Articles Posted in Contract Law

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Deceptive Consumer Sales ActIn a recent post, we discussed Rainbow Realty Group Inc., v. Carter, in which the Indiana Supreme Court considered whether a particular “rent-to-buy contract” was a land contract or a rental agreement. The court held that the transaction was a rental agreement, notwithstanding language in the contract that the transaction was a purchase and not a lease. Accordingly, the property was subject to the statutory requirement that a dwelling unit subject to a rental agreement must be in clean, safe, habitable condition. Because the house was clearly uninhabitable, Rainbow Realty violated that requirement.

Next, the Court considered the claim of the Carters that Rainbow Realty’s unsuccessful attempt to disclaim the statutory warranty of a safe, clean, habitable dwelling violated the Indiana Deceptive Consumer Sales Act (or “DCSA”), Ind. Code ch. 24‑5‑0.5. In particular, the Carters relied on Ind. Code § 24‑5‑0.5‑3(a)(8)*, which (at the time the rent-to-buy contract was signed) provided that a supplier’s representation that a “consumer transaction involves or does not involve a warranty, a disclaimer of warranties, or other rights, remedies, or obligations, if the representation is false and if the supplier knows or should reasonably know that the representation is false” is a deceptive act actionable under Ind. Code § 24‑5‑0.5‑4(a), which provides a private cause of action for consumers who are the victims of deceptive acts.  The court held that the tenants had no DCSA claim, for no less than three distinct reasons.

First, a false representation that Subsection 3(b)(8) defines a deceptive act as including a false representation that a transaction does or does not involve a warranty only if the supplier (i.e., Rainbow Realty) knows that its representation is false. In this case, the Supreme Court held that Rainbow Realty did not know its representation was false and, therefore, did not commit a deceptive act. Indeed the Supreme Court pointed to the fact that three members of the Court of Appeals agreed that the transaction was a land contract and, therefore, that Rainbow Realty’s representation of the absence of a warranty of habitability was, in fact, true. In essence, the Supreme Court held that no one could have known whether the representation was false until the court held that it was false.

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If you’re as old as I am, you might remember the television commercial in which twin sisters argued about the nature of Certs.  One said, “Certs is a candy mint,” iStock-947147792-300x200and her sister countered, “Certs is a breath mint.”  A booming male voice over said, “Stop. You’re both right. Certs is a candy mint and a breath mint. Certs is two, two, two mints in one.”*

In Rainbow Realty Group, Inc. v. Carter, the Indiana Supreme Court  encountered a real estate transaction in which one litigant said, “It’s a land contract,” and the other countered, “It’s a rental agreement.” Unlike the twins in the Certs commercial, only one was right.

Rainbow was a property manager for a trust that owned multiple houses for sale or rent in Marion County, Indiana. It offered four different types of transactions to its customers.  The first three were fairly standard:

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Until recently, almost all trade secret law was furnished by state law, not federal law. Absent federal diversity jurisdiction, lawsuits for misappropriation of trade secrets had to be brought in state court. Even though the vast majority of states (including Indiana) have adopted the Uniform Trade Secrets Act (“UTSA”), there are nonetheless variations in trade secret law from one state to another. However, in May 2016 President Obama signed the Defend Trade Secrets Act (or “DTSA”), creating at 18 U.S.C. § 1836 a new federal civil cause of action for misappropriation of trade secrets.  Even so, the federal statute does not pre-empt state law, and state causes of action under the UTSA remain viable.

Definitions of Trade Secret and Misappropriation

Two crucial components of trade secret law are the definitions of trade secret and misappropriation.  The DTSA definitions, found at 18 U.S.C. § 1839, are not identical to the familiar UTSA definitions, but there are no major surprises. At least for the most part, information that is a trade secret under the UTSA is also a trade secret under the DTSA, and vice versa.  Similarly, there are likely very few acts that qualify as misappropriation under one statute but not the other.

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This begins an occasional series of posts on basics of business contracts, principles that apply broadly to most types of business and commercial contracts, regardless of the subject — merger agreements, stock purchase agreements, asset purchase agreements, construction contracts, professional service contracts, generic independent contractor agreements, advertising agency agreements, software and other intellectual property licenses, publishing contracts, equipment leases, office and retail property leases, procurement contracts (both master agreements and single-purchase agreements), employment contracts, and others. Although there can be a subtle legal distinction between a “contract” and an “agreement,” I will use terms interchangeably.

Let’s start at the beginning, with the preamble clause, the first paragraph that appears after the title of most business and commercial contract. There is no universally recognized name for that part of a contract, but preamble is a good descriptive name. Here’s an example:

This Consulting Agreement (“Agreement”), dated March 22, 2018, is between John J. Doe, an individual with a place of business located at 3650 N Washington Blvd Indianapolis, IN 46205 (dba J.J. Doe Consulting) (“Consultant”) and Jane Roe & Associates, LLC, an Indiana limited liability company (“Client”).

