Source: https://www.jeremywrichter.com/category/contracts/
Timestamp: 2019-04-19 01:29:00+00:00

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Is a Contract Enforceable When One Party Claims to Have Misunderstood It?
It sometimes happens that a party to a contract discovers that he has agreed to something that is not is his personal or financial best interests. He might try to claim that he didn’t read or didn’t understand the contract so the contract isn’t enforceable against him.
This article is an examination of Alabama caselaw on the question of whether a contract is binding and enforceable when a party claims to have misunderstood it.
Can you be bound to a contract you didn’t understand?
Let’s start with the basic principle of why we put contracts in writing in the first place. We do that so everyone is quite literally on the same page and has same opportunity to review, comprehend, and concede to the terms of the agreement, and those terms cannot change. The written contract is the only document that purports to represent the parties’ intentions.
“The general rule of contract law is that when the parties reduce their agreements to writing, the writing is the sole expositor of the transaction and the intention of the parties, in the absence of mistake or fraud or ambiguity.” Jones v. Jones, 236 So.3d 119, 123 (Ala.Civ.App. 2017) (quoting Gunnels v. Jimmerson, 331 So.2d 247, 250 (Ala.1976)). “The purpose of a signature on a contract is to show mutual assent.” Bowen v. Security Pest Control, Inc., 879 So.2d 1139, 1142 (Ala.2003) (quoting Ex parte Rush, 730 So.2d 1175, 1177-78 (Ala.1999)).
So the question then is whether a contract can be enforced against a party (under normal circumstances, since there are always exceptions that can blow these things wide open) who claims not to have understood what he was signing. The short answer is – yes, it can. In general, an executed agreement between parties that is complete in and of itself and free of ambiguity is an enforceable contract, even though one party claims that he did not understand the agreement and that the agreement did not represent what he thought he was agreeing to. Allen v. Allen, 903 So.2d 835 (Ala.Civ.App. 2004).
“One who has executed a written contract in ignorance of its contents cannot set up his ignorance to avoid the obligation in the absence of fraud or misrepresentation.” Mays v. Johnson Prod., Inc., 530 So.2d 215, 217 (Ala. 1988) (quoting Gunnels v. Jimmerson, 331 So.2d 247, 250 (Ala.1976)). “[W]hen a competent adult, having the ability to read and understand an instrument, signs a contract, he will be held to be on notice of all the provisions contained in that contract and will be bound thereby. Power Equip. Co. v. First Alabama Bank, 585 So.2d 1291, 1296 (Ala. 1991); see also Wilcoxen v. Wilcoxen, 907 So.2d 447, 450 (Ala.Civ.App. 2005); Allen v. Allen, 903 So.2d 835, 841 (Ala.Civ.App. 2004). This is true even to the extent that a party to a contract “may be ‘bound’ by a contract in ways that he did not intend, foresee, or understand.” Lilley v. Gonzales, 417 So.2d 161, 163 (Ala. 1982).
Can you be bound to a contract you didn’t read?
If you’ve ever purchased a home or car or insurance or even signed up for a credit card, you’ve likely entered into a contract without having read the whole thing. It’s important then to know whether that contract can be enforced against you. Again, the answer is yes.
“Alabama law provides that a person who signs a contract is on notice of the terms of the contract and is bound by it even if he or she fails to read or understand the document.” See Locklear Dodge City, Inc. v. Kimbrell, 703 So.2d 303, 306 (Ala.1997); Power Equipment Co., 585 So.2d 1291. Parties to a contract must be allowed to rely on the terms of a signed agreement, because it would impose a punitive result upon a party for courts to determine that a party that chooses not to read a contract or claims not to have understood it is not obligated by that contact and can ignore any provision that does not suit that party. See Locklear Dodge City, Inc. v. Kimbrell, 703 So.2d 303, 306 (Ala.1997).
So be mindful of the contracts you enter into because regardless of whether you have actually read or understood them, they are likely enforceable against you.
Are Pre-Injury Releases and Waivers Enforceable in Alabama?
If you’ve ever been zip-lining or whitewater rafting, you have likely had to sign some sort or waiver or release. Did you stop to wonder whether it’s enforceable if you were to get hurt? Would you actually have signed away your rights to make a claims against someone? As with all good legal questions, the answer is it depends. These types of releases can be enforceable in Alabama, but as to whether any particular pre-injury release is enforceable, it will hinge on the language of the contract itself.
