Sunday, April 3, 2016

When are attorney’s fees recoverable as part of a lawsuit

When are attorney’s fees recoverable as part of a lawsuit?

Generally, Texas follows the “American Rule,” which means that litigants may recover attorney's fees only if specifically provided for by statute or contract.  See, e.g.,  Epps v. Fowler, 351 S.W.3d 862, 865 (Tex.2011); see also  Choice! Power, L.P. v. Feeley, No. 01-15-00821-CV, 2016 WL 4151041, at *8 (Tex. App.–Houston [1st Dist.] Aug. 4, 2016, no pet. h.).

Tuesday, March 29, 2016

Quantum Meruit

If my company provided goods or services to another company, but we did not have a contract, does my company have a claim for getting paid?

Yes, Texas law provides an equitable claim for the recovery of the reasonable value of goods or services that one provides to another when no contract covered the transaction.  This cause of action is called quantum meruit.  “To recover in quantum meruit, a claimant must prove that (1) valuable services were rendered or materials furnished; (2) for the person sought to be charged; (3) and were accepted by the person sought to be charged; (4) under circumstances that reasonably notified the person sought to be charged that the plaintiff, in performing the services or furnishing the materials, expected to be paid by the person sought to be charged.”  Weaver v. Jamar, 383 S.W.3d 805, 811 (Tex. App.– Houston [14th Dist.] 2012, no pet.)(emphasis added).  “To recover in quantum meruit, the plaintiff must show that his efforts were undertaken for the person sought to be charged; it is not enough to merely show that his efforts benefitted the defendant.”  Truly v. Austin, 744 S.W.2d 934, 937 (Tex. 1988).  A party may recover under quantum meruit only when there is no express contract covering the services or materials furnished. Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex.1990).

Thursday, March 17, 2016

Unilateral Mistake: An Equitable Exception to Contract Enforcement

Can I get out of a contract that I entered into by mistake?

Generally, under Texas law, if the other party did not enter into the contract based upon the same mistake (i.e., both parties made the same mistake or mutual mistake) a party cannot avoid its contractual obligations even though it entered into a contract based upon its own mistake.  Texas law, does however, recognize an equitable exception to this general principle. “[E]quitable relief will be granted against a unilateral mistake when the conditions of remediable mistake are present. These conditions generally are: (1) the mistake is of so great a consequence that to enforce the contract as made would be unconscionable; (2) the mistake relates to a material feature of the contract; (3) the mistake must have been made regardless of the exercise of ordinary care; and (4) the parties can be placed in status quo in the equity sense, i. e., rescission must not result in prejudice to the other party except for the loss of his bargain. There may be other circumstances which will govern or influence the extension of relief, such as the acts and extent of knowledge of the parties.” James T. Taylor & Son, Inc. v. Arlington Indep. Sch. Dist., 335 S.W.2d 371, 373 (Tex. 1960).

Monday, March 14, 2016

Specific performance as a remedy for breach of contract

Can one sue to make another party perform a contract that it has breached?

Generally, the remedy for a breach of contract is money damages sufficient to place the non-breaching party in the position that it would have been in but for the breach.  However, the equitable remedy of specific performance is an exception to this general rule.  The doctrine of specific performance may provide a means to make another party perform under the contract.  “Specific performance is an equitable remedy that may be awarded at the trial court’s discretion upon a showing of breach of contract. Paciwest, Inc. v. Warner Alan Props., LLC, 266 S.W.3d 559, 571 (Tex. App.– Fort Worth 2008, pet. denied). Specific performance is not a separate cause of action, but rather is an equitable remedy used as a substitute for monetary damages when damages would not be adequate. Paciwest, 266 S.W.3d at 571; Stafford v. S. Vanity Magazine, Inc., 231 S.W.3d 530, 535 (Tex. App.–Dallas 2007, pet. denied).  Because specific performance is an equitable remedy available only when the legal remedy of damages is insufficient, when one brings a breach of contract suit, one must elect to sue for either money damages or specific performance. See Carrico v. Kondos, 111 S.W.3d 582, 588 (Tex. App.–Fort Worth 2003, pet. denied).”  Kleberg County v. URI, Inc., 13-14-00158-CV, 2016 WL 363114, at *11 (Tex. App. Corpus Christi Jan. 28, 2016).

Friday, March 11, 2016

Recovery of Lost Profits for a New Business

Can a new business that does not have an established track record recover lost profits as part of a breach of contract claim?

