Massachusetts

[twgoodwin]

Jurisdiction

Rhode Island

So, as a law clerk I worked on a case and I wanted to hear from other attorneys on this.

The plaintiff sued landlord, Real Estate Holding LLC, and the tenant, Bubba Gump Shrimp Inc. on a pretty basic premises liability claim.

These are the rules: Generally, a commercial landlord owes its tenant's invitee a duty of care in limited circumstances. A commercial landlord (LL) owes a duty to its tenants invitee only if (1) LL has a duty to repair/maintain premises, (2) assumes a duty to repair, or (3) there is a defect known only to the landlord. If none of the (3) exceptions apply, then no duty.

The task was to file a MSJ for Real Estate Holding LLC, the commercial LL. Real Estate Holding LLC's manager is John Doe and he signed the document. He is the only member of the LLC. John Doe is also the president of Bubba Gump Shrimp, the commercial tenant, and he signed for Bubba Gump Shrimp. BGSis a closely held corp with only one shareholder, John Doe. Thus, John Doe signed the lease agreement as LL and tenant.

As I looked through the documents I noticed this and wondered if the lease agreement was enforceable. I saw that Restatement second of contracts section 9 states: There must be two parties to every contract. Ok, well Real Estate Holding LLC and Bubba Gump Shrimp there's your two parties.

But, the official comment gave me pause, and it states that "One person may have different capacities, as for instance as trustee, as executor, as partner, and as individual. If he purports to make a promise in one capacity to himself in another capacity, there may be legal consequences. He cannot make a contract by his own undisclosed mental processes; a contract requires a manifestation of intention."

If the lease is unenforceable, then we cannot say that Comm LL did not have a duty to repair under the lease because, well, the lease would not exist for all intents and purposes. The issue is whether the contract is enforceable?

 

[flyingron]

John Doe isn't a party to either side of the contract. He's an agent of the respective LLCs (or whatever the Gump entity is). While he might have a fiducial conflict of interest, I'm not seeing how this invalidates the contract.

 

[twgoodwin]

John Doe isn't a party to either side of the contract. He's an agent of the respective LLCs (or whatever the Gump entity is). While he might have a fiducial conflict of interest, I'm not seeing how this invalidates the contract.

John Doe isn't a party to either side of the contract. He's an agent of the respective LLCs (or whatever the Gump entity is). While he might have a fiducial conflict of interest, I'm not seeing how this invalidates the contract.

Thank you for your reply. I guess I am just having trouble wondering when the restatement would apply. In what instance would restatement 9 apply?

There is very little case law on this because typically people don't make contracts with themselves, and if they do, then they never sue themselves.

There is one case: Man is on the board of directors and majority SH of a company. He buys life insurance policies and names the corporation as the beneficiary. He does this to raise money for the corp, but as time passes the corp no longer needs the money. He then agrees with the board to rename his family as beneficiary on one of the life insurance policies. He dies and his estate sues for the proceeds of the life insurance policy. The corp disputes that estate is entitled to life insurance policies. The court held for the company because the man could not have made a contract with himself. The agreement to change the beneficiaries on the life insurance policy was no contract at all. In one capacity he was representing himself personally in trying to enrich his estate, while also acting in his capacity as a member of the board in agreeing to relinquish beneficiary status in the life insurance policy." A man cannot, through his own mental processes for a contract. That quote is from that case I believe and it appears in the official comments to restatement 9.

For me, and I mean to be deferential, the official comment says that the contract never formed. If he purports to make a promise in one capacity to himself in another capacity, then the contract never forms. Acting as an agent for one party is one capacity for one party, and an agent in another capacity for the other party seems like an instance where the rule would apply.