It Isn’t Breach of Contract If a Provision of the Contract Breaks the Law
Individuals or companies that sign contracts to do business together can agree to do almost anything, and if one party does not perform its contractual obligations, the other party can sue for breach of contract. Of course, if what you agreed to do was illegal, the court will not award you damages against the party that breached the contract; in fact, the contract is no longer legally valid. Imagine that Bob hires a hitman to kill his ex-brother-in-law, and they sign a contract agreeing to this. Bob pays the hitman in advance, pursuant to the contract, but two years later, Bob’s ex-brother-in-law is still alive; no reasonable person would expect a court to order the hitman to return Bob’s money. This is an extreme example, of course, because conspiracy to murder is a felony, but even if the illegal provision of the contract violates civil law instead of federal law, the court would still refuse to award damages for breach of a legally unenforceable contract. The best way to avoid the financial losses you can incur if someone with whom you have a business relationship breaches a contract is to have an Alabama business law attorney ensure that the contract is legally enforceable before you sign.
The Heritage Landing Business Dispute
In 2007, the real estate developers Terry McDonald and Mark Yarbrough signed a contract to purchase an area of land in Toney from Margaret Hulsey and her son Joe. With the Hulseys’ consent, their plan was to turn the land into a residential real estate development. For purposes of building the subdivision, McDonald and Yarbrough established a company called Limestone Creek Development, LLC in early 2008. In the early stages of the project, before they even founded the company, they met with Stuart Trapp, a developer who was in the process of developing The Landings, a subdivision near the Hulseys’ land. McDonald and Yarbrough agreed that, once they had completed the first stage of development at their own expense, they would sell the 51 plots of land in the new subdivision to Trapp so he could sell them to consumers. They agreed on prices and on a schedule for buying the plots; upon making the first payment, Trapp would get ownership of ten plots. The new subdivision would be called Heritage Landings.
By 2009, when it came time for Trapp to pay for the first ten plots, the housing market had crashed. McDonald and Yarbrough sued Trapp for breach of contract, but the court granted a summary judgment in favor of Trapp. It reasoned that the contract to develop Heritage Landings was unenforceable. The parties had not obtained approval from the county before beginning work on the subdivision; therefore, the contract was not legally enforceable.
Let Us Help You Today
If you are planning to build a housing development, an Alabama business & corporate litigation attorney will ensure that you have not overlooked any important details. Contact Cloud Willis & Ellis for a consultation.