Thursday, January 16, 2003

A Slip of the Lip Doesn't Sink the Ship

In an unpublished opinion, the Fourth Circuit turned aside a claim that a principal of a company had personally guaranteed a contractual obligation of the company.

Grimes was the CEO of Cyntergy. Cyntergy had leased computer equipment from ePlus. After Cyntergy fell into arrears on its lease obligations, ePlus informed Grimes that it intended to repossess the equipment. In order to forestall the repossession, Grimes promised ePlus that Cynergy would pay the arrearage. He also said that he would "take care of [ePlus]" if they would "give him some slack." Ultimately, ePlus sued Grimes, alleging that Grimes' statements constituted a personal guarantee made in consideration of the agreement by ePlus to forbear its attempts to repossess the equipment. The district court had dismissed ePlus' complaint for failure to state a claim.

The district court's dismissal was affirmed by the Fourth Circuit. The appellate court found that Grimes' statements were insufficient to establish a contractual undertaking to guarantee Cyntergy's obligations to ePlus. Specifically, the court found that there had been no meeting of the minds of Grimes and ePlus because a number of material terms of the purported contract (i.e., the length of time ePlus would defer repossession, how much Grimes would pay ePlus, when those payments would be made, and under what terms Grimes would make the payments) were not specified. Thus, ePlus had failed to allege "any facts to demonstrate that Grimes understood his statements to mean" that he was going to be personally liable for Cyntergy's obligations.

No comments: