As an entrepreneur, it’s always important to continually educate yourself regarding the basic regulations and rules pertaining to running a small business in your particular area.
There are eight basic concepts that entrepreneurs should understand about business law:
What is intellectual property? Any idea that a person comes up with to develop services and products that are offered to customers for sell and will generate the individual income. The most effective way to protect your intellectual property as an entrepreneur is by patenting ideas or filing copyrights and trademarks with your local government. Examples of intellectual property include inventions, business ideas, products, services, trademarks, and trade names.
Business Agreements & Contracts
What do business agreements or contracts require? The main purpose of a contract is to establish promises or a single promise that is enforceable by law. There are five elements of any agreement: an offer, acceptance, consideration, meeting of the minds, and execution or delivery of the contract. The first step of the agreement in the contract process is the offer, which is the terms that line out the agreement. There are three requirements of an offer: 1) There must be some current intent to contract on the part of the offeror that is shown by an objective indication. 2) The alleged offer terms must be definite and specific. 3) The alleged offer must be communicated to the offeree in some form or fashion. The second element of the agreement is the acceptance. An acceptance is a willingness to be bound by the terms and conditions contained in an offer by a promise or act by the offeree. The third element of a contract is consideration. This is when they agree upon payment, whether it is actual money or property exchanged, a promise to pay, a benefit, acceptance of an additional obligation, forbearance, release, etc. The fourth step is the meeting of the minds in which there's communication that each party has consented to the terms of the agreement. The last element is execution or delivery of the contract with the intent that it be mutually binding.
What is product liability? When a customer sues a business for a defective product that has caused them loss or harm. There are several theories regarding recovery under product liability including contract theories and tort theories. Contract theories have to do with product warranty which deals with promises of the nature of the product sold to the customer. In these type of civil warranty cases, the plaintiff will claim the product didn’t live up to the promises of the seller. Tort theories happen in regards to the plaintiff making claims that the defendant was negligent causing either monetary loss, bodily harm, or emotional harm to the plaintiff.
What are negotiable instruments? Negotiable instruments are a substitute form of payment also known as commercial paper. This method of payment is the use of payment as a contract form, agreeing to pay money and promises that you will pay a certain amount of money for a transaction. Commercial paper and negotiable instruments can be a form of payment accepted in the place or real money and typically pass easily through any financial institution. Other forms of negotiable instruments include: certificates of deposit, promissory notes, drafts, and checks.
What are sales contracts? A form of agreement between the buyer and seller of goods which involves the ownership of personal property being transferred in lieu of services, money, or other goods. There are four essential terms to any sales contract: 1) The price terms have to be spelled out and the terms of the price don’t have to be fixed. 2) The quantity terms must spell out the amount of products purchased by the buyer and the cost of the products by the seller. 3) The sales contract should state contracts terms and how they will be performed and how long it will take to perform the terms. If no performance time is stated in the contract, it’s implied that it will be performed in a reasonable time period. 3) The contract should lay out how the seller will deliver the products to the customer.
Liability For Business Partners
Are partners legally liable? In a business partnership, all members of the partnership assume personal liability for legal obligations of the business, business debts, and all business obligations. Each and every partner are held responsible and liable for tortious acts, wrongful acts, and business debts of the other partner(s). If business assets are unable to pay off a certain debt, the creditor(s) may hold all of the partners personally liable for the rest of the debt owed.
In a Limited Partnership (LP), the general partners will generally be held liable for the debts of the business and all transactions and the limited partners will not be held responsible. After paying their share of capital contributions to the business, the limited partners will be protected against liability.
In a Limited Liability Partnership (LLP), typically the primary partner is held personally liable for debts of the business/partnership and the limited partners are not held personally liable for business debts within the LLP. The limited liability partners will only be held liable for what they have invested in the business. ALL partners of the business are held accountable for the transactions made by the business partner(s).If the limited liability partner(s) committed wrongful or tortious acts, they may be held liable with the result of them being sued for malpractice.
