Articles Posted in Landlord Tenant

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The Official Code of Georgia § 13-4-101 explains the elements and requirements of what is known as “accord and satisfaction.” Accord and satisfaction happens when two parties to a contract, by a subsequent contract, have satisfied the first previous contract, and the subsequent contract has been executed.

What does this mean in simple, plain English?

Well, there are two parts to this law. In a nutshell, the execution of this new, second agreement may amount to a satisfaction of the first, older former contract for two reasons:

1. First, where it is so expressly agreed by the parties (both people state so); or
2. Second, if there was no such agreement to satisfy the first contract, if the new promise is founded on a new consideration (a promise to do something like pay money), the taking of it is a satisfaction of the former agreement.

Here is a good and easy example to understand what it means:

What if I had a contractual agreement with my Uncle Bob that I would hire him to build me a backyard shed for $30,000? Uncle Bob and I agree that I will pay him $10,000 to start the project and $5000 at the end of each week until he is finished.

Unfortunately, during the course of the shed building, Uncle Bob starts drinking again and can barely pick up a hammer to nail a board in straight. The shed turns out completely lopsided and crooked. I tell Uncle Bob that there is no way I am paying him $30,000 for this shed that looks like the leaning tower of Pisa. So, Uncle Bob and I make a new agreement, subsequent from our first contract where I pay him $20,000 rather than the $30,000 I originally promised him.

What is the consideration in this new subsequent agreement? The consideration is that for a $10,000 savings, I gave up what I was entitled to: a well-constructed shed. Uncle Bob gives up his right to full price to avoid being sued for a shoddy performance. Once accord and settlement has occurred, Uncle Bob and I have given up the right to sue for more money under this settlement agreement.

Months later when Uncle Bob is back on the wagon, can he sue me for the $10,000 I was supposed to pay him from the first contract? Can I sue him because I am still mad about the ugly crooked eyesore in my backyard? No! Accord and satisfaction has occurred.

As the Georgia courts have ruled: “Accord and satisfaction is an agreement between two parties to give and accept something in satisfaction of the right of legal action which one has against the other, which when performed is a bar (a blockade) to all actions on this account. Woodstock Rd. Inv. Properties v. Lacy, 149 Ga. App. 593, 254 S.E.2d 910 (1979); M.W. Buttrill, Inc. v. Air Conditioning Contractors, 158 Ga. App. 122, 279 S.E.2d 296 (1981).

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Contract Newer.jpgThe Official Code of Georgia § 13-2-2 sets out “rules for interpretation of contracts generally.” The law states that the following rules, among others, shall be used in order to arrive at the truthful interpretation of a contract. This means if you are having a business dispute with your partner, vendor, tenant, or another company and a question turns on what the contract between you two actually means or whose version (yours or theirs) interprets the contract correctly, consider the following rules:

(1) Parol evidence is inadmissible to interpret the written contract.–Parol evidence is anything that is outside of the four written corners of the piece of paper that the contract is actually written on. This could mean conversations that you had over the telephone or notes written on a dinner napkin at a restaurant you were eating at during contract negotiations. The only time this outside evidence (“parol evidence”)should come in to interpret the meaning of the written contract is if it the written contract is somehow ambiguous (unclear) and it is obvious that the written contract wasn’t intended to represent the entire agreement.

(2) Words generally should be interpreted by their usual and common meaning; but a technical word used in particular trades should be interpreted the way they are generally used in that line of business. The local use of a word can be brought in as evidence to determine the actual meaning intended by the parties who entered the contract. In other words, if you and I were chicken farmers and we entered into a contract where you would sell me 500 Rock Cornish broilers, if there was any dispute as to what a “broiler” was, the courts would look to the ordinary local use of how Georgia chicken farmers interpret “broilers.”

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Thumbnail image for contract.jpgMany commercial contract agreements have provisions for attorney’s fees in the event one party breaches the contract. The question is: what does Georgia law say about collecting attorney’s fees from a contract? The Official Code of Georgia Annotated law, O.C.G.A. § 13-1-11, talks about the validity and enforcement of obligations to pay such fees.

Specifically, Georgia law O.C.G.A. §13-1-11 states that obligations to pay attorney fees and an interest rate shall be valid, enforceable, and collectable as part of a debt if collected by an attorney, as long as it is subject to the following:

(1) If your contract provides for attorneys fees in some specific percent of the principle and interest it will be valid and enforceable, but you can never charge over 15 percent of the principal and interest.

(2) If the term in the contract just doesn’t specify a percent, then the provision will be interpreted to mean 15 percent of the first $500.00 of principal and interest and 10 percent of the remainder.

(3) You need to first notify the person who owes you the money in writing that they have ten days after receiving the notice to pay the principal and interest they owe without having to pay for attorney’s fees. If they pay the principal and interest in full before ten days then they won’t be obligated to pay attorney’s fees. If the person who owes you the money refuses to receive delivery of your notice, it will still be considered giving notice.

You do however need to make sure you request the attorney’s fees in your demand letter because if you don’t include any reference to the attorney fees provision in your contract, then you have no right to them. And, if you need to sue to collect the money you are owed, a court cannot award you them either if you never provided notice. E.g. Quintanilla v. Rathur, 227 Ga. App. 788, 490 S.E.2d 471 (1997). Trust Assoc. v. Snead, 253 Ga. App. 475, 559 S.E.2d 502 (2002).

Since you do need an attorney to collect “attorney’s fees,” you do need to make sure you have competent legal counsel representing you in your business dispute involving a breach of contract.

But this is a good thing. Using an attorney’s fees provision is a good way to make sure you cover the cost of your legal fees in the event you get into a business dispute. Having an attorney to help you navigate complex Georgia law is much better than going it alone. In fact, going it alone is the best way to end up in a bad situation. Unfortunately, many times our business clients come in after their situation leaves them with no choice other than retaining legal counsel.

Hire an attorney who can set up preventative measures that place your business in the strongest financial and legal position possible. Smart business owners know this and know that retaining an attorney in order to set up their business to ensure that preventative measures are in place is the best way to save money and make money down the road. For example, it is key that competent legal counsel draft your contract in order to carefully preserve your legal rights. Not only to protect your business interests, but also so they can do the ” smaller things” ensuring that your contract allows you to collect attorney’s fees in the event you must go to court for a breach. These “smaller things” end up being huge, in the long run.
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