Bluegrass Business Law

December 31, 2007

Get it in writing (or where’s the beef)

It is true that a contract can be formed orally; no writing is required to create a contract. Some contracts, though, are unenforceable as a matter of law without being in writing. For example, a contract for the sale the real estate is unenforceable unless it is put in writing. Many contracts are created AND are enforceable even if they are never written down. I would not recommend relying on oral contracts in business dealings though. The recent Kentucky Court of Appeals case Quadrille Business Systems v. Kentucky Cattlemen’s Association, Inc., 2005-CA-002621-MR & 2006-CA-000009-MR (December 28, 2007)(to be published) highlights the value of writing down agreements.

Quadrille and Cattleman’s did agree to work together to obtain a grant from the Kentucky Agricultural Development Board (“Board”) to establish and manage a cattle cooperative. However, Quadrille failed to make it to the jury on their breach of contract claim. This was because Quadrille “remembered” the contract one way and Cattleman’s “remembered” it quite another. Neither remembered the oral agreement to have sufficient details to establish definite terms of a contract. The Court noted that even Quadrille’s alleged terms “demonstrate[d] its lack of specificity and defiteness.” Id. at page 6. For example, there was no agreement as to how or what Quadrille would be paid for their efforts. This was fatal to the breach of contract as well as the quantum meruit claim.

Quantum meruit is a legal failsafe doctrine designed to prevent one party from getting a benefit from another party for free when some kind of compensation had been expected. An example would be if a homeowner contracted for a worker to install an inground pool and insisted that the pool be tiled. The worker digs the pool, pours the concrete, but gets sidetracked with a more lucrative job. The homeowner gets tired of waiting and hires someone else to tile the pool. While the homeowner may want to pay the first worker nothing because they failed to finish the job, they will have to compensate him for the work done though not the full contract price. The value of the work done is its quantum meruit value. Quantum meruit does not even require a contract to exist.

In this case, Cattleman’s did end up with a grant sans the elements that Quadrille wanted. Quadrille claimed they should be compensated for the work they put into the grant proposal since it benefited Cattleman’s. They actually won this from the jury, but the Court of Appeals said the trial court should have given Cattleman’s a directed verdict (taken it out of the jury’s hands and denied Quadrille’s claim). This was because there was no compensation complated in whatever agreement had existed between the two parties. In fact, Quadrille admitted they did not keep track of the time they spent on the project because they anticipated benefiting from the grant they hoped to recieve.

Since Quadrille’s only anticipated income from their work was the ultimate business deal with the Board, and there were no terms for compensation from Cattleman’s, they could not get quantum meruit relief. Once again, the absence of definite provisions to the alleged contract was fatal.

Finally, Qaudrille also claimed Cattleman’s had a fiduciary duty to them that was breached. The Court rightly found no fiduciary duty arose from a simple, arms length business deal. There has to be some mutual understanding of confidentiality or the undue exercise of power or influence. Neither existed here.

So, it is always best to commit an agreement to writing. The exercise of doing this allows for misunderstandings to be exposed and corrected. Having a written agreement also supplies evidence of what was meant in the first place if a later disagreement arises. In some cases, a writing is necessary to enforce an agreement. So, get it in writing.

January 31, 2007

Required findings for pre-existing condition – Workers Comp

Filed under: Workers Compensation — G.A. Napier @ 3:39 pm

The Kentucky Court of Appeals, in Finley v. DBM Technologies, 2006-CA-001132-WC, (Jan. 26, 2007)(To be published), made it clear that the Administrative Law Judge had to specific find whether a pre-existing condition had been permanently or temporarily aroused. In the case, Finley had soliosis which was deemed a dormant pre-existing condition by the Court of Appeals based on undisputed medical evidence. However, the ALJ attributed certain treatments to work related arousal and but denied coverage of later treatments.

In Workers Compensation,

    “a pre-existing condition that is both asymptomatic and produces no impairment prior to the work related injury constitutes a pre-existing dormant condition. When a pre-existing dormant condition is aroused into disabling reality by a work-related injury, any impairment or medical expense related solely to the pre-existing condition is compensable. A pre-existing condition may be either temporarily or permanently aroused. If the pre-existing condition completely reverts to its pre-injury dormant state, the arousal is considered temporary. If the pre-existing condition does not completely revert to its pre-injury dormant state, the arousal is considered permanent, rather than temporary.” Id.

In this case, the ALJ did not make a specific finding whether the arousal was permanent or temporary. So, if you are pursuing a workers’ compensation claim regarding a pre-existing condition, be sure request of the ALJ specific findings as to whether the pre-existing condtion was dormant and asymptomatic and whether it was a permanent arousal or temorary. This will save much time and effort.

January 23, 2007

Workers Comp Termination Date

Filed under: Workers Compensation — G.A. Napier @ 10:19 pm

In Frazier v. Morisey. Inc., 2006-CA-000895-WC (2007) the Court of Appeals ruled that KRS 342.730(4) is unambiguous and that the benefit termination date is the date that spouse or dependent would have qualified for Social Security benefits based on the earnings entitlement of the worker, had s/he survived.

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