In a Limited Liability Limited Partnership (LLLP), all business partners have elected personal liability protection for all partners involved. The general partner is held liable for any business transactions that were handled in an illegal manner. However, the LLLP partners can still be held liable for any transaction(s) that were been done illegally by a partner.
Liabilities, Rights, & Obligations Of Shareholders
What are the liabilities, rights, and obligations of shareholders in a corporation? The role of the shareholder is not to handle daily operations of the corporation. They are also not liable for actions of the corporation, such as, if an action caused harm or injury to an individual. Shareholders aren’t personally liable for any corporate debts any only report to the dividends received from the corporation within the year on their personal taxes. Simultaneously, the shareholders can’t report on their personal taxes any corporate losses. However, they are able to report losses from corporate investments. When can a shareholder be held personally liable for corporate debts? When they received corporate dividends or distributions in an illegal manner that they had knowledge of. Here are a few ways that shareholders can be held personally liable for corporate debts: 1) Incorporating the business in a defective way. 2) In certain states, shareholders can be held liable for all wages owed to employees of the company 3) Committing acts that “pierce the corporate veil”. When you “pierce the corporate veil”, two things occurred: 1) The corporation must be dominated by shareholders. 2) Shareholders use domination status for illegal purposes
Resolving Legal Disputes
How do you properly resolve legal disputes involving your business? Alternative Dispute Resolution (ADR) is a method many states are starting to require companies to embark in to resolve legal disputes before any lawsuit can be filed in court. Alternative Dispute Resolution is a safe and amicable technique where individuals resolve legal disputes. A few reasons states are requiring parties to use ADR techniques before court litigation include: 1) Some legal disputes can be resolved rather quickly. 2) It saves the parties time, money, and litigation of the dispute. 3) The court system will not be on case overload. 4) Parties can often play a significant role in conflict resolution for the issue(s) they are facing. 5) The decision makers have specialized expertise and experience to aid in resolving the legal dispute. Common forms of Alternative Dispute Resolution include settlement, arbitration, mediation, summary trial, and mini-trial. Settlements commonly involve a pre-trial conference where parties will settle on witnesses to testify at the court, the time length for the trial, the number of exhibits each side will provide, and ultimately, see if the case is resolvable. The settlement conference is typically handled two or three weeks before the trial. Both sides will determine if any of the proposed issues have been resolved and cover the procedures of the court case. Occasionally, the conference parties are able to avoid trial by resolving the entire case or shorten the length of the actual trial by resolving some of the issues. The next form of ADR is arbitration, which typically involves the parties to allow a neutral third party to assist in resolving the dispute before filing a legal claim in court. Like arbitration, mediation involves a third party that will assist the parties in trying to resolve their issues. However, in mediation the agreements of the resolution are not binding and can only be binding if signed by a judge. The third party, in this case, is considered the ‘mediator’. In a summary trial, the parties are are normally given a good dose of reality when it comes to their case. This trial is a ‘jury trial’ that isn’t pubic and is considered a mock trial, in the sense that it lets the plaintiff and defendant know the possible outcome of the case with a jury deciding it. A mini-trial is an informal trial that encourages parties to settle the case. In this situation, both sides present their side of the case to a panel that’s made up of senior management from each company in the lawsuit and either a retired attorney or judge will advise to proceed. Mini-trials help prepare both parties for the actual trial, if needed. The ultimate goal for all parties involved is to try and settle the legal dispute.
The Shipowners’ Protection Limited St Clare House, 30-33 Minories London EC3N 1BP Managers of The Shipowners’ Mutual Protection and Indemnity Association (Luxembourg) BIMCO and The International Group of P&I Clubs (IG) have completed a review of the Himalaya Clause for use in Bills of Lading and other contracts and as a result have drafted a revised Himalaya clause (the Clause). A Himalaya clause is a contractual provision intended to confer a benefit on an entity that is not a party to that contract. This benefit, in a contract of carriage such as a bill of lading, is to exempt, as far as possible, the servants, agents and independent contractors employed by the contractual carrier (carrier) from liability to other party(s) to the contract, such as the shipper, consignee or holder of a bill of lading or extend the same protection from liability enjoyed by the carrier. Why is it called Himalaya?
