{"id":374743,"date":"2015-01-08T06:01:31","date_gmt":"2015-01-08T13:01:31","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=374743"},"modified":"2015-01-06T14:10:04","modified_gmt":"2015-01-06T21:10:04","slug":"construction-contracts-nothing-beats-meeting-minds","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/construction-contracts-nothing-beats-meeting-minds\/","title":{"rendered":"Construction Contracts: Nothing Beats a Meeting of the Minds"},"content":{"rendered":"

Vicki R. Harding | Pepper Hamilton LLP | December 30, 2014<\/p>\n

Waldschmidt v. Singletary Construction LLC (In re Tackett), 516 B.R. 498 (Bankr. M.D. Tenn. 2014)\u00a0\u2013<\/p>\n

A bankruptcy trustee sought turnover of profits from the sale of homes constructed by a contractor.\u00a0 The trustee contended that there were contracts between the debtor and the contractor pursuant to which the debtor agreed to reimburse the contractor for its costs plus pay a $15,000 contractor\u2019s fee for each home.<\/p>\n

The debtor bought and the contractor (Singletary) constructed houses on five lots.\u00a0 The parties agreed that the arrangement for the first lot was as described by the trustee.\u00a0 However, although the debtor expected that the same terms would apply to the additional lots, Singletary asked for a larger payment.\u00a0 This was the subject of a continuing discussion and exchange of emails.<\/p>\n

Notwithstanding the failure to agree on terms, construction proceeded on the next three lots.\u00a0 During this period, Singletary stopped providing detailed statements to support invoices.\u00a0 Instead it would make a verbal draw request, the debtor would issue a check, and Singletary would send an invoice stating only the amount paid and the project.<\/p>\n

The debtor paid ~$700,000 and Singletary incurred or paid charges of ~$656,000 for these three lots, including a contractor\u2019s fee for one of the lots.\u00a0 The trustee sought turnover of (1) the difference between the amount paid and the invoices plus (2) the contractor\u2019s fee of $47,250 for a total of ~$97,000.\u00a0 Singletary counterclaimed, seeking an additional ~$75,000.<\/p>\n

The fifth house was to be built for a buyer that required a VA approved builder in order to qualify for a loan.\u00a0 The debtor needed Singletary to sign the contract since Singletary was VA qualified and the debtor was not.\u00a0 Singletary refused to sign the contract prepared by the debtor, but eventually did sign a contract prepared by the buyer\u2019s real estate agent.\u00a0 Singletary kept the net proceeds of ~$49,000.<\/p>\n

In support of his case, the trustee first argued that there was an oral contract.\u00a0 While acknowledging that if the evidence shows a meeting of the minds between the parties a court may be justified in finding oral contract \u2013 which can be just as binding as a written contract \u2013 in this case it was clear to the bankruptcy court that there was no meeting of the minds for the last four lots.\u00a0 Consequently, there was no contract.<\/p>\n

The trustee also argued that there was a \u201cjoint enterprise.\u201d\u00a0 The court identified the essential elements for a joint enterprise, which included \u201ca community of pecuniary interest\u201d in the joint enterprise\u2019s purpose.\u00a0 This means that \u201cit is necessary to the relationship that there be a sharing of the profits and losses.\u201d\u00a0 The court reiterated that the parties were not able to agree on sharing profits and losses.\u00a0 In fact, they were not able to agree on their respective roles:\u00a0 the debtor viewed Singletary as a subcontractor entitled to a set fee, while Singletary viewed the relationship as more of a partnership entitling it to share a percentage of profits.\u00a0 They never came to a consensus, but just \u201ccontinued to plow forward.\u201d\u00a0 So, no joint enterprise existed.<\/p>\n

In addition, with respect to the fifth VA lot the trustee argued that there was tortious interference with the debtor\u2019s contract with the buyers.\u00a0 The trustee contended that Singletary went behind the back of the debtor and induced the buyers to enter into a new contract with Singletary.\u00a0 However, the court noted that the debtor never signed a purchase agreement with the buyer because it had to be signed by a VA approved contractor.\u00a0 Since there was never a contract, there could not be tortious interference with the contract.<\/p>\n

The final theory considered by the court was quantum meruit.\u00a0 It identified the elements as: (1) valuable services were rendered, (2)\u00a0to the person from whom recovery is sought, (3)\u00a0which were accepted, received or rendered with the knowledge and consent of that person, and (4)\u00a0the person was on reasonable notice that the plaintiff expected to be paid.\u00a0 The court concluded without going into any detail that (a) both the debtor and Singletary contributed to the construction and sale of the lots, and (b) \u201cequity demands that the parties split the profits equity.\u201d \u00a0The court analyzed the numbers and concluded that the net result was that the bankruptcy estate owed Singletary ~$39,000.<\/p>\n

It seems obvious that when there is an ongoing dispute, it can be risky to proceed on the assumption that the dispute will eventually be resolved.\u00a0 In this case, neither party was left out in the cold, but there is no assurance that this will always be the case.<\/p>\n

via Construction contracts: nothing beats a meeting of the minds – Lexology<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Vicki R. Harding | Pepper Hamilton LLP | December 30, 2014 Waldschmidt v. Singletary Construction LLC (In re Tackett), 516 B.R. 498 (Bankr. M.D. Tenn. 2014)\u00a0\u2013 A bankruptcy trustee sought turnover of profits from the sale of homes constructed by a contractor.\u00a0 The trustee contended that there were contracts between the debtor and the contractor… Continue reading Construction Contracts: Nothing Beats a Meeting of the Minds<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14,9],"tags":[12,72],"class_list":["post-374743","post","type-post","status-publish","format-standard","hentry","category-construction-2","category-construction-contracts","tag-construction","tag-construction-contracts-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nConstruction Contracts: Nothing Beats a Meeting of the Minds - Advise & Consult, Inc.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-contracts-nothing-beats-meeting-minds\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Construction Contracts: Nothing Beats a Meeting of the Minds - Advise & Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"Vicki R. 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