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I am a fan of the radio show, A Way with Words.  Over the weekend, I ran across a clip on their website discussing an experiment run by a company in London to demonstrate the risks of using public WiFi.  The company set up a hotspot that offered free service to anyone who accepted a user agreement.  Buried in the agreement was what the company calls a “Herod Clause,” a promise by the user to assign his or her first-born child to the company for all eternity. Six people accepted the agreement.  Presumably those people fell into one of three categories:

  1. People with no children and no intention of ever having any children.
  2. Lawyers who knew that the clause would be unenforceable.
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A couple of years ago the Indiana Business Law Blog posted an article about two different Indiana statutes of limitations for breach of contract:

  • A six-year statute of limitations at Ind. Code § 34‑11‑2‑9, which applies to “promissory notes, bills of exchange, or other written contracts for the payment of money”
  • A ten-year statute of limitations at Ind. Code § 34‑11‑2‑11, which applies to “contracts in writing other than those for the payment of money”
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This one of a series of six posts regarding mechanics’ liens:

Part 1. The basics of credit risk and subcontracting.

Part 2. Reallocating risk in construction projects.

Part 3. Acquiring a lien.

Part 4. Enforcing a lien.

Part 5. Personal liability notices.

Part 6. No-lien agreements.

The last post in our series on mechanics’ liens addresses a situation in which mechanics’ liens are not available. For certain types of projects, the Indiana Mechanic’s Lien Statute permits the owner and principal contactor to enter into an agreement or stipulation that prohibits liens that arise from a particular contract.

There are essentially two categories of projects that are eligible for no-lien agreements. The first category includes “class 2 structures” (as defined at Indiana Code section 22-12-1-5), which encompasses single- and double-unit residential structures and some related projects. The second encompasses construction owned by certain types of utilities, including public utilities, municipal utilities, and rural membership utilities. The details of the projects that are eligible for no-lien agreements can be found at Indiana Code 32-28-3-1(3).

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[Note: This one of a series of six posts regarding mechanics’ liens:

Part 1. The basics of credit risk and subcontracting.

Part 2. Reallocating risk in construction projects.

Part 3. Acquiring a lien.

Part 4. Enforcing a lien.

Part 5. Personal liability notices.

Part 6. No-lien agreements.]

We’ve been examining the role of mechanics’ liens in construction contacts, including the way they reallocate credit risk among contractors and the owner of a construction project. The Indiana Mechanics’ Lien Statute includes another remedy for subcontractors who do not get paid, entirely apart from a mechanic’s lien against the real property where the construction takes place. The statute does not give a name to the remedy, but it’s often called a personal liability notice or PLN.

To see how it works, let’s go back to the hypothetical example of our last article. Assume you are a subcontractor with a $15,000 claim against the general contractor, a claim the GC disputes. Now let’s assume that the deadline for filing a sworn statement and notice of intention to hold a mechanic’s lien has already slipped by. Are you out of luck?

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[Note: This one of a series of six posts regarding mechanics’ liens:

Part 1. The basics of credit risk and subcontracting.

Part 2. Reallocating risk in construction projects.

Part 3. Acquiring a lien.

Part 4. Enforcing a lien.

Part 5. Personal liability notices.

Part 6. No-lien agreements.]

So far we’ve looked at the basics of subcontracting and allocation of credit risk, how a mechanic’s lien changes things by reallocating credit risk, and how a contractor, subcontractor, supplier, or worker goes about acquiring a mechanic’s lien. Now we’ll discuss how to enforce a lien once you have it. Assume you are a subcontractor with a claim against the general contractor, or GC, for $15,000. The GC has withheld that amount from your fees, accusing you of not finishing your work on schedule. The general contractor says it incurred $15,000 in additional labor charges because its workers had to wait around with nothing else to do until your work was completed. You blame the general contractor for the delay and additional expense, and you have recorded a sworn statement and notice of intention to hold a mechanic’s lien in the amount of $15,000. A copy of it has been sent to the owner.

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[Note: This one of a series of six posts regarding mechanics’ liens:

Part 1. The basics of credit risk and subcontracting.

Part 2. Reallocating risk in construction projects.

Part 3. Acquiring a lien.

Part 4. Enforcing a lien.

Part 5. Personal liability notices.

Part 6. No-lien agreements.]

In the first article in this series, we discussed the basics of credit risks associated with subcontracting in an area other than construction. In the second, we examined how a mechanic’s lien reallocates those credit risks for construction contracts. In this one, we explain how a contractor or subcontactor goes about acquiring a mechanic’s lien. For a change of pace, we’ll do it in a question-and-answer format.

Some caveats: First, mechanic’s lien requirement vary significantly from state to state. Given that this is the Indiana Business Law Blog, we’ll answer the questions based on Indiana law. Also note that the Indiana Mechanic’s Lien Statute is filled with complicated, cumbersome, even archaic language that can be difficult for even lawyers to parse, so we’ll try to give answers that are more easily understood. However, that also means we may leave out some details, making the answers a bit imprecise in some circumstances. As always, this blog is not legal advice and you should not rely on it as a substitute for legal advice.

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