The Himalaya clause takes its name from the English case of Adler v Dickson1. Mrs Adler was a passenger on the P&O liner ‘Himalaya’ who was seriously injured when the gangway she was walking down collapsed, throwing her to the dockside below. The passenger ticket contained a non-responsibility clause exempting P&O from liability, so Mrs Adler sued the Master of the ship, Captain Dickson, and the boatswain for compensation. The Court of Appeal held Captain Dickson liable and awarded damages to Mrs Adler. Significantly, the Court decided that it was possible for P&O to incorporate a clause excluding its employees from liability into its ticket conditions – however, it had not done so. A consequence of the ‘Himalaya’ case is that clauses in contracts of carriage (whether for passengers or cargo) developed to ensure, as far as possible, that liability attached only to the carrier – failing which, the carrier’s servants, agents and sub-contractors had the benefit of any limits, exemptions and defences enjoyed by the carrier. Claims would, generally, be brought only against the carrier and not its servants, agents and sub-contractors, (e.g. stevedores) and other independent sub-contractors (such as railroad companies.)
Himalaya clauses are by nature rather complex and it is impossible to produce a clause that operates successfully on every occasion and in every jurisdiction. The aim of BIMCO and the IG has been to produce a clause which should be recognised and given effect to in most of the major jurisdictions, including the US and UK. To this end, advice was obtained from leading UK and US counsel during the drafting process.
1 Adler v Dickson (The Himalaya) – 1954
2 Lloyd’s Rep 267, 1955
1 QB 158 Tel: +44 (0)20 7488 0911
Fax: +44 (0)20 7480 5806
Registered in England No 2067444 at the above address
The Clause is primarily intended for use in bills of lading, although with care it can be adapted for use in charter parties and other marine contracts. Parties using the Clause must take care to ensure that it achieves its purpose when incorporated into different types of contract. For instance, when used in bills of lading or other documents containing or evidencing contracts of carriage, the terms ‘Carrier’ and ‘Merchant’ will need to be defined and the definitions will need to reflect the parties’ intentions, which may vary from contract to contract. Where necessary, the IG/BIMCO recommend that any amendments to the Clause are made subject to obtaining appropriate legal advice. Members are of course free to contact the Managers for assistance in this regard. In summary the Clause is intended where possible to:
- Wholly exempt a contractual carrier’s or other contracting party’s servants, agents or sub-contractor’s from liability under a contract (subject always to any relevant court construing the Clause in such a way as to grant that total exemption) and/or to confer on such servants, agents and sub-contractors all the rights, limits, defences and exemptions from liability enjoyed by the contractual carrier under that contract.’
- Impose on the other party to the contract, defined in the Clause as the ‘Merchant’ (which term includes a shipper, consignee or holder of a bill of lading) an obligation not to sue any servant, agent or sub-contractor of the contractual carrier, and to indemnify the contractual carrier in the event that the Merchant makes a claim, whether under the contract or in tort, bailment or otherwise, against the servants, agents or sub-contractors of the contractual carrier employed in performing the contract.
- Ensure that the Clause operates as effectively as possible for the protection of its intended beneficiaries, by providing that the contractual carrier or other contracting party acts as an agent or trustee for its servants, agents or sub-contractors in relation to the contract, and that such servants, agents or sub-contractors are deemed to be a party to such contract.
To provide protection in respect of operations related to the carriage of goods but which are not necessarily carried out on board a ship, for example operations which take place before loading or after discharge from a vessel or operations involved in multi-modal carriage. However, depending on the jurisdiction in which liability may arise, the protection of the Clause cannot always be guaranteed. The full text of the IG/BIMCO Clause is set out below. The Clause may also be downloaded free of charge from the BIMCO website at www.bimco.org and is also available as an additional clause to subscribers of BIMCO’s online charter party editing system, idea. It can also be downloaded from the IG website www.igpandi.org.
