexpected, serious, and extend over a significant period of time. A short-term hiccup is not a MAC. This decision is notable because it largely extends this law to the commercial contract context.
This is an excellent review of when a signatory to a contract might be personally liable notwithstanding that he claims to have only signed in a representative capacity. Hint: contractual references to the signatory separate and apart from the entity for which he is signing may create an ambiguity that prevents dismissal. It also has a good discussion on the limits of immunity for court-appointed receivers.
This decision explains the difference between a defendant’s right of setoff and recoupment. The key difference is that the right of setoff arises out of an independent transaction, while recoupment must be based on the same facts that support the main claim. Another difference concerns the statute of limitations. Setoff is subject to a three-year statute of limitations, while time-barred claims can be considered for recoupment when they arise out of the same factually-related transaction as the plaintiff’s claim.
It may surprise many of us to know that a party who does not sign a general release may still be bound by its terms. Yet, that is what this decision holds under this case’s facts, which involved New York law and a release signed by the non-signatory’s affiliates. When the release binds those for whom the releasing party is authorized to act, carve out for those other parties is needed to avoid this result.
This is a great decision on when the provisions of a contract bar tort claims of fraud and tortious interference. Briefly, when the contract speaks to an issue (e.g., expressly permitting certain acts, or imposing no duty to act), a party may not assert a tort claim that would deny the other party the benefit of its bargain. Further, when the contract between two parties selects a judicial forum for dispute resolution, arbitration is not part of the deal even if provided in a collateral contract involving one of those parties, at least not where there are no grounds for binding the non-signatory to the arbitration clause.
This is an excellent primer on the rules that guide the proper interpretation of a contract. While the rules it applies are taught to first year law students, they are too often forgotten by those of us long out of school.
This decision holds that Delaware does not recognize a claim for the implied warranty of accuracy for a report of an inspection company. Of course, that does not mean there is no breach of contract claim for inspection services. The problem in such matters is that the contract often contains a limitation of damages clause that a clever plaintiff may try to avoid, but not this time.
Delaware Superior Court Clarifies When The Duty Of Acting In Good Faith Applies To Enforcement Of A Guarantee
This is a novel decision because it deals with when a guarantor can defend against enforcement of his guarantee by claiming the company whose obligations he guaranteed was wrongly put out of business by the plaintiff who is trying to enforce the guarantee. The Court held that there was a duty to act in good faith and fairly to permit that company to first fulfill its obligation to the guaranteed party, before it could enforce the guarantee against the guarantor. Whether this defense will win, of course, remains to be seen. However, the decision is a caution that it is important to not prejudice the ability of a party who has given a guarantee to have his guarantor pay off the debt..