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The BUSKLAW January Newsletter: Recent Court Decisions Prove It: Every Word in a Contract Has Meaning!

In contracts, words are weapons. A lawyer who effectively drafts contracts will make careful word choices because the client's fate often depends on it. And every word in a contract has meaning: two recent cases support that truth. 

First, we have Heimer v. Companion Life Insurance Co., a 6th Circuit Court of Appeals decision issued just a few days ago. One Beau Heimer got drunk with his friends, but they all decided to take their motorbikes off-road for even more fun. Unfortunately, Beau collided with one of his pals and suffered major injuries; the medical expenses to put Beau back into some semblance of order exceeded $200,000.00. Beau filed a claim with Companion Insurance, but they declined to pay. Why? Because the vehicle insurance policy that they issued to Beau contained an exclusion for theillegal use of alcohol

Beau's attorney was crafty. He argued that Beau didn't illegally use alcohol. Beau was not a minor and didn't drink in defiance of a court order. Beau…
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The BUSKLAW December Newsletter: Resolving the "Mental Mist" of an Ambiguous Contract

(Author's Note: Props to Kilroy J. Oldster for coining the term "mental mist.")

Contractual ambiguity - usually created when two provisions of the same contract irreconcilably conflict with each other - isn't pretty. At best, it's embarrassing to the lawyer who drafted the document; at worst, it thwarts the business purpose of the contract and may lead to litigation.

A typical case of contractual ambiguity results when a contract incorporates another document in the text that conflicts with one or more provisions. This scenario played out in Klapp v United Insurance Group Agency, a 2003 Michigan Supreme Court case. The decision prescribes how a Michigan court should resolve contractual ambiguity.

Craig Klapp was an insurance agent for United Insurance from 1990 to 1997. In 1990, he signed an "Agent's Agreement" that included a Vesting Schedule stating that on his retirement at an unspecified age and provided that he had worked at least two years for U…

The BUSKLAW November Newsletter: Dead Turkeys and Deader Tort Damages

November is the month of Thanksgiving. And Thanksgiving for most folks means time with family and friends (better yet, family who are friends), an appropriate but modestly-priced wine, and a turkey. Turkeys should live their brief sojourn on this earth in relative peace before winding up on our table. But that was not to be for the poor fowls in the recent Kent County (MI) Circuit Court case of White Acres, LLC et al v. Shur Green Farms, LLC et al

The case involves a plethora of parties (hence the "et al"), all of whom were in the distribution chain of a biofuel called Lascadoil. Unlike its parent product, Lasalocid, Lascadoil is not an appropriate turkey-feed additive. (Does anything with "oil" in its name sound fit for human or animal consumption?) So when a bunch of turkeys died after eating feed tainted with Lascadoil, the lawsuits started flying; each party was sued by its downstream buyer who in turn sued its upstream seller. And numerous insurance companies…

A BUSKLAW Newsletter Aside: Links to My Michigan Bar Journal Plain-Language Articles

Since my retirement from in-house corporate law in 2014, I've written or co-written several articles about using plain-language in contracts for the Michigan Bar Journal. And a new article has recently appeared in the October 2017 issue. But those articles haven't been a lone endeavor in any sense; I've had several plain-language experts give me their input along the way:
Plain English Scholar and WMU-Cooley Law School Distinguished Professor Emeritus Joe Kimblewho invited me to write for the Journal to begin with and has since freely given me editorial advice that not only benefits the particular article du jour but also helps my legal writing generally. And a hat tip to Journal Editor Linda Novak who has put, editorially-speaking, the "frosting on the cake" before publication of these articles. Michael Braem, J.D., Contract Manager of the Michigan State University College of Human Medicine, who has co-authored some of the articles with me. Michael has also becom…

The BUSKLAW October Newsletter: Liquidated Damages Must be Reasonable to be Enforceable

This Photo by Unknown Author is licensed under CC By-SA

In last month's newsletter, we determined that Michigan law doesn't recognize the concept that "unreasonable" or adhesion contracts are unenforceable. But there is a caveat: a liquidated damages contractual provision must be reasonable to be enforceable. 

A liquidated damages provision is a term of art in the legal world. It applies when, according to Professor Bryan Garner, the parties to a contract agree in advance on the measure of damages to be assessed if a party defaults. Liquidated damages provisions are common in employee non-competition agreements, and it was that clause in one such agreement that Kent County Circuit Court Judge Christopher Yates examined in the case of Alpha Automotive v Cunningham Chrysler of Edinboro.

The facts of the case are simple. Cunningham is a car dealer who contracted with Alpha to conduct promotional events to sell Cunningham&#…

The BUSKLAW September Newsletter: No Judicial Sympathy for "Unreasonable" Contracts in Michigan

If you work with contracts, it's just a matter of time before a contract with an "unreasonable" provision is sitting on your desk. Perhaps this happened because your company didn't have enough bargaining leverage to get the other party to change the unreasonable provision, but your senior management directed you to proceed anyway. Or maybe the unreasonable provision snuck in during the heat of contract negotiation and wasn't noticed until months later. In any event, you're thinking about going to court and arguing that the unreasonable provision should be disregarded (or even invalidate the contract). What are your chances? 

In Michigan, you'll have an uphill battle, as the plaintiffs found out in the case of Rory v Continental Insurance Company CNA that was decided by the Michigan Supreme Court in 2005 and, to my knowledge, is still good law. The contract at issue was an auto insurance policy issued by Continental to Rory. (Yes, an insurance policy is a c…

The BUSKLAW August Newsletter: This Single-Sentence Contractual Provision Can Save - or Ruin - Your Day!

When it comes to business contracts, some provisions are more important than others. And it's true that some of these critical clauses are buried deep within a contract, so by the time you get to them, your eyes are glazed over, and you gloss over them. But that could be unfortunate. 

One such provision is what lawyers call the choice of lawand forum selection clause (for convenience, "COLFS"). That clause typically reads as follows:

The validity, interpretation, and construction of this agreement are governed by the laws of the State of [INSERT STATE], and any and all claims hereunder shall be brought in [SPECIFY NAME OF COURT AND COUNTY].

A recent decision by Kent County Circuit Court Judge Christopher Yates underscores the importance of a COLFS provision in an employment contract between OtterBase, a Grand Rapids, MI-based staffing firm, and two of their former employees, Carrie Rogers and Emily Reed. Rogers and Reed had experience in the staffing services industry in so…