THE SHIPOWNERS’ PROTECTION LIMITED
Tel: +44 (0)20 7488 0911
Fax: +44 (0)20 7480 5806
Registered in England No 2067444 at the above address
INTERNATIONAL GROUP OF P&I CLUBS/BIMCO REVISED HIMALAYA CLAUSE
- (a) It is hereby expressly agreed that no servant, agent, direct or indirect sub-contractor or other party employed by or on behalf of the carrier, or whose services or equipment have been used in order to perform this contract (such persons so employed, or whose services or equipment have been used, hereinafter termed ‘Servant’) shall in any circumstances whatsoever be under any liability whatsoever to the shipper, consignee, receiver or other party to this contract (hereinafter termed ‘Merchant’) for any loss, damage or delay of whatsoever kind arising or resulting directly or indirectly from any act, neglect or default on the Servant’s part while acting in the course of or in connection with the performance of this contract.
- (b) Without prejudice to the generality of the foregoing provisions in this clause, every exemption, limitation, condition and liberty contained herein (other than Art III Rule 8 of the Hague/Hague-Visby Rules if incorporated herein) and every right, exemption from liability, defence and immunity of whatsoever nature applicable to the carrier or to which the carrier is entitled hereunder including the right to enforce any jurisdiction or arbitration provision contained herein shall also be available and shall extend to every such Servant, who shall be entitled to enforce the same against the Merchant.
- (c) (i) The Merchant undertakes that no claim or allegation whether arising in contract, bailment, tort or otherwise shall be made against any Servant which imposes or attempts to impose upon any of them or any vessel owned or chartered by any of them any liability whatsoever in connection with this contract whether or not arising out of negligence on the part of such Servant. The Servant shall also be entitled to enforce the foregoing covenant against the Merchant; and (ii) The Merchant undertakes that if any such claim or allegation should nevertheless be made, he will indemnify the carrier against all consequences thereof.
- (d) For the purpose of sub-paragraphs (a)-(d) of this clause the carrier is or shall be deemed to be acting as agent or trustee on behalf of and for the benefit of the Servant who shall to this extent be or be deemed to be a party to this contract.
Dave Roedel and Dick Wellborn
QUESTIONS FOR REAL ESTATE AGENT
25% of real estate purchasers are investors leasing rental property
A. When the investor buys the property is the old lease still in place and can the new owner force the tenant to pay the rent under the old lease?
It depends upon how the investor comes into title. Generally speaking, if the one investor buys a property from another, the property transfers to subject to whatever leases, obligations and other contracts are already in place. A new investor does not get any rights to cancel any of the contracts, including old leases. The new owner or management company should give notice to the tenant that they are start paying the new owner or management company. If they do not it is a defense in an eviction action and the JP will dismiss the action.
However, when there is a foreclosure and the investor buys the property at the foreclosure sale, the leases that were entered into after the lien being foreclosed was entered into are terminable at the new owner’s will. Protecting Tenants at Foreclosure Act of 2009 gives the tenant who had a lease in place before the foreclosure entitled to 90 days’ notice before having to move out.
However, the foreclosure leases that were entered into before the lien or mortgage being foreclosed attach to the property survive the foreclosure and the buyer does not have a right to cancel those leases.
B. Who is liable to send the tenant the security deposit at the end of the lease?
The rules regarding security deposits are different between residential and commercial tenancies. Under 92.101, Subchapter and Security Deposits applies to all residential leases. The statutes provide that a person who no longer owns an interest in the rental premises as the landlord still remains liable for security deposit received while that person was the owner, unless and until new owner delivers to the tenant a signed statement acknowledging that the new owner has received and is responsible for the tenant’s security deposit, and specifying the exact amount of deposit.
