Limitation of Remedies Contract Provision Ineffective

A company sold and installed a wastewater treatment system it knew was defective. Doing so violated Chapter 93A, the unfair and deceptive acts and practices law. The court found the plaintiff was entitled to double its consequential damages, including lost profits. The court held that the Chapter 93A recovery was not subject to a provision in the contract saying that no claim would be allowed for any consequential damages or business loss incurred.

Why This Is Important . . . Many businesses put limitation of remedies provisions in their contracts to limit the amount of a recovery under the contract. These provisions may not be effective in an action under Chapter 93A unless careful attention is paid to the wording.

No Knowing Policy Violation of Deny Unemployment Benefits

Plaintiff was fired from a nursing home when she cursed at a patient who insulted her. She was denied unemployment benefits because her conduct was a knowing violation of a reasonable and uniformly enforced rule or policy of the employer. The Court reversed the benefit denial order. It found that when the plaintiff said the offending words she was not sufficiently aware of the fact that she was violating the nursing home's policy.

Why This Is Important . . . An employee can be denied unemployment benefits if he or she is fired for a knowing violation of the employer's policy. The decision makes it clear that the employee must know they are violating the employer's policy when they engage in the conduct. Proof of prior warnings or explanation of the policies are important in these cases.

Unpaid Loans to Shareholder

In a recent case a court decided that where a sole shareholder borrowed amounts from the corporation, had not repaid and no evidence suggested an intention to repay, the loan was a constructive dividend to the shareholder. As a dividend, the amounts were taxable to the shareholder and were not deductible by the corporation.

Why This Is Important . . . Whenever a corporation lends money to a shareholder the agreement should include well-defined repayment terms. Otherwise, the IRS will reclassify the loan as a dividend.

Set Favorable Guidelines to Increase Renewal Rents

Many leases call for arbitration if the landlord and tenant cannot agree on the renewal rent for a lease. Arbitrators often do not have guidelines to follow when they calculate the new rent. To increase the potential amount of renewal rent, landlords should include favorable guidelines in the lease for the arbitrators to consider in arriving at a figure. For example, arbitrators could be required to consider improvements made by the landlord or the prior tenant, moving expenses saved by the tenant's remaining at the premises, and any extra services provided to the tenant.