In Alabama, parties may execute an agreement that will release claims or damages not particularly contemplated even before the claims or damages have arisen, although the parties’ intent must be clearly expressed in the agreement. See Minnifield v. Ashcraft, 903 So. 2d 818, 827 (Ala. Civ. App. 2004). Specifically, parties may expressly release claims for injuries and damages. Dudley v. Bass Anglers Sportsman Soc., 777 So.2d 135, 137-38 (Ala.Civ.App. 2000). The assumption with general pre-injury releases is that the parties “intended to release all claims – contract claims as well as tort claims…. If the parties had wanted to limit the release, they could have expressly reserved and excepted certain claims, including tort claims.” Reg’l Health Servs., Inc. v. Hale Cty. Hosp. Bd., 565 So.2d 109, 114 (Ala. 1990).
Parties may sign releases for injuries that have not yet occurred. “Future damages may be released if such is the intent of the parties.” Jehle-Slauson Const. Co. v. Hood-Rich Architects and Consulting Engineers, 435 So.2d 716, 719-720 (Ala.1983) (quoting W.J. Perrymore & Co. v. Penn Mutual Fire Insurance Co., 324 F.2d 791, 793 (5th Cir.1963)). “It is a well settled statement of law that ‘in absence of fraud, a release supported by a valuable consideration, unambiguous in meaning, will be given effect according to the intention of the parties to be judged by the court from what appears within the four corners of the instrument itself, and parol evidence is not admissible to impeach or vary its terms.’” Jehle-Slauson Const. Co. v. Hood-Rich Architects and Consulting Engineers, 435 So.2d 716, 719-720 (Ala.1983) (quoting Conley v. Harry J. Welchel, Co., 410 So.2d 14 (Ala.1982)).
To be enforceable, pre-injury releases (like other contracts) must be free from ambiguity. Where there is ambiguity as to what causes of action are intended to be discharged by the anticipatory release, the release is unenforceable. Where no ambiguity exists, a court’s only function is to interpret the meaning and intentions of the parties as found within the four corners of the document. Pruitt v. Circuit City Stores, Inc., 678 So.2d 1166 (Ala.Civ.App.1996).
In determining if the language of the release is unambiguous, a court must give the words of the release their ordinary meaning and the release must be given effect “according to its terms and the intentions of the parties thereto.” Nix v. Henry C. Beck Co., 572 So. 2d 1214, 1216 (Ala. 1990) (quoting Alabama Code § 12-21-109). If the express provisions of a release are unambiguous, then, in accordance with contract principles generally, they will be taken as expressing the intent of the parties and will be binding and enforceable. See Id.
 Alabama Court of Civil Appeals upheld validity of a release wherein signees “expressly assume all risks associated with the Tournament and I hereby release B.A.S.S., Inc., the host, sponsors and Tournament officials from all claims or injury and/or damage incurred in connection with this Tournament.” The release was found to be neither ambiguous nor otherwise unenforceable.
Photo via Shreveport-Bossier Convention and Tourist Bureau.
TLIG Maintenance Services, Inc. v. Fialkowski – Mental anguish claims in a home construction and repair case are only proper in severe circumstances, where the home has been made uninhabitable.
A jury awarded Deann Fialkowski damages for breach of contract and breach of implied warranty of good workmanship against TLIG Maintenance Services, Inc., Gala Rusich, and Bruce Kitchura, in the amount of $27,176.00. The jury further awarded Fialkoski $15,000.00 for mental anguish. The Defendants appealed the award of damages for mental anguish, arguing that the evidence did not support such an award. TLIG Maintenance Services, Inc. v. Fialkowski, [Ms. 2150255, Sept. 2, 2016] — So. 3d — (Ala.Civ.App. 2016).
Fialkowski purchased a house in Huntsville, Alabama, in May 2007. The outside of the house was “pretty rough,” so she undertook to have repairs performed. The repairs were projected to cost $35,000.00. After six years, Fialkowski had saved a sufficient amount of money and contracted with Kitchura (through Fialkowski’s friend Rusich) to do the repair work. Kitchura, who owned and operated TLIG, held a license that him limited to entering into contracts of not more than $10,000.00 because he did not have a homebuilder’s license. On the permit application, Kitchura indicated the scope of work would amount to $5,300.00.
Construction extended for many months. Throughout that time Fialkowski had concerns about the stability of a porch that Kitchura was building, but Kitchura gave assurances that everything was fine. Nevertheless, Fialkowski contacted the Huntsville building inspector’s office. The inspector found that the construction exceeded the scope of the permit and did not meet code minimums.
Fialkowski addressed her concerns with Kitchura, who demanded more money to perform the work. Fialkowski did not allow Kitchura to continue working on the project. She an additional $15,171.69 to complete the porch/deck project, on top of the $27,176.00 she had paid Kitchura/TLIG. Fialkowski sold a retirement plan to fund the construction, as well as selling personal belongings on an internet auction site.