Keep in mind this obligation does not apply to a lienholder who acquires title by foreclosure. Also, the landlord is not obligated to return a tenant’s security deposit but give a description of the damages or charges until the tenant gives the landlord written statement of the tenant’s forwarding address for purposes of refunding the security deposit.
Regarding commercial tenancies, Section 93.007 provides that upon the sale assignment or other transfer of the commercial property, the new owner is liable for the return of the security deposit from the date title to the premises is acquired, regardless of whether acknowledgment is given to the tenant or not. The statute goes on to say that the Seller remains liable for the security deposit that he received while he was the owner until the new owner delivers to the tenant a signed statement acknowledging the new owner is responsible for the security deposit. As a result in commercial transfers we always have assignment of the leases and acknowledgment from the new owner that terminates the old owner’s continuing liability for the security deposit.
C. Should there be an Assignment of the Lease from the old owner to the new owner and does the new owner need to give the tenant notice?
There should be an assignment of a lease from the old owner to the new owner and the old owner should give the tenant notice to start paying his rent to the new owner. It’s always the best practice and I wish it always happens. If they do not, the new owner steps into the shoes of the landlord and is subject to all of the landlord’s obligations
D. In commercial leases there is an Attornment Clause under which the tenant agrees to remain liable to the new owner under the lease. Does that apply in residential leases?
An attornment clause a clause that provides the tenant will “attorn” to any new owner (usually the lender in a foreclosure or after a foreclosure) and it’s a normal common clause in commercial leases. You rarely see it in a residential lease. Keep in mind, however, that TREC does not promulgate any commercial leases and commercial lease forms vary from landlord to landlord with a great amount of pride. Commercial leases should always be reviewed by a lawyer representing the tenant.
E. MCB will draft an assignment of lease agreement to new owner – Look at TAR Residential Lease regarding lease assignment
A copy of the TAR Residential Lease is attached.
2. What happens when an owner dies without a will – How does Probate work – When and how do heirs get title?
Texas law provides that property is always owned by someone. There are no periods when property is not owned. Upon the death of a person their property vests in their heirs subject to the probate of the will. That is to say, immediately upon death, the heirs at law whether that’s the wife, children or siblings are at the property and own the property, however, it is subject to being changed when their will is probated. Probate is the tendering of the will to the court in proving up of the death the qualifying of a representative of the estate and then the wrapping up of the estate. Basically the representative gathers together all of the assets, gathers together all of the debts, pays the debts and then distributes what’s left according to the terms of the will.
Being a community property state, if a person dies without a will, only their half of the community passes and the surviving spouse keeps the half of the community they already have. When all of the children of the decedent are children of the surviving spouse, the spouse inherits all of the decedent’s community property. However, when the decedent has children that are not children of the surviving spouse, the decedent’s half interest in the community property goes to all of his or her children, share and share alike. Separate different rules apply to where someone’s separate property is inherited without a will.
3. Explain the difference between a Quit Claim Deed and a. General Warranty Deed, Fee Simple Title, Estate in land
GENERAL WARRANTY deed contains the covenant of seizen and the covenant against encumbrances. A GWD therefore contains a warranty from the grantor that if there is any claim made against the property that is not revealed on the face of the deed that the seller will come back and make good on the warranty and protect and defend the buyer and reimburse him any loss stemming from the warranty title. Whether the claim arises from the beginning of time until the day that the seller sold the property.
In a SPECIAL WARRANTY DEED the same amount of title is conveyed but the scope of the warranty is limited so that the grantor or seller agrees only to make good on the warranty if the claim arises from an event occurred during the time of the seller’s ownership.
FEE SIMPLE TITLE is the greatest estate in land you can own. It includes the right to immediate possession of the property, the right to lease out the property, the right to sell the property to anyone you want and the right to leave the property to anyone you desire. If you take away these “sticks of ownership” you are left with less than fee title.
