Published on:

How One Missing Provision Cost an LLC Principal Greatly in His Florida Breach of Contract Case, and What It Means For You

Making sure the commercial contract you get is the one you need involves careful attention to detail where an experienced South Florida commercial attorney can provide invaluable input. One of those things is helping you to understand what is – and what isn’t – required by your agreement, and making sure your final agreement is something that matches what you agreed to in your pre-execution negotiations.

That may all seem very easy, but, in reality, it’s often not. As an example, take a look at this case, litigated in Miami-Dade County, that involved two LLC principals. The two businessmen, J.G. and R.A., had been in business together but decided to go their separate ways professionally in March 2016. One of the key entities impacted by that decision was another LLC, “MM,” that the two principals’ respective LLCs owned equally.

To establish a written plan for this break-up, the principals created and executed a Reorganization Agreement. That contract bound the parties to pursue restructuring or liquidation of MM and to pay off an investor who MM owed $80,000. R.A. paid the full $80,000 to the investor with no input from J.G.

R.A. later sued J.G. for breaching the reorganization agreement by not paying the investor. At trial, the case came down to one sentence in the agreement: “The Parties will endeavor to restructure or liquidate this company and pay the amounts owed to” the investor.

Even though both principals asserted that the provision as written was clear and unambiguous, they argued for very different interpretations in court. R.A. argued that the sentence made the two principals individually liable for paying the investor, and that J.G. breached when he paid nothing on that amount owed. J.G.’s argument was that, considered in context, the contractual provision clearly called for the investor to be paid by MM itself as a result of the restructuring or liquidation process.

The trial court and the appeals court both agreed with J.G.’s interpretation and argument. To endeavor means “to attempt… by exertion of effort.” Clearly, then, the contract called for the principals to strive to reorganize or liquidate MM and then to pay the investor from the sums generated by that restructuring or liquidation.

Another reason that the appeals court rejected R.A.’s argument was found just one sentence later in the agreement. The sentence demanded that, “Within thirty (30) days of the date of this Agreement, each of Gervas and Aleman will pay one half of the amounts owed” to a pair of law firms. This sentence is a clear indicator that J.G. and R.A. were individually liable for paying the law firms.

The absence of similar language in the provision related to paying the investor was key proof that no similar individual liability was intended when it came paying the investor. As the court explained, that subsequent sentence “makes clear that the parties knew how to draft a provision imposing individual liability where they intended it.”

Sometimes, the key to success in a contract dispute case – even when the contract is hundreds of pages long – is just a sentence or two… or maybe even just one word. When you’re embroiled in a contract dispute case, make sure you have the diligent and detail-oriented legal team you need. Rely on the experienced commercial litigation attorneys at Stok Kon + Braverman to provide you with exactly that sort of skillful representation to get you the success your business deserves.

Contact us online or by calling (954) 237-1777 to schedule your consultation.

Contact Information