In some circumstances, and often in the context of a loan, parties may enter into multiple agreements with one another. When there are multiple agreements between the same parties, one party may want to negotiate the inclusion of  “cross default” provisions in those agreements.  A cross default provision provides that a party’s default under one agreement triggers an automatic default of all of the other agreements between the parties. Banks or Lenders often include a cross default provision in their loan documents to protect their financial interests.  Once the cross default provision is invoked, the defaulting party is not likely to have many options for recourse.

In order to be effective, the cross default provision must be included in each of the agreements subject to the cross default. Eagle Ridge LLC v Albert Homes LLC, 2009 Mich App, LEXIS 2382 (November 17, 2009).  In the recent case of Eagle Ridge LLC v Albert Homes LLC, the Michigan Court of Appeals refused to enforce a cross default provision that was found in only one of two simultaneously signed agreements.

The Michigan Court of Appeals used basic contract principals to support its decision.  Quoting Randolph v Reisig, 272 Mich App 331 (2006), the Court found that “an unambiguous contractual provision is reflective of the parties’ intent as a matter of law, and if the language of the contract is unambiguous, we construe and enforce the contract as written.”  Therefore, because one of the agreements at issue did not contain a cross default provision, the Court concluded that the parties must not have intended that the agreement be subject to a cross default provision.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm.

The most important provisions in a severance agreement are those regarding payment, non-competition, and the release of claims. In a severance agreement, the employee typically agrees to accept payment in exchange for agreeing to release employer from claims he or she may have against employer. It is also very typical for a severance agreement, like many employment agreements, to include a non-compete provision. An agreement not to compete should be reviewed for reasonableness, which will vary depending on the specifics of the situation.

It is recommended that employers offer the terminated employee a reasonable period of time to consider signing a severance agreement with a release. A release is unenforceable unless the employee voluntarily executes it, i.e., the execution is not the result of duress or coercion.

Employers should make sure to have legal counsel draft or review their severance agreement to ensure that the employer is adequately protected. Employees should consult legal counsel before signing a severance agreement to ensure that the agreement terms are fair and reasonable.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm.

Some oral contracts are enforceable, but several types of contracts are enforceable only if they are in writing.  This stems from a legal concept called the “Statute of Frauds,” which was developed in the 17th Century and is still followed today.  The purpose of the Statute of Frauds is to prevent fraud in certain types of contracts

Under Michigan law, the following types of contracts (among others) generally must be in writing to be enforceable:

• real estate agreements, including purchase agreements, deeds, mortgages, and leases (unless the lease is for less than one year)
• contracts that cannot be performed within one year (e.g. a two-year employment contract)
• promises to pay the debt of another (e.g. a personal guarantee)
• marital contracts (e.g. prenuptial agreements)
• real estate commission agreements
• promises made by financial institutions (such as a promise to lend)
• misrepresentations regarding credit
• sales of goods worth more than $1000
• sales of personal property

How can you protect yourself or your business?  First, it’s generally a good idea to make sure that all contracts are in writing and are signed by all parties to the contract.  If the agreement is in writing, and signed by all parties, the parties usually cannot dispute later that something was left out of the agreement.  Second, if you have an existing agreement that’s not in writing, you should contact an attorney to find out whether that agreement should be put into writing in order to make it enforceable.

This article was written by Melissa L. Demorest, Associate at Demorest Law Firm.

In the Michigan Court of Appeals case Bronco Oil v Citizens Bank (click here to download), the contract language, in essence, immunized the breaching party from having to pay the damages it allegedly caused because they occurred outside of a 12-month period before the lawsuit was filed. Even though the lawsuit was timely, the potential damages were lost because of when the lawsuit was filed.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm.

Click here to download a PDF.

This article was written by Stephen J. Dunn, Of Counsel to Demorest Law Firm.

Once you’ve found the bar that you want to buy, the first step is to sign a purchase agreement.  The purchase agreement should cover everything that you and the seller have agreed upon – purchase price, payment method (e.g. cash, promissory note, etc.), timing of various steps, all terms and conditions, default provisions, naming rights, etc.  (See our article on Merger Clauses for the importance of including everything in one document).  The purchase agreement should also provide a date for closing, which will not occur until after the liquor license is transferred.

Note that Michigan law requires that all liquor inventories be purchased in cash.  Therefore, if your purchase includes any type of financing (such as a promissory note or loan), the purchase of liquor inventory must be specifically excluded from the purchase agreement and must be done in cash at closing.