QUIT CLAIM DEEDS are greatly misunderstood in Texas. In a warranty deed, seller represents that he owns the property and has the right to sell the property to the buyer and that no liens or claims are against the property except those that are expressed on the face of the deed. However, in a quit claim deed the seller makes none of these warranties. A quick claim deed basically is a statement from the seller saying:
“I am not saying that I own the property and I am not saying to you that I have a right to deed you any property. I am just saying that if I own something described below then you are getting whatever amount I owned.
So if I give you a deed to the bridge over the ship channel or to the moon, and you find out later I don’t own it, I’ve made no misrepresentation if I give a quick claim deed. I have made misrepresentations if I give a warranty deed.
4. Regarding a dispute for real estate commission between two brokers, what controls who gets the commission? Bonus TSA – Brokers Information Sheet is not part of sales contract
The commission dispute is to be resolved according to the law and the facts. Are there written agreements someone is promised to pay a commission? Are there emails or written agreements between the two brokers? The individual facts of each of these cases is going to control the outcome. If the brokers cannot agree, they can agree to arbitrating with TAR or mediate it and hope to resolve it with alternative dispute resolution. Lastly, of course, they can always go to court.
A. Brokers Information Sheet – identifies all commissions to be paid – MLS identifies which broker gets what
If the broker’s information sheet has no place on it to identify the commissions to be paid. The purpose of the broker information sheet is to alert the consumer that the person they are talking to either represent someone else or may represent someone else. The broker information sheet is created to satisfy the requirement that “brokers make it clear on the first substantial contract who they represent in the transaction”.
B. TAR Contract – does TAR provide the arbitrators?
Yes they have a referral program of arbitrators generally need to be paid by the parties.
5. A. With a buyer’s rep, what is my real obligation if a client wants to see a hot property and I cannot see in the next day or so due to existing commitments?
When you are an agent under a buyer’s representation agreement, you owe a duty to do a good reasonable job making yourself available at reasonable times to reasonably accommodate your client’s needs. If you are out of town and work with another client, it’s reasonable that client calling you at that moment will have to wait. If you have existing commitments you do not break any duties to your client. You tend to them first. If however you are so busy that you cannot give your client good service you are failing in your obligation as his agent and you should have him find another agent or make time available for him.
B. A client calls me after 7pm or on a day off to put an offer in – am I legally obligated to jump on it and work late if I know other offers are probably coming in?
You are not legally obligated to do anything after 7 pm, although you are always required to act reasonably during the circumstances. If for example you are actively engaged in negotiating last minute changes before the inspection period runs then it would make sense that you work pass 7 pm. On the other hand, if you have a sudden fire drill that is caused only by the buyer’s nervousness, again you are only obligated to act in a reasonable manner.
6. I receive a contract or document that has a signature with a high probability of that signature being forged by the other agent, as opposed to the party that should have signed it. Since I do not know for sure, do I move ahead with the process or question the agent about the questionable signature?
I believe that you are entitled to rely on every document as though it was not forged unless you have a substantial reason to believe otherwise. If the agent forges a document, he/she will be liable to all the parties for his misconduct. If the seller authorized the agent to sign his name, then the agent had the power and the contract is good. This actually ties into the next question.
7. Can an agent that has a rep agreement ever sign the client’s name on a 1-4 residential contract or associated documents without a power of attorney?
No. Texas recognizes two types of agencies. General agency and special agency. As between you and your sponsoring broker, you are a general agent when you sign for the sponsoring broker you bind your sponsoring broker.
But as to the buyer or seller, you are a special agent. The special agent does not have the power or authority to bind his principals by signing the principals’ name. Although the buyer or seller could give you a power of attorney to sign their name, I would suggest that this is a terrible idea in every case, with little or no upside. If the party giving the power of attorney ever becomes dissatisfied with the deal, they will accuse you of having exceeded your authority for purposes of making commission. If they need to give power of attorney, let them give it to family member or some third party.
