Councils Corner v105
When Material Terms Are Lacking
Steven Barnhart and Ashley Smith met when they both worked at the same bank. They started an affair in 2011 that lasted three years.
Barnhart gave Smith money so she could pay off her high-interest credit card debt, to terminate her auto lease, to pay her lawyer in an unrelated matter, for moving expenses, to purchase an antique necklace, and to reimburse her for funds stolen from her.
As he continued to pay Smith monies, Barnhart would periodically provide her with documentation of the amounts given and the amounts owed. The documents were intended to reflect that both Smith and Barnhart understood that some of the monies were gifts, while others were loans which Smith was supposed to repay at zero percent interest.
In an email of 2013 Barnhart explained that he was owed $47,050, and itemized the total amount among 20 separate sums of money he had provided to Smith. The sums were divided into four categories: (1) short term / payment plan, (2) long term, (3) to give, and (4) home.
The first category, short term / payment plan, consisted of $20,000 total that Barnhart had furnished to Smith to pay off credit card debt.
The second category, long term, totaled $20,550 that Barnhart gave Smith to pay for her attorney’s fees and other expenses.
The third category, to give, represented $6,500 which was the sum Barnhart had promised to deliver to Smith to pay her remaining attorney’s fees.
And the fourth category, home, consisted of a single $15,000 payment for Smith’s moving expenses.
Barnhart notified Smith in a later email that he was willing to work out a payment plan for the entire amount of $47,050. Smith responded with OMG. Barnhart reminded her that the amount stated did not include $15,000 for moving expenses, which he considered a gift. And that if he added $15k to $47k the total amount was over $60,000.
Smith responded: OMG – I am abt to vom.
One month later Barnhart sent another email to advise Smith that he had loaned her an additional $5,000 to pay additional attorney’s fees, bringing the total to $67,000 which amount included the $15,000 gift.
A following email listed five more sums of money Barnhart had given to Smith, which increased the amount of all sums furnished to Smith to $75,985. Subtracting $15,000 Barnhart had given Smith as a gift yielded a balance of $59,985.
About a week later Smith sent an email to Jana Barnhart, stating that Smith hoped to pay back a large portion of what is owed within the following two months.
When nothing was paid and Ms. Barnhart received no further communications, she contacted Smith by email to request a status update. Smith responded that her (Smith’s) records reflected that she owed $28,000 as opposed to the $59,985 requested by Mr. Barnhart.
From there, Smith tendered 31 payments of $100-$200 each in a two year period, totaling $4150. And then stopped making payments.
In May 2017 Barnhart sued Smith. Barnhart alleged that he and Smith entered into a valid contract pursuant to which Barnhart made a series of loans to Smith in exchange for Smith’s promise to pay him back. The agreement to repay the funds constituted legal consideration, he claimed. He further alleged that Smith breached the contract by failing and refusing to repay the loans in full.
Barnhart sought damages in the amount of $61,102, plus attorney’s fees.
At trial Smith testified that when Barnhart gave her money he never said anything about repayment. Further, that she never agreed to repay anything. And last, that the sums of money were gifts. Not loans.
The trial court concluded that, based on Barnhart’s testimony, both parties had an agreement under which Barnhart loaned Smith money at zero percent interest. Smith breached the agreement, and Barnhart was entitled to recover $61,102 plus attorney’s fees.
The Court of Appeals determined that enforceable contracts must address each material term with a reasonable degree of certainty. With regard to loans, the material terms are the amount to be loaned, maturity date, interest rate, and repayment term.
If the parties’ conduct showed that they clearly intended to agree, the contract terms are definite enough to be enforceable as the Court will imply some missing material terms such as price, duration and time for performance.
From there, the Court of Appeals determined that Smith had agreed to reimburse Barnhart, as Barnhart testified. And the fact that exact repayment terms were not proven was not fatal to Barnhart’s claim. The suggestion that the funds could be repaid in “installments over a period of several years” was sufficient to support Barnhart’s claim for breach of contract.
Barnhart wins. Smith loses. See Ashley Smith v. Steven Barnhart; Texas Court of Appeals, 1st District, Cause Number 01-18-00111-CV; April 2, 2019: https://law.justia.com/cases/texas/first-court-of-appeals/2019/01-18-00111-cv.html.
Lessons Learned / Questions Asked:
1. Be. Careful. What you say / write / text / post can be used against you in a Court of Law. While a piece of paper signed by the parties is best, much less can be used as evidence. Emails and texts can be used to support a claim.
2. Don’t have all the material provisions of a contract worked out such as a loan repayment term? Good news, it may not be required. The Texas Court of Appeals, 1st District, will supply those material terms for you.
Stuart A. Lautin, Esq.*
* Board Certified, Commercial (1989) and Residential (1988) Real Estate Law,
Texas Board of Legal Specialization
Licensed in the States of Texas and New York
Higier Allen & Lautin, PC
2711 N. Haskell Avenue, Suite 2400
Dallas Texas 75204