Insight

When It Comes to Real Estate, Get It In Writing

Published on: September 18, 2020

As the old adage goes, it’s always safest to get an agreement in writing. In Louisiana, when an agreement is about the sale of real estate, the adage is law. A contract for sale must be in writing as provided in Louisiana Civil Code articles 1839 and 2440.

This long-standing rule was at issue in the recent case of Holmes v. Paul, 19-130 (La. App. 5 Cir. 10/2/19), 279 So. 3d 1068. In Holmes, the plaintiff/seller and defendants/purchasers entered into a purchase agreement for a Metairie home which required a closing by no later than April 29, 2016. The contract was a standard form Louisiana purchase agreement which required that any change in the closing deadline be written and signed by both parties. The parties later entered a written extension of the closing deadline to May 6, 2016.

Three days before the closing, the home appraised for $14,000 below the purchase price, leading the seller’s agent to encourage the purchasers’ agent to pursue an appraisal review. However, the parties did not sign a written extension of the May 6, 2016 closing deadline. Thereafter, the seller agreed to decrease the purchase price to the appraised value, but on the same day the purchasers sent a signed cancellation. The seller sued the purchasers for breach of contract, arguing that the parties verbally agreed to extend the closing deadline and intended to execute a written extension as soon as they determined a feasible closing date.

The purchasers moved for summary judgment on the ground that the purchase agreement had expired and was unenforceable. The Court agreed. The purchase agreement expressly required that extensions be made in writing signed by both parties. Upon the expiration of the May 6, 2016 closing deadline, the contract was unenforceable.

The seller also asserted a detrimental reliance claim, arguing she was lulled into not insisting on a written extension because the purchasers’ agent agreed to it orally. However, the seller conceded her awareness that an extension had to be in writing. As such, her reliance was not reasonable. The court further noted the absence of evidence that the purchasers themselves agreed to orally extend the contract or to waive the writing requirement.

Unfortunately, business deals in the modern world cannot be finalized by a handshake. Remember that when you buy and sell property in Louisiana -- get it in writing.

Marty Golden has been practicing law based in Baton Rouge, Louisiana for over thirty years, concentrating in civil litigation primarily involving injuries, property damage, insurance coverage, and contract disputes. Much of his practice is defending and advising real estate agents in suits by property buyers and sellers, but Marty also defends other professionals, insurance companies, manufacturers, and business owners. Marty has a special interest in all things procedural, because they are the rules of the road for litigators and knowing them better than his opponent gives him a leg up in court.

Posted by:

Disclaimer

Keogh Cox & Wilson, Ltd. provides this blog as a public service for general information only. The materials contained herein may not reflect the most current legal developments or even express the opinion of all or even most of Keogh Cox attorneys. Such material does not constitute legal advice or form any attorney-client relationship. Keogh Cox and all contributing author(s) expressly disclaim all liability to any person with respect to the contents of this Web site and Blog and expect that no reliance will be made upon the information provided.

Continue Reading

Explore legal perspectives on the issues shaping Louisiana's key industries and courtrooms.

Insight

The Louisiana Legislature Overhauls the “Direct Action” Statute

For decades, Louisiana law provided a claimant or injured person an uncommon opportunity (1) to directly name an insurer in a lawsuit, and (2) to make the jury aware of the presence of insurance. This was known nationally as the “Louisiana Direct Action Statute.” This statute, embodied in LSA—R.S. 22:1269, has long been a topic of debate.

The Louisiana Legislature recently amended the “direct action statute” in Act 275 and declared that the injured person “shall have no right of direct action against the insurer” unless at least one of the exceptions applies: the insured files for bankruptcy, the insured is insolvent, service cannot be made on the insured, a tort cause of action exists against a family member, uninsured motorist claims, the insured is deceased, or when the insurer issues a reservation of rights or coverage denial (but only for the purpose of establishing coverage). The Act further provides that the insurer shall not be included in the caption of the case. And, the existence of insurance is not to be disclosed unless the Louisiana Code of Evidence requires it. This new legislation is effective August 1, 2024.

But, the Act also provides for new provisions that allow for the joinder of an insurer after settlement or in connection with a final judgment. The Act further includes specific provisions enacted to provide notice to an insurer of an action and outlines the procedures and timelines for how insurers assert reservation of rights or a denial of coverage.

The revisions to LSA—R.S. 1269 represent a significant change in how lawsuits involving insurance companies will proceed.

Insight

UM Waiver Completed by Insured’s Assistant Found Invalid

Uninsured/underinsured motorist coverage (“UM coverage”) is included in all automobile liability policies by Louisiana law unless the insured “rejects [UM] coverage, selects lower limits, or selects economic only coverage.” What constitutes an adequate rejection of UM coverage has been the crux of countless lawsuits across the state. Recently, in Havard v. Jeanlouis, et al, 2021-C-00810 (La. 6/29/22), the Louisiana Supreme Court examined the validity of a corporate representative’s signature in the context of execution of a UM waiver form. Louisiana courts have found that without a valid signature, UM coverage generally may not be waived.