The purchase agreement should also include provisions about the liquor license, including the purchase price and a provision covering what will happen if the liquor license cannot be transferred.  This is because the license itself cannot be transferred just through a purchase agreement.  Rather, the purchaser has to apply to the Michigan Liquor Control Commission (“LCC”) to transfer the license.  The purchaser then must undergo a rigorous application process in order to be approved to buy the license.  This process can take months, so purchasers must be patient!

While the liquor license transfer is pending, you should conduct due diligence on the operations of the bar.  If you plan to keep the bar open continuously before and after the closing, you should plan accordingly for a seamless transition.  Once the liquor license transfer has been approved, you can hold a closing and complete the sale.

This article was written by Melissa L. Demorest, Associate at Demorest Law Firm.

Here is a scenario where a general release was used, which demonstrates the importance of reviewing the specific language used.   The example comes from the recent case of Levy v Ford Motor Company (Click here for a PDF of this decision).   Party A had a history of contracting with Party B for delivery of construction materials and services. In October 1998, an incident occurred involving a truck owned by Party A and a train owned by Party B. Each party maintained that the other was responsible. Party B issued a debit memorandum in 2001, and thereafter stopped paying invoices to offset its alleged losses from damage to its train.   In connection with other contracts, Party A sued Party B for payment for ready-mix concrete shipped after May 2004. The parties settled that case, and their agreement included a release that comprehensively waived any further claims Party A might have against Party B “from the beginning of time,” but “with the sole exception of any claim arising out of damage to the train equipment.

In 2007, Party A filed an action as a claim for payments due under invoices dating from “2001 and before” in connection with deliveries of materials to Party B.  Party A sought monetary contract damages plus an accounting.   However, the Court held that Party A had already released any and all claims it might have otherwise had against Party B arising from events prior to 2004, despite the fact that the claims were not related to the train accident. Because of the comprehensive language and nature of the release it had signed in the first settlement, Party A wound up releasing any and all claims it could have had against Party B, despite the fact the causes of action were completely different.

Always have an attorney review your settlement and release documents to ensure you are preserving valuable rights and not being taken advantage of in the settlement.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm.

The Michigan Court of Appeals continued this trend on September 29, 2009, when it issued its decision in Siuda v Tobin. The contract for purchase of a modular home stated that any claim had to be filed no more than one year from the date of sale of the home, rather than the normal six years.  The purchasers claimed that the home was damaged during construction, but failed to bring suit until three years after construction began.  The Court of Appeals rejected all of the purchasers’ arguments against the enforcement of the shortened Statute of Limitations.

You should review the forms and contracts that your company uses, and decide whether to shorten the time period that your customers or suppliers have to bring a lawsuit.  On the flip side, if you have a potential lawsuit, you need to review the contracts to make sure how long you have to bring a claim.   Don’t simply assume that the Statute of Limitations has not been modified.

Click to Download Case from Michigan Court of Appeals in PDF Format

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm

A recent Michigan Court of Appeals ruling in the case Reicher v SET Enters, Inc (click here to view) decided that a settlement agreement between the representative and principal after the representative was terminated and had filed a lawsuit against the principal can negate the non-waiver rule.  In other words, when Reicher decided to settle his claims against the principal he signed away his rights to protection under the SCRA.  When the principal breached the settlement agreement, the statutory penalties under the SCRA did not apply.  Reicher was limited to the damages for breach of contract.

The non-waiver provision will still apply to a contract or agreement establishing or modifying the business relationship between the principal and the sales representative, but does not apply to post-termination agreements.

An example would be a pre-printed, non-negotiated commercial lease for an office photocopier. There is typically no room for negotiation other than the price. These agreements also typically contain a choice of forum clause wherein as a party to the lease you have agreed that any disagreements related to the lease will be litigated in the state where the leasing company is located. Should you or your company begin missing payments or have some other dispute with the leasing company, the leasing company would be allowed by the terms of the agreement to sue you in their home state, as far away as New York, Florida or California. You would be required to locate an attorney in that jurisdiction to defend your interests. You might also be required to travel there for a deposition of trial. If you ignore the lawsuit filed in the selected forum, a default judgment could be entered against you, and the Judgment then recognized and enforced by Michigan Courts because of the language in the agreement.

Before entering into an agreement, it is imperative that you review all the language and the fine print, including the choice of forum clause and know that should you have a dispute with the other party, you could be hauled into court in a different state. You may be able to negotiate to remove the forum selection clause from the contract, or simply choose another vendor.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm. Click here to view his professional resume.