Home

Practice Areas

    Employment Law

    Labor Law

    Employee Benefits Law

    Commercial Litigation

    Construction Law

    Dispute Resolution

    Harassment Claims

    Wage and Hour Law

    Mediation and Arbitration

    Other Employment Litigation

Newsletters

Links

Contact Us

 

HR Solutions

 

Is a Credit Information Sheet

A Contract?  Court says Yes

----------------------------------

Builder Argues Subcontract

Controls, but Loses

 

            A credit application can be a contract, even if the subcontract entered into thereafter presumes to supersede it.  Midwest Builder Distributing, Inc. v. Lord and Essex, Inc., __IllApp3d__, No. 1-06-1233 (1st Dist App Ct. November 9, 2007).

             Midwest Builder Distributing delivered cabinets and appliances for installation at various homes being built by Lord & Essex.  In October 2000, evidently to induce Midwest to sell goods on credit to Lord, the Lord contracts manager signed a “credit information sheet” that solicited standard information such as company name and address and credit and bank references.  The latter section of the document was left blank by Lord.  

             Near the bottom of the sheet was this text:  “In the event MBD, Inc. retains an attorney to pursue collection of payment by suit or in bankruptcy or probate proceedings, seller may recover reasonable attorney fees and costs of court and interest at a rate of 1 ½% per month from the date payment became due…..The information contained in this statement is provided for the purpose of obtaining, or maintaining credit with you on behalf of the undersigned, or persons, firms, or corporations in whose behalf the undersigned may either severally or jointly with others, execute a guaranty in your favor.  Each undersigned understands that you are relying on the information provided herein…in deciding to grant or continue credit.”

             Between October 2000 and January 2001 Midwest executed eight subcontracts with Lord.  Each provided that Lord would send out purchase orders and job release notices for each delivery to each house, along with a description of the work.  At delivery, the subcontracts provided, Lord’s signature on the purchase order and the job release indicated acceptance of goods of satisfactory quality, and that the execution of the documents reflected “conclusive evidence” of the price of Midwest’s performance.  Midwest was accepting payment as full and complete compensation for its work at the specified jobsite.   

             Each subcontract limited to ten months after completion of work as the period in which Midwest could sue Lord.  Each subcontract contained a zipper clause stipulating that the agreement was complete and fully integrated; it “supersedes all previous understandings, representations and agreements…”

             When it did not get paid for its deliveries, Midwest sued for $58,608 on the unpaid principle, plus the 1 ½% interest, court costs, and attorneys fees.

             In a close case, the court decided that the credit information sheet was binding on Lord.  However, the sheet was ambiguous as to the obligation to pay for the goods, therefore “the credit information sheet at best would only function as a source of contingent liability should money be owed under another contract.”

             Lord had argued that even if the sheet was a contract document, it was superseded by the integration clause.  Admittedly there was no mention in the subcontracts of Midwest’s remedy for non-payment. The court disagreed with Lord, finding that the subcontracts should have overridden the sheet, since payment and remedies were central to the agreement, but “there is no text in the subcontractor agreements that deals with the omission of remedies or purports to clash or overlap with the remedies provided under the credit information sheet.  Nor is there any relevant testimony that would tend to show that the documents were drafted deliberately to avoid mention of them….”


  

1/24/08