The Havard court recognized that a corporation cannot “sign” its own name, and that an authorized representative must act on its behalf. Under the facts of this case, an administrative assistant attempted to execute a UM waiver form at the corporate representative’s direction with a stamp of the representative’s signature. The plaintiff argued that the use of the stamp did not meet the requirements for proper execution of the UM waiver form at issue.

Considering these facts, the court noted that Louisiana law of mandate provides that “when the law prescribes a certain form for an act, a mandate authorizing the act must be in that form.” The court continued: “Accordingly, where one individual signs a UM form on behalf of another individual and authority is not conferred by law, our Civil Code requires this authority be in writing.”

While the corporate representative in Havard verbally instructed his administrative assistant to complete the waiver with his signature stamp, no written mandate existed between the representative and the assistant to confirm this authority. Absent the written mandate, the court disregarded the express intention of the corporate representative and held the form invalid.

The court recognized the impracticality of its holding. However, it also commented “Concerns over the practical impact within the insurance industry in scrutinizing stamped signed UM forms are unavailing. Inconvenience is not absurdity. The insurer has the authority, opportunity, and responsibility to assure the UM form is completed properly. … Practical considerations regarding increased due diligence requirements are matters of policy best directed to the legislature.”

Cases involving UM waiver forms are fact-sensitive. Havard involved unique facts where the company’s authorized agent did not sign the UM waiver form personally. While Havard may be limited to its facts, it reminds that proper execution of a UM waiver form is necessary for UM coverage to be properly waived.

Louisiana Supreme Court Provides Updated Guidance on Execution of UM Waiver Forms

Insight

Subcontractor’s Status as Plaintiff’s “Two-Contract” Statutory Employer Establishes Owner’s Immunity

In Louisiana, a “statutory employer” is entitled to protection from tort suit. With limited exceptions, the defense must be supported by a contractual provision declaring the defendant to be a statutory employer in a manner consistent with La. RS 23:1061. In Spears v. Exxon Mobil Corporation & Turner Industries Group, LLC, 2019-0309, 291 So. 3d 1087 (La. App. 1^st Cir. 2019), the defendant-premises owner successfully asserted the defense, notwithstanding multiple issues with respect to the nature and terms of the agreement and an alleged lack of privity with the plaintiff’s immediate employer.

In Spears, the plaintiff was injured when he slipped and fell on the production floor at the Exxon plastics plant. Spears filed suit against multiple parties, including Exxon, alleging it failed to provide a safe premises. The plaintiff worked for Poly Trucking who operated at Exxon under a contract with Polly-America. Poly-America, LP and Exxon, in turn, were signatories to an agreement entitled "STANDARD PURCHASE ORDER" which stated that Polly-America was to:

"… provide pickup/delivery service… For all containers of Polyethylene scrap as well as Polyethylene's scrap recovery vacuum service for a quoted amount of one dollar.”

The "STANDARD PURCHASE ORDER" also contained a section expressly recognizing Exxon:

“… as the statutory employer of employees of Poly America and subcontractors while such employees are engaged in the contracted work.”

Exxon filed a motion for summary judgment based upon its status as Spears’ statutory employer. The Trial Court granted the motion and dismissed Exxon with prejudice. On appeal, Spears argued that the contract between Exxon and Poly-America presented multiple issues of fact and law which necessitated a reversal of the summary judgment. The issues identified by the plaintiff included the following:

The agreement upon which Exxon relied was a “Contract of Sale,” not a “Contract for Services;”
The agreement specified that the signatory contractor (Poly America) was an "Independent Contractor;"
The plaintiff’s immediate employer (Poly Trucking) was neither a signatory to, nor specifically identified anywhere in the agreement; and,
Although the agreement designated Exxon as the statutory employer of the “employees of Poly America,” Exxon is not specifically designated as the statutory employer of the employees of Poly Trucking, the plaintiff’s immediate employer.

The First Circuit Court of Appeal expressly rejected each of the plaintiff's arguments.

First, the Court pointed out that the law does not mandate that the contract containing the statutory employment language be of any particular type. As such, whether the contract was considered a contract of sale or for services was irrelevant.

Secondly, the Court rejected the claim that contractual language describing Exxon as an “independent contractor” required a rejection of the statutory defense. The Spears Court reasoned that nothing in La. RS 23:1061 prevents an independent contractor from entering into a written agreement whereby the principal to that contract is recognized as the statutory employer of the employees of the contractor and its subcontractors.

Finally, the Court rejected the claim the defense should be rejected because the plaintiff’s immediate employer was not a party to the contract. As discussed in Spears, the law provides that the contract establishing statutory employment can be with either the plaintiff’s immediate employer or the plaintiff’s statutory employer, and Poly America qualified as the plaintiff’s statutory employer under the “two contract” theory because the work that Poly America subcontracted to the plaintiff’s immediate employer (Poly Trucking) was included within Poly America’s “STANDARD PURCHASE ORDER” contract with Exxon.

The Spears opinion highlights that the statutory defense should be maintained, even under unusual facts, when the requirements of La. RS 23:1061 are satisfied.