The Implied Duty of Good Faith and Fair Dealing in Tennessee
In Cavanaugh v. Avalon Golf Properties, LLC, 2011 WL 662961 (Ct. App. Tenn., Feb. 24, 2011), the Tennessee Court of Appeals reminded us of the scope of the implied duty of good faith and fair dealing in Tennessee.
By A Personal Guaranty Must Be Signed in Individual Capacity to Be Enforceable Against an Individual
A Tennessee Court has once again reaffirmed the majority view in the country that signature of a document in one’s capacity as an officer of a company does not bind one individually. In the case of 84 Lumber Co. v. Smith, 2010 WL 4272739 (Tenn. Ct. App. Oct. 28, 2010), the Court held that the defendant/owner of the company who signed a commercial credit application as “President” was not personally liable despite language in the agreement that stated as follows:
BY SIGNING BELOW I HEREBY CERTIFY THAT I AM THE OWNER, GENERAL PARTNER OR PRESIDENT OF THE ABOVE BUSINESS, AND I DO UNCONDITIONALLY AND IRREVOCABLY PERSONALLY GUARANTEE THIS CREDIT ACCOUNT AND PAYMENTS OF ANY AND ALL AMOUNTS DUE BY THE ABOVE BUSINESS.
When Is a Guaranty Limited and When Is It Unconditional?
Guaranties generally come in two flavors: limited and unconditional. At the outset of a loan, one of the topics for negotiation is the guaranty. First, will there be a guaranty? Second, if there is a guaranty, will it be unconditional and unlimited or will it be limited in some way? A recent case reminds us that even if a guaranty does not have a specific dollar amount as a limiting factor, it may not necessarily be interpreted as unlimited and unconditional.
Good Faith and Fair Dealing Is Not an Independent Tort Claim
In a lawsuit by former wide receiver David Givens against the Tennessee Titans, Givens alleged that the team was aware of a defect in his left knee and did not tell him about the problem. As a result, Givens alleged, he continued to play football until he was injured in a game in November 2006. Givens never played professional football again. Among other claims against the Titans, Givens asserted a cause of action for “the legal wrong, whether styled in quasi contract or tort, of performing its contractual obligations in bad faith.” Givens further alleged that this claim was a tort claim that did not require an interpretation of the collective bargaining agreement in place between the Titans and the NFL Players Association.
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