8. How to properly deal with inspection reports handed or delivered to me, and we have the listing. What’s next????
If you use the HAR Seller’s Disclosure, it asks you to produce any inspections tendered to the seller during the time the seller owned the property. An inspection report tendered to the seller’s agent has been tendered to the seller so the short answer is you’ll either have to attach it to your seller’s disclosure and give it out to everyone or use a seller’s disclosure form that more matches the Property Code and does not contain the item specifying that your producing whatever inspection reports you received.
9. Someone from Mexico wants to buy a house here. Is there anything I should tell them because they are foreigners
Foreign nationals may buy property here at anytime they wish. There is no requirement for citizenship in order to own property in America. Foreign countries and foreign nationals own a lot of property in America already.
Buying property isn’t a problem. When a foreign national sells property, the Federal FIRPTA legislation requires that a non-US person (that’s a person who does not file a US tax return or have a social security number) as a Seller, the buyer must withhold 30%of the purchase price and send it to the IRS until the seller files appropriate paperwork for the return of the money. This law applies to the sale of residential property over $300,000.00. As for what you should tell them? It’s simple. Tell them to get legal and tax advice that you are not allowed to give either.
10. A Buyer’s agent and a potential buyer look at a property and there is a vacant house or mobile home on the lot or acreage. Since there is an exception in all title policies for things that are on the land that can be seen on inspection, do I have a legal obligation to advise the buyer that he might be buying with a claim of adverse possession since I saw the structure and know about the possibility of adverse possession?
THINGS I WANT TO MENTION
1. Things to do not to get sued:
A. Never answer a question about the condition of a property. Always e-mail the Listing Agent and ask the Listing Agent to ask the owner and e-mail you the answer and put the e-mail in your file so you can prove it was the owner’s representation not yours.
B. Follow the requirements of the 1-4 Unit Residential Sales Contract as to objecting to title problems, terminating the contract etc.
2. The DTPA no longer applies to realtors, but §27.01 of the Bus & Com Code, Statutory Fraud in real estate transactions still applies to realtors along with common law fraud, common law misrepresentation and violations of the Real Estate Licensing Act and the Code of Ethics creates a standard of care that could give rise to a legal duty.
Fraud In a Real Estate Transaction pleading:
A. Plaintiff and defendant were parties to a transaction involving real estate
B. During the transaction, defendant made a false representation of material fact to plaintiff, or during the transaction, defendant made a false promise to plaintiff with the intent not to fulfill it
C. Defendant made the false representation or promise for the purpose of inducing plaintiff to enter into a contract.
D. Plaintiff justifiably relied on defendant’s false representation or promise by entering into the contract, and
E. Defendant’s false representation or promise proximately caused injury to plaintiff, which resulted in the following damages:
§27.01 does not require proof that the defendant knew the statements were false. A false representation can occur by failing to disclose something that is material to deciding on whether to purchase or not. The intent to defraud can be proven by the defendant subsequent acts. This statue has been applied to realtors and allows for punitive damages and is not subject to the proportional responsibility to apportion damages.
BOLTZ’ Proposed Amendment to the
Uniform Electronic Transactions Act(UETA)
Texas Business And Commerce Code § 322.001 et seq.
Proposal. Amend the Uniform Electronic Transactions Act (UETA), Texas Business And Commerce Code § 322.003 (b) by adding the following additional exemption to the UETA:
(3) real estate transactions and other matters controlled in the Statute of Frauds, Texas Business And Commerce Code §26.01 are exempt from this Act History. To avoid the catastrophic consequences to an individual of misunderstandings, incompleteness and deception in real estate transactions, on April 16, 1677 the English Parliament enacted Bill 29 Chas. 2 c. 3, authored by Lord Nottingham and entitled An Act for Prevention of Frauds and Perjuries and known to us as the Statute of Frauds. Every state in the United States and every province in Canada have enacted the same or similar language in their Statute of Frauds. For the last 337 years this Act has served and been the mechanism of the real estate industry, controlled every real estate transaction, guided every negotiation and been taught in every real estate school. This all changed on October 31, 2013.