Assuming the losses are a natural, probable, and foreseeable consequence of the defendant’s breach, then under Texas law, the answer depends upon a fact intensive inquiry, which focuses on the experience of the people involved in the business, the nature of the business, and the relevant market.  See Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 280 (Tex.1994).  “To recover damages for breach of contract, a plaintiff must show that he suffered a pecuniary loss as a result of the breach. To recover lost profit damages, a plaintiff must show the loss by competent evidence and with reasonable certainty.” Peterson Group, Inc. v. PLTQ Lotus Group, L.P., 417 S.W.3d 46, 64 (Tex. App. Hous. [1st Dist.] 2013).  “Lost profits are damages for the loss of net income to a business and, broadly speaking, reflect income from lost business activity, less expenses that would have been attributable to that activity. As a minimum, opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained. Lost profits cannot be based on pure speculation or wishful thinking.” Peterson Group, Inc. v. PLTQ Lotus Group, L.P., 417 S.W.3d 46, 64-65 (Tex. App. Hous. [1st Dist.] 2013) (citations and quotation marks omitted) citing Tex. Instruments, 877 S.W.2d at 279.  “Profits which are largely speculative, as from an activity dependent on uncertain or changing market conditions, or on chancy business opportunities, or on promotion of untested products or entry into unknown or unviable markets, or on the success of a new and unproven enterprise, cannot be recovered. Factors like these and others which make a business venture risky in prospect preclude recovery of lost profits in retrospect . . . .  The mere hope for success of an untried enterprise, even when that hope is realistic, is not enough for recovery of lost profits.”  Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279-80 (Tex.1994).  However, the fact that a business is new does not absolutely preclude recovery of lost profits. See id. at 280.  Recovery will depend upon the experience of the people involved in the business, the nature of the business, and the relevant market.  See Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 280 (Tex.1994).

Thursday, February 4, 2016

Contract Damages: Lost Profits

If someone breached our contract, can I seek recovery of lost profits?

Generally, Texas law does allow a party injured by another party’s breach of their contract to sue for lost profits. “Generally, the measure of damages for breach of a contract is that which restores the injured party to the economic position he would have enjoyed if the contract had been performed. This measure may include reasonably certain lost profits. Lost profits may be in the form of direct damages – that is, profits lost on the contract itself – or in the form of consequential damages – such as profits lost on other contracts resulting from the breach. To be recoverable, consequential damages must be foreseeable and directly traceable to the wrongful act and result from it. Thus, consequential damages are generally not recoverable unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach.” See AZZ Inc. v. Morgan, 462 S.W.3d 284, 289 (Tex. App. – Fort Worth 2015, no pet.) (citations omitted).

Wednesday, January 27, 2016

Shareholder Oppression

Does Texas recognize a common law cause of action for minority shareholder oppression?

The Texas Supreme Court recently decided that Texas does not recognize a common-law cause of action for “shareholder oppression.”  Richie v. Rupe, 443 S.W.3d 856, 891 (Tex. 2014).  The Court reasoned that since the Texas Legislature has crafted a statutory scheme governing domestic corporations in the Texas Business and Organization Code there are no compelling grounds to impose a cause of action upon the statutory framework.  Id.

The Texas Business and Organization Code provides that the only remedy for shareholder oppression is the appointment of a rehabilitative receiver.  Richie v. Rupe, 443 S.W.3d at 877; see also Tex. Bus. Orgs. Code § 11.404.  This remedy for “oppressive” actions is limited yet sufficient according to the Texas Supreme Court.  Richie, 443 S.W.3d at 891.

Thursday, September 24, 2015

Read Before Signing: You Should Not Rely Upon What the Other Side Tells You a Document Says

Under Texas law, if I have a written contract with someone, they tell me what the terms are, and later I find out that what I was told differs from the written terms, are the written terms enforceable?

Generally, the written terms will be enforceable.  In a recently decided case (National Prop. Holding, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015), the Texas Supreme court stated that: “Texas courts have repeatedly held, a party to a written contract cannot justifiably rely on oral misrepresentations regarding the contract's unambiguous terms. See, e.g.,  Thigpen v. Locke, 363 S.W.2d 247, 251 (Tex. 1962) (‘In an arm's-length transaction the defrauded party must exercise ordinary care for the protection of his own interests . . . . [A] failure to exercise reasonable diligence is not excused by mere confidence in the honesty and integrity of the other party.’) (citation omitted). This is particularly true when the party had a reasonable opportunity to review the written agreement but failed to exercise ordinary care to do so. See Tex. & Pac. Ry. Co. v. Poe, 131 Tex. 337, 115 S.W.2d 591, 592 (1938) (holding that evidence was legally insufficient to support a finding of fraud where party who relied on oral statement that release was receipt had an opportunity to read the document which plainly identified itself as a release); see also Thigpen, 363 S.W.2d at 251.  Instead of excusing a party's failure to read a contract when the party has an opportunity to do so, the law presumes that the party knows and accepts the contract terms.  It is not the courts' role ‘to protect parties from their own agreements.’ El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 810-11 (Tex. 2012).  As the [United States] Supreme Court explained long ago: ‘It will not do for a man to enter into a contract, and, when called upon to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained.  If this were permitted, contracts would not be worth the paper on which they are written.  But such is not the law. A contractor must stand by the words of his contract; and, if he will not read what he signs, he alone is responsible for his omission.’  Upton v. Tribilcock, 91 U.S. 45, 50, 23 L. Ed. 203 (1875).”