Sometimes, commercial contract relationships are less than perfect. Imperfections… mistakes… omissions… and more may crop up in the course of your business relationship. Even when those flaws or errors were on your end, that doesn’t necessarily mean you’re not still entitled to be paid for the work you did. If things have become a bit “messy” — or a lot messy — when it comes to your business contract and payment for the work your business did, you need to be sure you have the right Atlanta commercial contract lawyers on your side to get you fair payment.
One way in which this sort of circumstance can emerge is if the contract you signed ends up being void and unenforceable. Just because your agreement is unenforceable, however, that doesn’t mean you can’t still receive payment under alternate legal theories like unjust enrichment.
That was the situation facing an Atlanta firm specializing in providing advice relative to establishing employee stock option programs (ESOPs) and the Kennesaw-based firearms broker that retained its services.
The relationship soured within the first few months. The financial advisor invoiced the client for $1.05 million. The client sued for rescission of the contract and the advisor countersued for unjust enrichment and breach of contract.
By the end of the trial, the court had concluded that the Atlanta company had operated as a registered financial advisor without the required registration, which meant the contract was void. As a result, the advisor could not win a claim for breach of contract. The advisor did, however, have an actionable claim for unjust enrichment, for which it ultimately received $1.5 million in damages.
The client launched a round of post-trial motions arguing that because the advisor engaged in unlicensed investment advice (thereby making the contract void,) the advisor was barred from recovering anything for any service that was connected to the agreement.
How the Courts Apply Severability in the Case of a Void Contract
The court disagreed. While the court found that the advisor engaged in violations of the Investment Advisors Act, the advisor’s judgment survived because it sought no compensation for any of the unlicensed investment advice-related work it did. The services that formed the basis of its unjust enrichment claim (and subsequent $1.5 million damages award) were wholly unrelated to that advice. Those services — which included soliciting and negotiating a term sheet with the client’s eventual lender — are not things covered by the IAA, so they were “severable” from the illegal part… and therefore actionable.
Georgia law has a test “for determining whether a demand connected with an illegal transaction is capable of enforcement at law.” The singular analysis under that test focuses on “whether [the] plaintiff requires any aid from the illegal transaction to establish his case.” When the advisor engaged in services related to securing financing, it engaged in activities that required no aid from its unlicensed investment advice activities, as the advisor was permitted to perform those loan solicitation and negotiation activities with or without a license to provide investment advice. That satisfied the test and made those financial services things for which the advisor could recover compensation.
Any time there’s a dispute regarding a commercial contract, the resulting effects can be complicated. That’s even more true when the underlying agreement is eventually judged to be void. Whether yours is an enforceable contract (or even if it is a void one,) you need legal counsel that has “been there” and “done that” before to get you what you’re owed under the law. The knowledgeable Atlanta commercial contracts attorneys at Poole Huffman, LLC are here to offer our clients creative and experience-driven solutions to their commercial contract dispute issues. Contact our attorneys online or by calling (404) 373-4008 to schedule your confidential consultation today.