Event. On October 31, 2013, the Corpus Christie Court of Appeals ruled in Dittman v. Cerone (Civ.App.—Corpus Christie Mem. Opinion No. 13-11-00196-CV 2013) that three e-mails discussing a possible future purchase of land created an enforceable option sales contract under the Statute of Frauds. In this case, a real estate broker negotiating the sale of one parcel discussed the possible terms of the sale of a second parcel in two e-mails to the buyer. The owner later sent a third e-mail continuing the discussions of some of the acceptable terms. There was never any contract for the sale of the second parcel, but the Court ruled that a valid option contract had been formed by making the following findings:
- The requirement that the seller sign the contract was satisfied under the UETA by the e-mails of the broker and owner because any transmission attributable to a person is treated as a signature and because the owner admitted authorizing the communication;
- Although brokers are not authorized to bind their clients because they are special agents, the court found that the agent bound the owner;
- Although the e-mails were on-going negotiations and proposals, the Court found they created a contract because the UETA instructs consideration of events and communications outside the e-mails and because the Court found all of the elements of a contract by cobbling together the various e-mails;
- The broker’s name on the e-mails was deemed to be the same as his handwritten signature or his authorized electronic signature, and
- Because the Court deemed the e-mails as an enforceable promise, the seller’s refusal to sale supported a finding that the seller committed fraud and awarded civil damages.
Compelling Justifications. The essence of the Statute of Frauds is that it is a mechanism of formal verification of the concurrent intentions of the parties to agree upon specifically enumerated terms. Real estate transactions must be exempted from the UETA because:
- Modern technology has availed an ever increasing variety of communication mechanisms and means of storing them. E-mails and the newly emerging technologies are the means of conducting and facilitating routine exchanges and explorations. The inherent danger of elevating these casual exchanges to contract formation is an invitation to perpetrate on the public the catastrophic consequences of the misunderstandings, disputes and deceptions that the English Parliament protected against in 1667;
- The UETA creates unreasonable liability to realtors and the parties by creating the likelihood of inadvertent and unintended contracts;
- TREC, HAR, TAR, NAR and many others have created many forms that imbed the current laws, the procedures to closing and consumer protections that will be lost and the road to closing will become chaos without the formal promulgated forms;
- Litigation will sky rocket over the claims and disputes and courtrooms will become title companies;
- With the limited terms of three e-mails, closings will become argumentative and confrontational
- The Act is too broad. It states that if you use electronic means: that you have agreed to conduct your business electronically and that you will be bound by the totality and the consequences of your short term or long term communications that may have been changed over the course of dealing; that you signed a document by having your name, voice, attachment, reference to something or logo anywhere in the transmission; if the communication is storable by any means, it can become an enforceable transaction; a communication plus outside circumstances may make one liable; a contract can be formed even if a person did not even know that electronic agents were sending transmissions in their behalf, and
- 7. Hundreds of thousands of realtors and millions of people in the real estate business must be immediately retrained
The firm represented the majority shareholder of a corporation against the claims made by a minority shareholder (one who owns less than 50% of the stock of a corporation, or less than controlling interest in a LLC or partnership). The trial court and the court of appeals affirmed the decision of the arbitrator in an arbitration proceeding that there was no minority shareholder oppression as claimed by the minority shareholder.
The 49% shareholder claimed that the majority shareholder was using his majority ownership control of the company to prevent the minority shareholder from exercising his rights as a shareholder and received benefits and financial gains for themself that were not shared with the minority shareholder. The minority shareholder presented evidence that the majority shareholder received vehicles, leased their property to the corporation at above market rates, got special discounts, received off book income and discounts and cut back the minority shareholder’s income by exercising their majority control. Irrespective, based upon current legal standards it was found that there was no abuse by the majority shareholder or right of recovery under the other claims, in fact, the Supreme Court has ruled that there is no claim for majority shareholder oppression.