Generally, under Alabama law, mental anguish is not recoverable as part of a breach of contract claim. See B&M Homes, Inc. v. Hogan, 376 So.2d 667, 671 (Ala. 1979). There is an exception that allows mental anguish when the claims arises from a contract for construction or repairs to a resident and the breach of contract actually did cause mental anguish of suffering to such a degree that it resulted in emotional or mental detriment. See Id. at 672.
The Alabama Court of Civil Appeals has previously determined that mental anguish claims are proper in home construction/repair cases under the following circumstances: “where the contractual duty or obligation is so coupled with matters of mental concern or solicitude, or with the feelings of the party to whom the duty is owed, that a breach of that duty will necessarily or reasonably result in mental anguish or suffering. … The majority of the cases in which a plaintiff has been allowed to recover damages for mental anguish involved actions on ‘contracts for the repair or construction of a house or dwelling or the delivery of utilities thereto, where the breach affected habitability.'” Baldwin v. Panetta, 4 So.3d 555 (Ala.Civ.App. 2008) (Internal citations omitted).
Where defects are not so severe as to render a residence uninhabitable, the homeowner is not entitled to an award for mental anguish. See Baldwin, 4 So.3d 555. There was no evidence before the court that any of the work performed by Kitchura on the porch/deck rendered the house uninhabitable or caused any damage to the house itself. Nor was Fialkowski’s health or safety endangered by remaining in the house. And none of her possessions were exposed to harm. As such, the Alabama Court of Civil Appeals found that Fialkowski did not qualify for an award of damages for mental anguish.
John Boman v. City of Gadsden – An employee handbook may create a contract between employer and employee, but the contract does not extend to matters not addressed in the handbook, including not providing retiree health benefits.
The Supreme Court of Alabama has published its decision in John Boman v. City of Gadsden [Ms. 1150987], — So.3d — (Ala. 2016), wherein Boman appealed the summary judgment entered in favor of the City.
Boman worked for the Gadsden Police Department from 1965 to 1991. During the period of his employment, he operated under various versions of an employee handbook. At the time of his retirement, Section 26 of the handbook, entitled “Employee Benefit Plan” noted changes to the prior employee benefit plan and addressed the major medical benefits that were available to employees. Nothing the in the handbook suggests the medical benefits extended to retirees.
Boman has alleged breach of contract claims against the city, arguing that various versions of the employee handbook guaranteed lifetime health-care benefits to retirees such as Boman, and that the employee handbook is a binding contract between the City and Boman. While the Alabama Supreme Court did not dispute Boman’s claims that the employee handbook created a contract between the parties, it found that there was no language in any version of the handbook that addresses retiree health benefits.
Therefore, because the City’s employee handbook did not address retiree health benefits, the City did not agree to provide Boman with retiree health benefits, and cannot have breached a contract where none existed to provide such benefits.
On June 3, 2016, the Supreme Court of Alabama decided the matter of Scottsdale Insurance Company v. Har-Mar Collisions, Inc. [Ms. 1141267], — So.3d — (Ala. 2016), wherein it reinstated the jury verdict of $101,054.40 in favor of Har-Mar Collisions against Scottsdale, and overturned the setoff against the jury verdict that was entered against Scottsdale. The trial court had offset the jury verdict by the amount Har-Mar had recovered in separate settlement agreements with Auto-Owners and CRC Insurance Services; because the amount of the settlement agreements was greater than the amount of the jury verdict, the trial court entered a judgment against Scottsdale for $0.00.
Har-Mar Collisions, Inc. is an auto paint-and-body shop in Mobile, Alabama, owned by Wayne Hartung and operating as Marshall Paint & Collision. In December 2010, Har-Mar obtained insurance coverage from (1) Auto-Owners for garage-liability and umbrella coverages, and (2) Scottsdale for commercial property coverage. On January 24, 2011, a fire destroyed the body shop. The following day, Har-Mar had its broker notify the insurance carriers of the loss, and requested an advance of $50,000 for lost business income. On January 27, 2011, Scottsdale sent a letter to Har-Mar notifying Har-Mar that it was engaging an independent adjuster to investigate the loss and enclosed in the letter a check for $50,000.00.
Over the course of the next six months, a coverage question arose when Scottsdale determined that it had as its named insured “Harmar, Inc. d/b/a Marshall Paint & Collision” and did not insure any entity named “Har-Mar Collisions, Inc.” Scottsdale did not formally deny the claim but refused to make any additional payments on the claim on the basis that its investigation was ongoing.
Thereafter, Scottsdale contacted First National Bank, who was the mortgagee of the insured property, so that Scottsdale could provide payment to First National. Scottsdale provided payment in the amount of $473,268.60, which was about $39,000.00 less that Har-Mar’s mortgage indebtedness; Scottsdale explained that it had already made a payment of $50,000.00 to Har-Mar, which payment should have been applied to the mortgage. First National then liquidated Har-Mar’s certificate of deposit, in order to make up the difference, thereby extinguishing the mortgage and satisfying First National’s interest in the body shop.
On August 10, 2011, Har Mar sued Scottsdale and CRC asserting claims (1) for bad faith and breach of contract against Scottsdale, and (2) for negligence and fraud/misrepresentation against CRC for its alleged failure to procure insurance for the auto shop. Auto-Owners moved to intervene on April 2012, indicating that Hartung Commercial Properties, Inc. (“Hartung”), the entity that leased the buildings to Har-Mar, had brought a separate suit against Har-Mar for negligently/wantonly causing the fire. Wayne Hartung was the principal of both Hartung and Har-Mar. Auto-Owners determined there were questions concerning its coverage as a result, and asked the trial court to determine Auto-Owners’ obligations. Har-Mar later amended to add the following claims and defendants: negligence claims against International Assurance and Kahalley for their alleged failure to obtain insurance for the body shop and breach of contract and bad faith claims against Auto-Owners.
In August 2014, Har-Mar and CRC entered into a settlement agreement for $12,500.00. On November 18, 2014, Auto Owners settled its claims with Har-Mar and Hartung for $135,000.00. At trial, the jury was not advised either of the settlements or of the possibility of a setoff. Outside the presence of the jury, the Court reformed the contract between Scottsdale and Har-Mar to reflect that Scottsdale insured “Har-Mar Collisions, Inc. d/b/a Marshall Pain and Collsion”. The jury returned a verdict Har-Mar for the breach of contract claim, in the amount of $101,054.40, and in favor of Scottsdale as to the bad faith claim. The trial court then applied a setoff in the amount of $147,500.00 and entered a final judgment of $0.00 against Scottsdale. Har-Mar moved the court to amend its order and tax costs against Scottsdale; the Court denied both motions. Har-Mar appealed the setoff, and Scottsdale cross-appealed, arguing that the trial court committed error in reforming the contract, and that (assuming the correction of the reformation error) Har-Mar lacked standing to sue Scottsdale.
Contract reformation is governed by Alabama Code (1975) § 8-1-2, which allows (in pertinent part) that when, through a mutual mistake of the parties, a written contract does not truly express the intention of the parties, it may be revised by a court on the application of the party aggrieved so as to express that intention. The trial court found that there had been a mutual mistake by the parties in misidentifying the named insured. The Supreme Court determined that “the undisputed evidence in this case indicates that Scottsdale and Har-Mar Collisions intended for the Scottsdale policy to insure the auto shop, regardless of under what name the auto shop is incorporated,” and furthermore that “both Scottsdale and Har-Mar Collisions, at the time Wayne purchased the Scottsdale policy, believed that the Scottsdale policy as written insured the auto shop.” Therefore, the Supreme Court of Alabama affirmed the trial court’s judgment in reforming the Scottsdale policy to reflect Har-Mar Collisions was the named insured based on a finding of mutual mistake. As such, Scottsdale’s “standing” argument was nullified.
Whether Scottsdale is entitled to a setoff is a question of law. Har-Mar argued, “[W]hen an insured enters into a settlement agreement with one of its insurers, the nonsettling insurer is not entitled to a setoff if the two insurers ‘owe separate and distinct contractual obligations’ to the insured.” Alabama Farm Bureau Mut. Cas. Ins. Co. v. Williams, 530 So.2d 1371 (Ala. 1988). The Alabama Supreme Court determined from its analysis of Williams that “the relevant inquiry as to whether Scottsdale is entitled to a setoff is whether the obligations Scottsdale owed Har-Mar Collisions under the Scottsdale policy are ‘separate and distinct’ from the obligations Auto-Owners and CRC owed Har-Mar Collisions.” Upon applying the law to the facts, the Court found that Scottsdale and Auto-Owners had separate obligations, and Scottsdale was not entitled to a set-off. Additionally, CRC did not have any insurance obligations to Har-Mar and had contracted only to procure insurance for Har-Mar; accordingly, CRC did not undertake a joint obligation as to Har-Mar with Scottsdale. As a result of the foregoing, the trial court committed error in applying the setoff to Scottsdale, and should have entered a judgment in the amount of the jury verdict.

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